So where Costco found its niche - and where it still holds a substantial edge over No. 2 Sam's and No. 3 BJ's Wholesale Club, say analysts - is in merchandise quality. Traditionally, warehouse stores sell the most obscure brands, a trade-off consumers are willing to make to save money. Costco found a way to bring in well-known name brands, whether Dom Perignon champagne or Jif peanut butter, and sell them at the same price other warehouse clubs stamp on domestic sparkling wine and no-name peanut butter.

Costco is so successful at finding name brands at astounding discounts that its buyers are legends in the industry, whether they track down designer jeans or high-end appliances. David Andrew, the global wine director, has been featured so often in the wine press - including a splashy New York Times profile that played up his days as a Hollywood agent - that no one should be surprised Costco is the biggest wine retailer in the United States.

The company also reinvented the store brand, which had lost favor with many retailers by the early 1990s because consumers considered store brands poorly made and poorly packaged. Costco developed its Kirkland Signature private-label merchandise so successfully that its customers often buy Kirkland instead of better known national brands.

"One of the big arguments in retailing is about who owns the customer," says consultant Dan Graham. "Is it the manufacturer or is it the retailer? Costco owns the customer. Consumers trust Costco to give them the best value, regardless of brands."

THE TREASURE HUNT
Ask Sinegal about owning his customers, and his smile is almost sly. Ask his customers about it, and they speak of the chain with an almost religious fervor. It's difficult to find disgruntled Costco customers. The sampling for this story, though not scientific, didn't uncover even one.