DEI and Retailers' Bottom Line: Balancing Inclusivity and Growth

With political and economic pressures rising, and figures like President Trump advocating for the rollback of DEI programs, many retailers are reassessing their DEI strategies. Recently, Costco’s board of directors rejected a shareholder proposal that would require the company to produce a report on the risks of its diversity, equity and inclusion (DEI) policies.

At a time when companies such as Walmart, Tractor Supply, and McDonald’s are withdrawing from such initiatives, Costco seems to stand alone.

However, as with many aspects of Costco’s business model (e.g., its member-first mentality, labor practices, and sustainability efforts), inclusion is a byproduct of its real purpose: the bottom line. For retailers looking to navigate this challenging environment, Costco’s approach offers valuable lessons on balancing inclusivity with profitability, even in an increasingly polarized climate. Let’s take a look at some of them, and how brands can implement these trends.

A Business Model Built on DEI

Costco’s unique business model, which has helped the company become the fifth largest retailer in the world, has long focused on profitability. Yet for over a decade, investors have challenged Costco to hire more low-wage, part-time workers. Costco has always pushed back hard against doing so because it views its workers as core to the business model. Long-term and diverse labor works in all countries and is partly why Costco integrated DEI so quickly into its strategy. This was the core of its initial response to the shareholder request.

It also bluntly called out the request for what it is: political, not business. Essentially, Costco saw the proposal as a waste of time and resources, and its response highlighted that its DEI efforts align with its core business values, not political agendas.

Related story: Why DEI is Good for Business

As the board laid out, Costco’s DEI efforts align with the company’s code of ethics and go beyond any political affiliation, real or inferred. They're smart business decisions.

For instance, a diverse employee base reflects members’ own demographics, which increases member satisfaction. By the same token, those employees better understand the members they serve, enabling them to select original and creative merchandise that speaks to members’ specific needs, tastes and preferences.

According to Kantar MONITOR data, 61 percent of Costco shoppers say it's important that companies hire more diverse people. By investing in a diverse, long-term workforce, retailers can create a culture that directly enhances customer satisfaction, improves product offerings, and ultimately drives profitability.

Appealing to the Present and Future Members

Costco’s commitment to diversity is a growth strategy, not just a moral stance. According to Kantar MONITOR data, Costco’s U.S. same-store sales rose 7.2 percent in Q1 of FY25 with a member renewal rate of 92.8 percent in the U.S. and Canada. On more than one occasion, the club has cited ethnic foods as fueling higher grocery sales. Kantar MONITOR data supports this, citing that 54 percent of Costco shoppers are willing to spend more on products that reflect their values. In addition, the U.S. population is becoming more diverse, partly driven by immigration outpacing births as the main source of growth.

While Costco’s member base doesn't directly reflect the population, a more diverse population will translate to more diversity within its member ranks — and the labor pool the club can draw from. Its members are also more likely than shoppers of other retailers to support DEI efforts.

Costco’s support for diversity and inclusion aligns closely with the characteristics of its members, who tend to be more affluent and educated than shoppers of retailers like Walmart and Tractor Supply. Thirty-eight percent of Costco shoppers have a Bachelor's degree or higher, according to Kantar MONITOR data. These demographics are typically more supportive of DEI efforts, giving Costco a strong foundation on which to champion DEI without alienating its core audience.

Costco’s approach shows that diversity isn't just a value-driven initiative; it's also a strategic growth lever. As the U.S. population becomes more diverse, retailers that align with this demographic shift can tap into new consumer segments and capitalize on emerging trends.

What This Means for Retailers

For retailers, Costco’s approach to DEI is a clear message: inclusivity isn't just a moral or social obligation — it’s a smart business move. By staying true to its principles, Costco has not only enhanced its member experience but has also seen tangible financial benefits. Higher sales, stronger member loyalty, and a growing customer base are all outcomes of its commitment to diversity.

Many retailers are grappling with how to approach DEI in a way that aligns with their values and business goals. For some, it’s been a source of risk, while for others, it’s an opportunity. As Costco’s example shows, staying authentic to your core values is crucial. If DEI is simply a checkbox, it can backfire. However, if it’s an integrated part of your business strategy, it can drive growth and create deeper connections with both customers and employees.

Gina Logan is a principal analyst on Kantar’s Retail Insights team focusing on the club channel.

Adrienne Pulido oversees thought leadership and trends diversity markets at Kantar MONITOR.