When most of us think of Costco (CSCO), we think of buying bulk ketchup or toilet paper, but the retailer has started offering new products, some of which may come as a surprise.
The recent financial crisis resulted in tighter lending practices at banks, and retailers such as Costco, spotting an opening in the market, have stepped in to fill the void. So now, in addition to household items, you can use Costco’s financial services to refinance your house or buy home insurance.
Costco is not alone in jumping into the financial services sector. Consumers can take out loans at Home Depot (HD) to renovate their homes, Wal-Mart (WMT) has started to test selling life insurance, and Sam’s Club offers small business loans. Not only are retailers offering these services to consumers that may not qualify for loans elsewhere, they are offering them at lower prices.
It is good to see consumers be presented with cheaper alternatives for their financial needs, but it is unclear how this new trend will turn out. A lot of people are getting financial services that they would not qualify for at major financial institutions, but this poses a big risk for the retailers that are jumping into the industry.
Time will tell how this will work out for retailers, but if the last decade has shown us anything, it is a risky endeavor to say the least.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors.