Three Reasons Why Costco Is Beating Wal-Mart And Target

Ted Chi on FlickrBusiness at Costco is thriving.

The retailer is posting gains even as competitors like Wal-Mart and Target have struggled to attract cash-strapped consumers.

Analysts at Trefis have pinpointed a few reasons for Costco's incredible success.

1. Customers want deals. It's estimated that shoppers can save up to 55% on groceries from buying in bulk at warehouse chains, write the analysts at Trefis.

Costco also keeps prices low by keeping store displays at a minimum and offering fewer items. The retailer only marks up merchandise 15%, compared with a 25% average for most grocery chains.

"Due to these bargains, the warehouse club industry sales have grown at a higher rate than general merchandise store sales over the last decade," the analysts write.

2. Costco is hyper-focused on local markets. The brand "grants its local store managers some discretion over the products that are kept in stores," the analysts at Trefis write.

Demand for salsa is highest in the Southwest region of the U.S., so stores there are sure to stay stocked up, for example.

3. Costco changes its brands often. "Customers always find something new at its stores and get a 'treasure hunt' experience," say the Trefis analysts.

The retailer occasionally offers some high-end items like Coach purses and Dom Perignon champagne to further intrigue shoppers.