Costco sells pallet junk.
Everyone who doesn't know what they are talking about re: retailing and marketing: shut it.
The posters mentioning that Costco has differentiation by product quality, return policy and lastly cost are totally right. They have a target, which they achieve, of a higher end consumer, with more disposable income. Specifically, than Sam's (and there were other, mostly regional cost clubs when they started).
This is well-known in business and marketing circles. Look it up.
What do we mean by quality? That the Costco buyers pick stuff that meets their target audience. Then the supplier has to sign a contract that the products delivered will continue to meet the quality of the samples. First few years I shopped there, products were a lot more transient, because (and aside from Business Week interviews, I've talked to a Costco buyer) suppliers would slip, or try to pull one over. That only works at Walmart/Sams, and Costco would happily drop them.
The return policy is not just to satisfy customers, but a way of /judging/ customer satisfaction. They log why the product was returned, and look at the results, I believe, twice a week. If there's a regular problem with a product, they fix it.
Apple, by dropping them, is missing out on this high customer-service model, and an audience that buys a surprising number of $800 items essentially on whim. Costco will not notice one whit, which is why they have the ability, during negotiations, to walk away when someone won't meet their basic markup, quality and return policies.