Costco Wholesale Corporation: Mission, Business Model, and Strategy

Costco’s former CEO Jim Sinegal designed the Wholesale Club Notion in 1983. Stores were quickly spread throughout the United States, Canada, and Mexico. According to Michaud (2012), “By the end of 2008, there were 550 stores in 40 states and 7 countries, with 54 million members” (Para. 3). The company creates a global chain of warehouses that carry value products as per their slogan. Michaud further discussed that “Costco is also one of the largest corporation in the world with 663 stores

Majority of Costco warehouses is located in U.S. and Canada. Therefore, Costco’s financial and operational performance is highly dependent on U.S. and Canadian operations. Within the U.S. it is highly dependent on its California operations, which contained almost third of U.S. net sales. Any substantial decline in California operations could

Costco’s business model is focused on producing high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of national name brands and select private-label products in a wide range variety. Costco is focused in low-cost strategy is concentrated on a narrow buy segment and out competing rivals by having lower costs, therefore being able serve a niche consumers at a lower price. (Gamble, John and Thompson, Arthur (2009)

Costco is one of the most profitable retail stores in the United States at the moment. This is in spite of the prevailing tough global economic times and stiff competition from stores such as Wal-Mart and Target. Costco, a members’ wholesale retail store, was founded in 1983 in Washington by Jeffrey Brotman, who serves as the current Chairman of the board of directors and James Sinegal, the current company president. Costco has not been spared by the current global economic conditions. They have affected it in a number of ways that have made the company’s management respond in a manner that is meant to ensure that the business not only survives but grows even stronger. First, Costco has taken strong measures to keep

The first of Porter’s Five Forces that impact Costco is the threat of new entrants. The threat of new entrants into the wholesale and membership retail space is low. There are several reasons why the threat of entrants into the market is low. The leading reason why the threat of entry is low is because an emerging company will struggle to have the volume necessary to compete with Costco. Costco is the sixth largest retailer in the U.S. As a major retailer, Costco has the highest discounts on a majority of its

Imagine a store that never advertises, has no signs in its aisles, doesn’t bag what you purchase, and charges you a fee just to walk in the door; Costco Wholesale is that shop. The purpose of this report is to illustrate how Costco as a multinational corporation strategically manages its marketing operation across global markets. For research purpose, this report will be focused on Costco wholesale in Japan and USA.

What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Costco Wholesale Corporation began operations in 1983 in Seattle, Washington. In 1993, it merged with The Price Company -which had pioneered the membership warehouse concept– and formed Price/Costco, Inc. However, in 1997, the company changed its name to Costco Companies, Inc., and in 1999 after relocating to Issaquah, Washington –where headquarters are located– it adopted the name it is now recognized for: Costco Wholesale Corporation. Its company’s website is www.costco.com, and trades on the NASDAQ under the symbol “COST.”

Costco announced its opening/expansion to the public in March 2013 and was officially opened on the 19th of November 2014. Currently Costco’s cash-and-carry-warehouse shares its location with numerous other retailing giant franchises. While commencing their new expansion into South Australia, the organisation was confronted with the marketing issue of competing against other retailing businesses, in regards to layout, location, physical and mental availability (Tauriello 2013).

Costco’s mission is, “To continually provide our members with quality goods and services at the lowest possible prices” (Costco.com, 2018). With the Costco mission in mind, their strategy was essentially simple in terms of marketing segmentation. Originally, Price Club started with a strategy of selling goods to the small business market, but branched off and began selling to selected non-business owners. As the world's first membership warehouse club, the strategy was simple and lucrative. After the two companies merged, Costco continued with the strategy of the membership warehouse club.

The Costco strategy for getting into the wedding gown business is to have a set of touring trunk shows at its Western stores during the season where people are planning their weddings. Costco's typical pricing strategy is to undercut competition and make up for this with high volume sales. The company applies this strategy to the wedding gown business as well. Costco offers one of the lowest prices of any company on its wedding dresses. The company's business plan ensures that the details have been fleshed out, and that has led to the unique distribution strategy for wedding gowns.

Years earlier, Sol Price had experimented with discount retailing at a San Diego store called Fed-Mart. Jim Sinegal got his start in retailing there at the age of 18, loading mattresses for $1.25 an hour while attending San Diego Community College. When Sol Price sold Fed-Mart, Sinegal left with Price to help him start the San Diego Price Club store; within a few years, Sol Price’s Price Club emerged as the unchallenged leader in member warehouse retailing, with stores operating primarily on the West Coast. Although he originally conceived Price Club as a place where small local businesses could obtain needed merchandise at economical prices, Sol Price soon concluded that his fledgling operation could achieve far greater sales volumes and gain buying clout with suppliers by also granting membership to individuals—a conclusion that launched the deepdiscount warehouse club industry on a steep growth curve. When Sinegal was 26, Sol Price made him the manager of the original San Diego store, which had become unprofitable. Price saw that Sinegal had a special knack for discount retailing and for spotting what a store was doing wrong (usually either not being in the right merchandise categories or not selling items at the right price points)—the very things that Sol Price was good at and that were at the root of the Price Club’s growing success in

Costco shoppers pay in order to buy merchandise at the store. This up-front investment increases the likelihood that customers will return and be loyal to Costco. After researching the information, I do believe it is safe to say that Costco follows this strategy and is successful with it. “Costco (NASDAQ: COST) has remained steady in a market where rival retailers including Macy's (NYSE:M) and Sears (NASDAQ: SHLD) have struggled mightily.

This paper explores Costco Wholesale as an international company, including its products, promotion and advertising methods, distribution channels, and pricing strategies. Costco Wholesale is the second largest global retailer founded in 1983 with headquarters in Issaquah, Washington, United States. Costco plans to grow the company further through expanding into untapped international markets. It has successfully expanded into the markets of the United Kingdom, Taiwan, Puerto Rico, Mexico, Korea, Japan, Spain, Canada, and Australia. The company provides members with a wide variety of quality products and brands, including Costco’s private-label Kirkland Signature™.

Costco’s main objective is to lure members into its warehouse weekly by providing new products weekly. According to Brian Woolf “To create a sense of excitement, urgency, and a need to visit frequently, Costco provides a flow of in-out items continually throughout the year: buy now, it may not be here next week!” Finding these non-repeated in-out offers creates a treasure hunt environment Woolf went on to say. These new products include big designer or luxurious