Ron Vachris rose through Costco from a teenage forklift operator. Now as CEO he stands before business leaders and delivers a message that cuts against the grain of much of corporate America. Artificial intelligence does not replace people at his company. It lifts them into better roles.
“We’ve not displaced people because the business is growing at a faster rate,” Vachris told the audience at The Economic Club of Chicago earlier this month. “Those employees who were doing those tasks before have now elevated up to more of a forward-thinking role.”
The remarks come at a moment when many executives cite AI as reason enough to shrink headcount. Tech giants have trimmed thousands of positions. Retail peers experiment with automation that reduces the need for store associates. Vachris offers a different view. And Costco’s numbers back him up.
The warehouse club operator employs more than 341,000 people worldwide. Its turnover rate sits near 7 percent. More than 55 percent of U.S. employees have stayed longer than five years. Roughly 23,000 have logged more than 25 years. These figures stand out in an industry known for churn. They reflect a deliberate choice to treat technology as support rather than substitute.
Costco posted revenue just over $250 billion in fiscal 2025. Shares have climbed about 17 percent so far this year. Market capitalization exceeds $440 billion. The company ranks No. 12 on the Fortune 500. Paid memberships reached 81 million in 2025 and climbed to 82.1 million by the end of the second quarter of 2026. Net sales hit $68.24 billion in that quarter, up 9.1 percent from a year earlier. Net income rose nearly 14 percent to $2.035 billion.
Such growth did not require staff reductions. Business expansion absorbed new volume. Digital tools handled the extra throughput. “Adoption of the new digital enhancements have really allowed us to maintain the staffing we have in place and then handle this new growth of volume we’re seeing,” Vachris said on the company’s March earnings call, according to a Retail Customer Experience report.
Pre-scan technology offers a concrete example. Employees scan items as they shop with customers. Shoppers then pay at automated stations. Average transaction time clocks in at eight seconds. Locations using the system report checkout speeds up to 20 percent faster. Traffic flows more smoothly. Member feedback runs strongly positive. Productivity climbs. Yet headcount stays steady.
Similar patterns appear across operations. Mobile wallet features and pharmacy pay-ahead options speed service. AI compares prescription drug prices across vendors and triggers autonomous reorders. In-stocks exceed 98 percent. Pharmacy script growth sits in the mid-teens. Margins improve. Prices for members fall. Gas stations use AI for inventory management. The result? Incremental sales and better availability.
Online, personalization powered by AI proves even more potent. Recommendation carousels generated more than $470 million in e-commerce sales during one recent quarter. Digitally enabled comparable sales jumped 22.6 percent. Online traffic rose 32 percent. App traffic soared 45 percent. “On our digital sites, we continue to roll out new personalization capabilities, which are resonating well with our members and are starting to have measurable impact on e-commerce sales growth,” Vachris said in the same earnings discussion.
These wins follow a consistent philosophy. Costco approaches technology in what Vachris calls a “very Costco way.” Practical. Member-focused. Tied directly to tangible outcomes. The company partners with Microsoft Azure, Google Cloud’s Vertex AI and data cloud services. It builds proprietary applications. None of it exists for its own sake.
“This isn’t about technology for technology’s sake, it’s about using technology to strengthen the fundamentals that makes Costco who we are, increasing member loyalty, driving top-line sales and improving efficiency in our operations so that we can bring goods to market at the lowest possible price,” Vachris said during the company’s first-quarter fiscal 2026 earnings call, as reported by Constellation Research.
He draws a firm line on certain decisions. Buyers still select merchandise. AI assists but does not choose items for the warehouses. Performance evaluations remain human. “I don’t see AI making choices on items for Costco,” Vachris told the Chicago audience. “I don’t know that we’ll ever take that out of the hands of a skilled buyer. AI won’t be doing evaluations with our employees, but there is a great place for developing AI systems, and it’s going to make us a better company.”
The stance echoes broader cultural commitments. Costco pays hourly wages well above industry averages. It has kept the famous $1.50 hot dog and soda combo unchanged for decades. Rotisserie chickens stay at $5. These moves sacrifice short-term margin for long-term trust. Membership fees provide the bulk of profit. Loyalty follows. Low turnover reduces training costs. Experienced staff drive better operations. Technology amplifies all of it.
Chief Financial Officer Gary Millerchip noted on an earlier call that tech investments have helped offset rising healthcare expenses and wage increases. Selling, general and administrative expenses as a percentage of sales held nearly flat even as the company extended hours and invested in people. The math works because productivity gains outpace the added costs.
Other CEOs voice parallel views. Delta Air Lines chief Ed Bastian argues against scaring workers with talk of artificial intelligence replacing them. IBM’s Arvind Krishna has pushed back on hiring freezes for entry-level roles. Yet many firms still cut staff while pouring capital into AI. The tension persists. Costco shows one path through it: grow the business, improve the work, keep the culture intact.
Vachris started at Price Club, the predecessor to Costco, more than four decades ago. He absorbed lessons from co-founder Jim Sinegal, who emphasized listening to frontline employees and trusting their judgment. Store workers once suggested repurposing leftover rotisserie chicken into salads. The idea succeeded. That openness continues. Buyers retain authority. Warehouse teams influence process changes. AI handles repetitive calculation. People handle insight and relationships.
Recent earnings underscore the approach. Digital sales growth outpaces overall sales. Personalization lifts conversion. Operational tools free associates for higher-value tasks. Members enjoy shorter lines and better in-stock rates. The company plans to open at least 30 new warehouses annually. Growth continues. So does hiring from within.
Costco’s IT organization actively recruits for roles that blend technology with retail knowledge. Job postings emphasize collaboration and a focus on efficiency that serves members. The message is clear. Technology jobs at Costco exist to support the core model, not to displace it.
Vachris has warned that the biggest risk is the company losing its way. Becoming arrogant. Losing focus on the fundamentals that built success when there were only two warehouses. So far the record suggests discipline holds. Shares trade near all-time highs. Membership renewals remain strong. Employee retention leads the sector. AI contributes. It does not define the story.
Retail faces real pressure. E-commerce giants optimize every click with algorithms. Traditional chains chase efficiency through automation that sometimes reduces staff. Costco charts a middle path. It invests in systems that accelerate checkout, predict inventory, personalize offers. Those systems produce measurable sales and productivity gains. They also create space for workers to move beyond routine tasks into roles that demand judgment and customer connection.
The result looks simple on the surface. Faster lines. Better stocked shelves. Relevant recommendations. Loyal members. Yet it rests on a deliberate refusal to treat technology as a shortcut to lower labor costs. Growth absorbs the productivity dividend. People advance. The model reinforces itself.
Investors appear to approve. So do members. And employees stay. In an era of rapid AI adoption, Costco’s experiment offers a case study worth watching. Not every retailer can replicate the membership model or the cultural discipline. But the underlying logic, pair technology with people rather than against them, may prove more durable than headlines about job losses suggest.
Vachris keeps the name tag on. He still eats the $1.50 hot dog in public. These gestures signal continuity. The message to Wall Street, to employees, to competitors stays consistent. We will use AI. We will not let it erode what makes this place different. The numbers, so far, say the bet is paying off.
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