Economic Impact

1619 WordsMay 14, 20157 Pages
ECON 310 Intermediate Microeconomics Costco; Your Local Friend Lawrence Lam Cal State Fullerton Superstores such as Wal-Mart, Target, and Home Depot have always been frowned upon by local businesses because of the competition it brings. Lower prices forces nearby stores to lower their prices until they shut down because of the negative profits from lowering their prices or because they don't acquire enough revenue to stay in the market. However ironically this feeling isn't shared towards the opening of Costco, another wholesale superstore. Costco's lower prices surprisingly causes local businesses to raise their prices. Even to the point where investors find area's relatively close to Costco to be an ideal location to…show more content…
Which all in all provides a better atmosphere of customer service towards consumers. This convinces consumers to prefer to shop at Costco, knowing that they will come out satisfied at the end of the day. (USA TODAY) Another key difference between Wal-Mart and Costco is the fact that Costco requires memberships from consumers. A contract which consumers pay in order to purchase any product at Costco. Membership prices range from $55-110 annually which in return for the discount prices is well worth. Costco memberships also provide reward programs for the more premium package such as 3% cash back for gasoline purchases. (ann arbor) This provides an incentive for consumers to do their bulk spending ,like groceries, at Costco; knowing that a small fraction will be returned in the short run which eventually adds up in the long run. This not only applies for those who plan on doing their groceries but also for heavy purchases; TVs, Mattresses, Computers..etc. However this does not appeal the consumers who wish to buy small quantity of units like picking up a gallon of milk. To pay $55-110 a year for a gallon of milk doesn't make sense, especially since Costco only sells packages of two gallons. Now you would have to spend more and are responsible for not letting the milk go to waste. This maintains local stores as an alternative option for consumers where they
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