The past month has been a bumpy ride for retailer Costco Wholesaler Corporation (NASDAQ:COST). The Costco stock share price has fallen significantly after investors were spooked by the firm’s second quarter results which showed that gross profit margins were shrinking.

However, this slump for COST stock is a great entry point for long-term investors that want to add a grocer to their portfolio.

Worries about Costco are overdone-the company’s long-term potential makes it a solid buy-and-hold choice.

Costco Stock is protected by a Wide Moat

Although Costco hasn’t been totally immune to the troubles facing retailers in recent years, the discount wholesaler has a relatively wide moat due to its unique position in the retail space. Costco offers its members the opportunity to get bargain-basement prices on quality products if they are willing to buy in bulk.

That makes the company unique compared competitors like Amazon.com Inc. (NASDAQ:AMZN) because the bulk-buying opportunity appeals to its customers.

Costco also offers its customers somewhat of a “treasure hunt” experience because of the store’s constantly changing inventory. That experience adds value to consumers’ store visit and keeps them interested in returning.

While there are some drawbacks to this business model, for example the fact that buying such huge quantities may not appeal to those living in urban areas with less storage space, it also keeps the brand isolated no matter what the competition is doing.

Other grocers like Kroger Co (NYSE:KR) and even big-box retailer Walmart Inc. (NYSE:WMT) have struggled with worries about Amazon’s purchase of Whole Foods, but for Costco, that acquisition is unlikely to make any real difference to the company’s customers. Amazon and Whole Foods don’t offer low cost or bulk-buying, making the deal no more than a blip on Costco’s radar.

Loyalty and Costco Stock

Costco’s bulk-buying model sets it apart from Amazon, but there are many comparisons to be made between the two when it comes to customer loyalty. Much like Amazon, Costco has built a loyal following of customers who choose to shop their first because of their membership.

The majority of Costco’s income comes from membership fees- the firm makes very little money on its goods sold. That means people have come to expect that Costco will offer them the lowest possible price, so members are happy to shop there for everything from electronics and furniture to snack foods.

On top of that, Costco has built somewhat of an ecosystem that keeps people renewing their subscription. The company’s fuel prices are unbeatable and often entice members to drive long distances to benefit from the savings.

The store is also known for offering free samples and a section of low-priced hot foods that customers can eat before or after their shopping trip.

In short, Costco is constantly thinking about ways to make its members value their experience at the store and that focus has kept store traffic up even as online shopping gains momentum. Costco customers are insanely loyal and the company boasts a 90% renewal rate among members.

Solid Long-Term Bet

Another big reason to snap Costco stock up while its share price is under pressure is the firm’s long-term growth potential. Last quarter comps in the U.S. were up 5.7% suggesting that the company’s appeal is still strong among its customers.

The fact that the company makes virtually no money on the sale of goods means that its revenue stream is steadier than competitors’ because the majority is coming from regular subscription fees. Management is even expecting to continue growing it’s renewal rate from its already impressive 90%.

Over the next few years Costco is also planning to continue expanding, both online and with physical locations. The company is planning to open 15 new locations in the fourth quarter and while the brand is already huge in the U.S., it’s footprint abroad in Europe and Asia is considerably smaller which opens up another wide runway for future growth as well.

The Bottom Line on Costco Stock

Amazon isn’t the only pick in the retail space- Costco has a lot going for itself as well. The wholesaler has proven that its business is well insulated from big-moves by competitors and it’s moat appears to be widening as the firm grows its business.

The recent pullback in Costco stock shouldn’t be taken as a warning, but rather an opportunity to jump on board.

As of this writing, Laura Hoy was long AMZN.