The Hidden Cost of Costco’s Convenience: A Tale of Private Equity and Customer Complaints
By A. Piratemonk
In the sprawling aisles of Costco, where bulk buys and bargain deals reign supreme, shoppers find more than just oversized jars of peanut butter or discounted tires. They encounter a marketplace of services—mortgages, water delivery, custom blinds, even event tickets—all under the reassuring umbrella of Costco’s trusted brand. For many, the warehouse giant is a one-stop shop, a haven of reliability in a world of corporate corner-cutting. But beneath this veneer of consumer confidence lies a troubling reality: many of these services are outsourced to vendors increasingly controlled by private equity firms, and the consequences are starting to show.
Steve Hunt, a customer service representative at a Costco in Oklahoma City, has seen this firsthand. A self-described “gadfly” who once ran for mayor, Hunt has spent the past year and a half fielding calls from frustrated members. His observations, shared on the podcast *Organized Money*, paint a stark picture of what happens when private equity takes the wheel. “When certain vendors get taken over by private equity,” Hunt says, “the number of complaints spike.” It’s a pattern he’s noticed repeatedly, from water delivery services to photo printing, and it’s threatening the trust that Costco has spent decades building.
Take Primo Brands, a bottled water and delivery service that Costco offers. When Hunt began noticing a surge in complaints about Primo—billing errors, missed deliveries, unresponsive customer service—he dug deeper. He learned that the company had been acquired by a private equity firm just months earlier. Almost immediately, the service began to unravel. “It was so fast,” Hunt recalls. “From the time they were taken over to the time you started seeing major issues.” Customer service centers were shuttered, staff walked out, and members were left stranded, their water jugs undelivered. For Hunt, it was a case study in what he calls the “gradual degradation” that follows private equity acquisitions—a process that typically takes years but, in Primo’s case, unfolded in months.
This isn’t an isolated incident. Hunt points to other vendors, like SunSetter, which provides custom blinds, and Vivo, a discounted ticketing service. SunSetter customers have complained about shoddy quality and delivery delays, with orders bouncing through a labyrinth of outsourced logistics firms before arriving—if they arrive at all. Vivo, meanwhile, has frustrated members, particularly elderly ones, with a convoluted redemption process that requires navigating digital codes and scant customer support. “It’s engineered to make it very difficult for the consumer,” Hunt says, recounting the story of an elderly New Yorker who struggled to use Vivo tickets for a Yankees game, only to be met with silence from the vendor’s support team.
At the heart of the issue is Costco’s business model. The retailer doesn’t directly provide these services; it outsources them to third-party vendors, many of which are now owned by private equity firms. These firms, known for their aggressive cost-cutting and profit-maximizing strategies, often prioritize efficiency over quality. They slash staff, offshore customer service, and streamline operations to the bone, leaving consumers—and Costco—holding the bag. “When you get all these companies involved,” Hunt explains, “it creates so many moving parts that it becomes very difficult.”
Costco’s liberal return policies, a hallmark of its customer-first ethos, inadvertently exacerbate the problem. Vendors know that if a product or service fails, Costco’s generous refunds will shield them from accountability. “They’re scamming Costco,” Hunt says bluntly, citing Shutterfly, a photo-printing service owned by Apollo Global Management. Customers who receive incorrect or subpar prints often find themselves stuck, reliant on Costco’s goodwill to make things right. The retailer, in turn, absorbs the cost, while the vendor walks away unscathed.
This dynamic isn’t just a headache for Costco’s members; it’s a reputational risk for a company that has built its brand on trust. “Costco has a pretty good reputation,” says David Dayen, co-host of *Organized Money* and executive editor of *The American Prospect*. “But if a lot of its vendors are ending up being these private equity vultures that aren’t delivering, that’s a problem.” The question is whether Costco, a company known for its meticulous operations, can address this growing issue before it erodes the confidence of its 100 million-plus members.
The problem extends beyond Costco’s walls. Private equity’s reach is vast, touching everything from healthcare to housing. Hunt, who has witnessed this firsthand in Oklahoma City, recounts the closure of a senior living facility bought by Tower Capital, which was bulldozed to make way for a rental home neighborhood that never materialized. “People died,” he says, his voice heavy with frustration. In Oklahoma, a state with a storied history of populist rebellion, the scars of predatory finance run deep. From the Dust Bowl, fueled by predatory loans from National Citibank, to the Penn Square Bank collapse in the 1980s, which tipped the state from a Democratic stronghold to a bastion of conservatism, the echoes of corporate exploitation resonate.
Yet Costco, with its vast network and data on customer complaints, could be uniquely positioned to push back. “Costco and Walmart are natural repositories of information about private equity control,” says Matt Stoller, co-host of *Organized Money* and research director at the American Economic Liberties Project. In the absence of robust federal oversight— gutted, in part, by the dismantling of agencies like the Consumer Financial Protection Bureau—retailers like Costco could serve as a frontline defense against predatory vendors. By tracking complaints and holding vendors accountable, Costco could protect its members and set a precedent for other retailers.
But change is slow. Hunt notes that while Costco conducts member surveys, the process of phasing out problematic vendors is cumbersome, often because alternatives are scarce. Logistics, in particular, is a choke point. Many of Costco’s deliveries rely on RXO, a spinoff of XPO Logistics, which itself is backed by private equity giants like Blackstone. With mom-and-pop logistics firms squeezed out by consolidation, Costco is often left with no choice but to work with these behemoths, despite their spotty performance.
There are glimmers of hope. Hunt mentions a pilot program in New Jersey aimed at bringing logistics in-house, a move that could reduce reliance on third-party vendors and improve accountability. But for now, the burden falls on employees like Hunt, who field calls from frustrated members and try to navigate a system that often leaves them powerless. “I’ve got a real heart for elderly folks,” he says, recalling the countless times he’s had to break the news that a vendor’s reduced hours or outsourced support means there’s little he can do.
For shoppers, the lesson is clear: the Costco card in your wallet may promise access to a world of convenience, but it doesn’t shield you from the broader forces reshaping the economy. Private equity’s grip is tightening, and even a retail giant like Costco isn’t immune. As Hunt puts it, quoting Noam Chomsky, “It takes a sentence to tell a lie, ten minutes to debunk it.” The lie—that private equity makes our lives better—is one that Costco’s members are increasingly debunking, one complaint at a time. Whether Costco itself will take up the fight remains an open question, but for now, the warehouse aisles are a battleground where trust and betrayal collide.
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