Every retailer wants to be like Costco, at least when it comes to China’s financial results.
Costco drives revenue by selling memberships.
“The most important item we sell is the membership card,” Costco CEO Ron Vickres told Fortune in an April interview.
Membership fees are important to Costco because they generate approximately 60-70% of its operating profit from them.
“This model generates predictable, high-margin revenue primarily from membership fees, which account for a significant portion of its operating profit, protecting the company from the volatility of discretionary spending,” shared Ineo Register.
And, while memberships drive revenue, the warehouse club’s popular “treasure hunts” drive traffic to its stores because members never know what they’ll find on each visit.
Dollar General wants to capitalize on those two models — membership revenue and visits driven by treasure-hunting shoppers.
Costco founder Jim Senegal explained how the treasure hunt model works in an interview with The Wall Street Journal.
“We try to create an attitude that if you see it, you should buy it because chances are there won’t be another time. You’ll come in and find that maybe we have some lucky jeans that we’re selling. You come in the next time and we don’t have these jeans but we do have Coach handbags. That’s the treasure hunt aspect,” he said.
It’s not just about changing merchandise, but what you sell, according to a leading retailer analyst.
“The most important element of a treasure hunt is the quality of the merchandise, and Costco delivers. And men, many of whom hate shopping for clothes, can keep their wardrobe fresh while looking for steaks or wine. Everyone wins,” retail expert Cathy Hotka wrote in RetailWire.
RELATED: Costco has a secret weapon to fight rising gas prices
Dollar General is testing a new store format, designed to make the retailer more like Costo.
“We’ve reimagined our traditional store format by creating a new layout in response to what customers told us they wanted from their shopping journey. This new format is designed to be more open and inviting, resulting in more shopping and treasure hunting as customers encounter more categories as they walk through the store.”
Early results were promising.
“We tested this new format as part of our 2025 remodeling projects and were pleased with the increase in sales and relative sales performance compared to traditional remodels. Ultimately, we believe this format will help drive both transactions and tickets as the store prepares for a fully-loaded tour.”
This model is not entirely new for Dollar General.
“This need to get rid of an item first is exactly what the store is playing… This tactic involves a wide variety of products that change often throughout the year. The treasure hunt is also effective because e-commerce sites, a major competitor for dollar stores, can’t replicate the deal, Reuters shared, commenting on many of the items typically priced under $5.
While Vasus only shared basic details, he made it clear that Dollar General wants recurring revenue from membership or subscription programs.
“Looking ahead, we have ample opportunity to drive increased sales by enhancing the customer experience, increasing customer awareness, and expanding loyalty opportunities, including the planned pilot of a subscription program,” he said during the Q4 earnings call.
Subscription revenue can help retailers build their bottom line and drive recurring revenue, but it’s a challenging area.
Other Retail:
“Many traditional retailers have yet to achieve significant success with their subscription businesses. Part of the struggle for incumbents is launching a new line of business in an unfamiliar channel and sometimes failing to nurture their subscription business — running it as a unique offering or experience,” according to insights from McKinsey & Company analysts.
There are real brand risks with choosing a subscription model.
“Failures to build participatory businesses in food, beauty and retail are well-documented. Such failures often destroy value and, at worst, risk reputational damage,” the study showed.
Several retail brands have tried subscription services, including Lottery, which filed for Chapter 11 bankruptcy; Eleven James, a luxury watch subscription model that closed; And Stitch Fix, which continues to work, but has struggled.
Dollar General is planning big changes to its stores. Shutterstock ·Shutterstock
As the economy has struggled, Dollar General has benefited from wealthy customers who visit more often. The retailer recently shared its fourth-quarter and full-year earnings.
Fourth-quarter net sales rose 5.9% to $10.9 billion.
Net sales for the fiscal year rose 5.2% to $42.7 billion.
Same-store sales increased 4.3% in the fourth quarter.
Same-store sales increased 3% in the fiscal year.
Operating profit rose 106.1% to $606.3 million in the fourth quarter.
Operating profit for the fiscal year increased 28.6% to $2.2 billion.
Diluted earnings per share (“EPS”) in the fourth quarter increased 121.8% to $1.93.
Diluted EPS for the fiscal year increased 34.1% to $6.85.
Annual cash flow from operations rose 21.3% to $3.6 billion. Source: Dollar General Q4 earnings release
Dollar General reported a strong quarter and year, but its stock had its worst day in two years since reporting on March 12.
“The answer lies in the company’s 2026 financial outlook. Management’s guidance implies a significant reduction in the retailer’s main growth engine,” Motley Fool analyst Daniel Sparks reported.
For fiscal 2026, Dollar General expects net sales growth of 3.7% to 4.2%.
“And more notably, management guided for same-store sales to rise just 2.2% to 2.7%. This marks a sharp decline from the 4.3% same-store sales growth the company posted in fiscal Q4. It also trails Dollar General’s 3% full-year same-store sales growth.” He added.
Related: Drive-thru coffee chain closes all locations after surprise sale
This story was originally published by The Street on March 14, 2026, where it first appeared in the Retail section. Add TheStreet as a Favorite Source by clicking here.
