Despite the U.S. economy’s lackluster performance, the nation’s fourth-largest retailer, Costco Wholesale, appears to be thriving, reports ABC News.  One secret to its success is the fact that Costco limits the number of items it carries.  Senior VP for Food and Sundries Tim Rose says “we only carry about one-tenth of the number of items that a typical supermarket carries.”

Yes, the store that is the single-largest purchaser of USDA-Choice meat, that sells more than 37 million rotisserie chickens and some $375 million worth of toilet paper a year, offers only about 4,000 unique products for sale as compared to a typical supermarket’s 40,000 stock keeping units (SKUs) or a Wal-Mart store’s typical 125,000 SKUs.

Jim Sinegal, who founded the company in Seattle, Washington 25 years ago, explained to ABC News how Costco determined, for example, to carry one large bottle of Advil pain medication – a $15 bottle of 325 pills – instead of smaller bottles of 25, 50, and 100 pills. 

“We look at it from the standpoint that if ten customers come in and they’re looking to buy Advil, the fact that we have 325 maybe turns off one of those customers, but nine of them will buy that large size of Advil,” Sinegal said.

Another “secret” to Costco’s success is pricing and the fact that people buy memberships for the privilege of shopping there.  Sinegal insists Costco never sell anything for more than 14% above cost. “If you study the retail business you will find all sorts of examples of people who thought that they could charge another dollar for an item, and another dollar here, and they could cut the wages on their employees, and the net result is that you have lots of companies that wind up going out of business,” Sinegal said while acknowledging that Costco’s profits come primarily from their customers’ membership fees which begin around $50 per year.

With 2007 revenues of $64.4 billion, Costco is the fourth largest retailer in the U.S. and employs 132,000 people in more than 529 stores in seven countries.