While consumers have cut back on discretionary purchases, that has not been true of Costco customers.
A May 2026 report from the Federal Reserve showed that Americans have broadly become more conservative when it comes to spending.
- 46% of adults delayed a major purchase in response to higher prices.
- 62% switched to cheaper products.
- 60% used less of a product or stopped using it.
- 41% reduced their savings.
Americans have been making changes to how they spend money.
“Consumers are making discretionary trade-offs and starting their holiday shopping earlier to spread purchases, take advantage of promotions and manage ongoing financial pressures,” EY Americas Retail Sector Leader Mark Chambers said.
“That behavior is reshaping the holiday season, with retailers competing to introduce promotions earlier and consumers increasingly looking for value well before traditional holiday shopping peaks.”
Costco, because of its low prices, has been an exception to broader spending patterns.
Costco customers are buying discretionary items
Costco customers have been buying items in both discretionary and non-discretionary areas.
“They’re also, as I mentioned, willing to spend on items where they see it’s a great value, even if it is in some of those non-discretionary categories. So what I mean by that is, maybe, just taking as examples for you, the sort of three main categories that we focus on, which are nonfoods, food, and sundry and fresh. If you think about nonfoods, we see strength in everyday items where we offer great value on things like tires and housewares and even everyday furniture,” CFO Gary Millerchip said during Costco’s fourth-quarter earnings call.
Costco, however, has also seen strength in the type of discretionary spending that other retailers have been missing out on.
“We also see strong growth in some of the health and beauty items, like small appliances when you look at self-care, things like fragrances, skin and hair care. Members want to splurge on great value items where we’re offering tremendous value on massage chairs and saunas, those kinds of items,” he said.
Costco’s growth in those areas has been significant.
“We’ve seen over 50% growth in those items. So in nonfoods, they would be good examples where we’re seeing both of those dynamics at play: looking for that great value on everyday items, but also willing to buy items that are maybe more discretionary where they see the value,” the CFO added.
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Costco changes how people shop
As a former Costco member, I have fallen into the trap of buying discretionary items I did not need. You might go to the warehouse club looking for a toothbrush and groceries, and leave with a kayak or an above-ground pool.
That’s a massive advantage over traditional retailers and supermarkets.
“Think about this for a minute. Costco charges people to shop there, makes them buy quantities they may not need, and has a fraction of the selection of a traditional supermarket. And somehow it’s beating Kroger,” RTM Nexus CEO Dominick Miserandino told TheStreet.
“That should tell you something about how much consumers value the feeling that they’re getting a good deal. Kroger has to work a lot harder to give shoppers a reason to come back,” he added.
GlobalData Managing Director Neil Saunders explained the Costco difference in a 2024 Fortune Interview.
“You never quite know what else you’ll find when you’re there,” he said. “And there’s always something where you think, ‘I didn’t even know I needed that.’”
Costco has built a niche that other retailers can’t match. It’s a store where members feel the value is so strong that they buy things they don’t need, even when they feel financially stretched.
That’s not something other retailers can easily emulate, and it shows a level of trust between the warehouse club and its members that should carry the retailer through periods of economic uncertainty.
Related: Costco and Walmart offer very different Thanksgiving meal costs
