Costco Wholesale Corporation: Mission, Business Model, and Strategy

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CASE STUDY Costco Wholesale Corp.: Mission, Business Model, and Strategy In 2008, Costco’s sales totaled almost $71 billion at 544 warehouses in 40 states, Puerto Rico, Canada, the United Kingdom, Taiwan, Japan, Korea, and Mexico. More than 50 of Costco’s warehouses generated sales exceeding $200 million annually and 2 stores had sales exceeding $300 million. Sales per store averaged $130 million annually, about 75 percent more than the $75 million per store average at Sam’s Club, Costco’s chief competitor in the membership warehouse retail segment. The membership warehouse concept was pioneering by discount merchandising sage Sol Price who opened the first Price Club in San Diego in 1976. Originally conceived as a place where…show more content…
Management believed that rapid inventory turnover, when combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, enabled Costco to operate profitably at significantly lower gross margins than traditional wholesalers, mass merchandisers, supermarkets, and supercenters. Examples of the incredible volume that Costco generated included selling 110,000 carats of diamonds (2007), 40 million rotisserie chickens (2008), 40 percent of the Tuscan olive oil bought in the U.S., 29 million prescriptions (2007), 150 million croissants (2007), 100 million pounds of ground beef (2007), 1 million pumpkin pies during Thanksgiving week (2007), annual gasoline sales of $4.6 billion (2007), and 1.5 million $1.50 hot dog/soda pop combinations per week; Costco was also the largest seller of fine wines in the world ($499 million out of total 2007 wine sales of $1.01 billion). At one of Costco’s largest volume stores, which had annual sales of $285 million and 232,000 members, annual
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