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 The business model of Costco’s is simply to generate high sales volumes and rapid inventory turnover by offering its members low prices on a limited selection of nationally branded and selected private-labeled products in a wide range of merchandise categories. The company’s business model is appealing in today’s market because of the economic downturn we are experiencing. Everyday American’s are looking to make their dollar stretch and Costco’s provide them with a great way to buy in bulk and stretch the consumer dollar to the max! The chief elements of Costco’s business strategy are strong within its pricing, product selection, and treasure-hunt merchandising. This strategy is key to the success of Costco’s. We can tell…show more content…
These are usually one time buys at very low prices and that turn very quickly. Costco’s customers shop their stores and look for these deals. These customers also know that when they spot these bargains they have to act quickly, because they would not last for long and most likely would not return. This concept naturally led to even high turnover of the “Treasure Hunt” products and is a definite competitive advantage. These characteristics – Low Prices, Limited Selection and the Treasure Hunt shopping environment are all key components to their winning Strategy. Costco’s prices are not too low…Low prices are what their brand was built on. Their merchants have very strict guidelines on maximum margins on every product line. Brand name merchandise for instance has a cap of 14% compared to 20 – 50% mark ups at other discounters. Jim Sinegal makes mention of other retailers selling a product for $10 and wonders how to sell it for $11, while his buyers are constantly looking for ways to sell that same product for $9. There is another example of where Costco was selling a pair of $50 jeans for $30. In this situation most competitors would be upset with Costco for destroying the street price and eroding the margins for the entire industry, but Costco has stuck to its guns and to its strategy not winning the friendship of any competitors undoubtedly. Even Wall Street was not happy with their low prices and margins and would draw attention to

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