Costco Is A Dollar Warehouse Club

Costco has many risks associated with its financial and operational performance. One of the biggest risks that Costco is facing todays is the competition from other retailers and wholesalers, such as Wal-Mart and Target. Costco compete with its competitors for customers, qualified employees and management personnel, suitable sites and suppliers. The retail business is extremely competitive and continues to get even more completive. Such events as the evolution of retailing in online channels has improved the ability of customers to compare prices and products and as a result enhanced competition. Any significant increases of competition may adversely affect Costco’s financial performance, and make Costco incapable to compete successfully in the future.

Costco Wholesale Corporation (Costco), with its subsidiaries operates membership warehouses that offer its members low prices on a limited selection of branded and selected private-label products in a range of merchandise categories.

Costco does not have distributors or retailers to supply its products to the end users. They do, however, have reseller who buy their products for their business and sell to the end user. For example, Costco’s business membership offers tax-exempt purchases to restaurant and small grocery store owners; they then sell those purchased goods to the end user.

The first warehouse store was opened in 1976 by Price Club which was founded by Sol and Robert Price in San Diego, California. Initially it was open only to Business shoppers. By 1983, Jim Sinegal and Jeffrey Brotman created Costco and open its first membership warehouse in Seattle, Washington on September 15, 1983. Within the first three years Costco had opened 17 more warehouses in other locations, had 1.3 million members, and 3,740 employees (Costco, 2014a). Costco expanded

Most wholesalers either cut costs such as employee wages or insurance, or increase prices to increase profit. Costco’s strategy involves treating employees well, cultivating consumer loyalty, and not allowing another corporation to undercut its prices-- ensuring a profitable future.

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

Costco is a membership club, committed to bringing their individuals the best conceivable costs on quality brand-name stock. With several areas around the world, Costco

In 1982, Jeff Broman and Jim Sinegal plan to start a wholesale club business. One year later, the first Costco warehouse was open in Settle, Washington (Costco). In the following years, Costco crossed into national market, it expand their market to United States, Canada, Mexico, Japan, Taiwan, Korea, and the United Kingdom (Costco Wholesale Corporation).

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

Costco's mission is to “continually provide our members with quality goods and services at the lowest possible prices (Costco Wholesale Mission Statement - Profits and Prices Revolve Around Ethics, 2013)

Costco has a very unconventional advertising technique, spending $0 in marketing. What they pay in advertising is very little and can be found on their big trucks with a big red, white, and blue Costco logo, yet they are extremely effective at conveying to the public that they exist, and are selling goods to business and non-business consumers at wholesale prices. How do they do it? It’s very commonly known as “word of mouth”, and has effectively made Costco one of the most successful businesses in the world. When asking any common man or woman where someone could purchase goods at wholesale prices, the average answer will likely be “Costco”. There are no commercials, or billboards, or website advertisements, or spam that shows up on search engines. Their greatest advertisements are the enormous stores and parking lots crowded with people trying to do some shopping. Despite the lacking of marketing, Costco is a household name.

In September 1983 Costco's first warehouse opened in Seattle, Washington. At this time, warehouse outlets had long existed, but the concept of a wholesale club was relatively new and promising. Dubbed "buyers' clubs" and begun in 1976, these warehouses were wholesalers that required shoppers to become members and pay an annual membership fee. The membership fee helped reduce already-low overhead, so that items could be sold at an average of 9 percent over cost from the manufacturer. At the time Costco was formed, membership warehouses were primarily a West Coast phenomenon; however, since then, their popularity has spread throughout the United States, across the borders to Canada and Mexico, and beyond to many other countries.

Suppliers: Costco has a famous business model, in which it maintains a good relationship with suppliers, because Costco is buying huge quantities, and general they are getting lower or similar price on same products compared to other buyers. So they get the price no higher than other retailers, and they still keep the price down to save for people. Sometimes, the vendor would show them the cost of goods, and let them decide how much the buy price would be to benefit both and have the fair profit, as indicated by their merchandise manager Claude Gravel (Haney, 2011).

Costco Wholesale Corporation, which began operations in 1983 in Seattle, originated the membership wholesale club retail concept. By providing low prices on consumables like fresh foods, health and beauty care items, high-quality apparel, electronics, jewelry and other general merchandise, the company pioneered the retail concept that encourages members to visit regularly to achieve savings. In the meantime, the retailer has been successful in encouraging members to spend the savings on impulse big-ticket, discretionary purchases.

At the end of 2012, Costco was a successful business, but there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor is able to provide the service at a much reduced cost, problems will arise. As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is that their finances are too reliant on acquiring new members and not on selling their products. If they cannot keep acquiring new members at a steady rate, their financial infrastructure could suffer.