The Costco Inventory Strategy You Probably Didn't Know About

The only thing in life sexier than inventory is literally everything else. What a store stocks on its shelves is not something most of us think about regularly, until we are standing in front of a wall of light bulbs, trying to make sure we get the right kind, only to find that what we need is sold out. Though sitting around and mulling over inventory and stocking strategies is not a common practice in your everyday life, it can quite literally make or break a business. It can also make or break your shopping experience, because, if a store consistently does not have the items you are looking for, you are bound to start shopping elsewhere.

Costco has probably spent more time thinking about its inventory than any other store. Costco only carries approximately 4,000 different items, according to The Motley Fool, whereas Target or Walmart offers shoppers a selection ranging between 80,000 and 150,000 different items. This means Costco is exceptionally particular about what it has since it opts to typically carry one type of a particular item over having several options on hand. While this may limit the number of choices Costco shoppers have, it is actually part of the secret to the company's success.

Since Costco's inventory is exclusive to a degree, the selection process for what lands on the retailer's pallets and what fails to make the cut is as brutal as surviving the landscape of a "Mad Max" movie — sans the cars, the dust, and Charlize Theron, but it still is pretty savage. The reasoning behind Costco's method is simple. According to the company's website, "By carefully choosing products based on quality, price, brand, and features, the company can offer the best value to members."

But Costco is not looking to just add value alone. In essence, the company wants to stock only that which will go flying off the shelves, perhaps leaving animated wind streaks in their wake. "We seek to limit specific items in each product line to fast-selling models, sizes, and colors," says the company's 10-K report (via the SEC). Therefore, the goal is not only affordable items but things people buy often. By only stocking inventory that sells better than hotcakes, Costco is able to execute part of an overall game plan aimed at tricking people into spending more money while ensuring not an inch of warehouse space is wasted.

While inventory management might not come across as the epitome of excitement, it has made Costco a retail force with which to be reckoned.