Among other things, Fong argues that Costco’s limited selected raises its average product quality. This is similar to to Joan Westenberg’s argument as well.
In other words, winnowing selection is a service, not a limitation—especially with Costco’s product catalog. Costco is not known for having the cheapest goods, but it is known for having the cheapest price on its goods, and that is because its buying team has closer relationships with suppliers than any other big retailer. Such scrutiny and communication point away from low-road suppliers. This is a structural effect of Costco’s conscious choice to offer a low SKU count: fewer products to investigate means more time to investigate each product, and a natural gravitation away from the bargain basement. That its member-customers have come to expect a certain quality of everything in their stores reinforces this dynamic.