COSTCO

'Costco Wholesale Corporation' () is the largest membership warehouse club chain in the world based on sales volume, headquartered in Issaquah, Washington, United States,^[1] with its flagship warehouse in nearby Seattle.^[2] Costco's Canadian operations are based in Ottawa, Ontario, and Burnaby, British Columbia.^[3]

Contents

History

Costco today

Other retail formats

Sales model

Costco Cash Cards

Products

Kirkland Signature

Trivia

Working at Costco

See also

External links

References

History

Founded by James Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington on September 15, 1983.^[4] Sinegal had started in retailing by working for Sol Price at both FedMart and Price Club. Brotman, an attorney from an old Seattle retailing family, had also been involved in retailing from an early age.
In 1993, Costco merged with Price Club. Costco’s business model and size were similar to those of Price Club, which was founded by Sol and Robert Price in 1976 in San Diego, California.^[5] Thus, the combined company, PriceCostco, was effectively double the size of each of its parents. Just after the merger, PriceCostco had 206 locations generating $16 billion in annual sales. PriceCostco was initially led by executives from both companies, but then Sol and his son Robert Price founded Price Enterprises and left in 1994.
In 1997, the company changed its name to Costco Wholesale.^[6]

Costco today

The main competitor in the membership warehouse space is Sam's Club. Although Sam's Club has more warehouses^[7] than Costco, Costco has higher total sales volume.^[8] Costco employs about 132,000 full- and part-time employees,^[9] including seasonal workers, and for fiscal year 2006, ended on September 3, 2006, the company's store sales totaled $60.2 billion of which $1.1 billion was net profit.^[10] Costco is #32 on the Fortune 500.
As of August 23, 2007, Costco has 516 locations.

★ 379 in the United States and Puerto Rico

★ 71 in Canada

★ 30 in Mexico (50-50 joint venture)

★ 19 in the United Kingdom

★ 6 in Japan

★ 5 in South Korea

★ 4 in Taiwan (One under construction)
In the United States, Costco is closed on the following holidays (most other major retailers stay open on all of these dates except Easter, Thanksgiving, and Christmas):

★ New Year's Day

★ Easter

★ Memorial Day

★ Independence Day

★ Labor Day

★ Thanksgiving Day

★ Christmas Day

Other retail formats

Costco currently operates two other retail formats, a home furnishings concept known as "Costco Home," and a strictly business operation known as "Costco Business Center."
There are currently two Costco Home locations (Washington State & Arizona, both in former HomeBase warehouse stores) with plans for a third on the west coast. Costco membership is required, and hours of operation are identical to that of regular Costco warehouses.
There are a handful of Business Centers, all of which offer delivery via a private fleet of trucks. Some locations have a retail selling floor open to Costco members who wish to shop in person, while others are strictly delivery only.
Plans for Costco Fresh, a gourmet supermarket, were shelved in 2004.

Sales model

Typical Costco warehouse interior

Costco focuses on selling products at low prices, often at very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses. Furthermore, Costco does not carry multiple brands or varieties where the item is essentially the same. This results in high volume of sales from single vendor, allowing further reduction in price, and reducing marketing costs. Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must bring their own bags or use the merchandise shipping boxes from the company's outside vendors.
Currently membership fees at Costco are $50 per year for Goldstar and Business Memberships, which can be upgraded to Executive membership for an additional $50 per year. Along with the additional benefits the executive membership has (e.g. car purchasing savings, home loans, car insurance, check printing services) executive members also receive an annual "2% Rewards Check" from Costco on all purchases made (excluding gasoline and tobacco).
Costco is only open to members and their guests, except for purchases of liquor and gasoline in some U.S. states due to state law; and prescription drugs due to federal law. Memberships must be purchased in advance for one year (as of May 5, 2007). Purchases made at Costco's website do not require a membership; however, a 5% surcharge is added to purchases made by non-members. Purchases made with Costco Cash Cards also do not require a membership, and there is no surcharge. United States Costco locations only accept American Express (not in the UK and only Samsung credit cards in South Korea), PIN-based debit cards (Interac in Canada), cash, and checks. Guests of members are not allowed to write checks.
Lighting costs are reduced on sunny days, as most Costco locations have several skylights. During the day, electronic light meters measure how much light is coming in the skylights and turn off an appropriate percentage of the interior lights. During a typical sunny day, it is very common for the center section of the warehouse to have no interior lights burning.
Most products are delivered to the store on shipping pallets, and the pallets are used to display products for sale on the retail floor. This contrasts with other retailers that break down pallets and stock individual products on shelves. Costco caps its profit margin on most products at 14% or 15%, but generally limits price markup on products from 8%-10%.
Most Costco locations have either a Food Court or a Hot Dog Cart. Both offer a quarter-pound kosher hot dog and drink for $1.50, the same price as when (pre-merger) Costco opened in 1983.

Costco Cash Cards

Costco Cash Cards can be purchased in the warehouse and members can load them with money to make non-cash purchases at all Costco warehouses in the United States. Because Costco gas stations take only Costco Cash, debit cards, and American Express, people who can only pay for gas by check or cash must purchase a Costco Cash Card inside the actual Costco building before filling up.

Products

A food concession stand at the Costco warehouse in Mountain View, California

Over the years, Costco has gradually expanded its range of products and services. Initially it preferred to sell only boxed products that could be dispensed by simply tearing the shrinkwrap off a pallet. It now sells many other products that are more difficult to handle, such as fresh produce, meat, dairy, seafood, fresh baked goods, flowers, clothing, books, software, home electronics, jewelry, art, hot tubs, and furniture. Many stores have tire garages, pharmacies, hearing aid centers, optometrists, photo processors, and gas stations. Optometrists working at Costco locations will see patients without Costco memberships. However to fill precriptions through the optical department, membership is required. (Occasionally Costco employees will not be aware of the optometrists' status and initally deny entry to non-members, however after verifying with management will allow them access to the optometrist office.)
Some locations have liquor stores, often kept separate in order to comply with liquor license restrictions. In some states (such as Texas), the liquor store must be owned and operated by a separate company with separate employees. In 2006, Costco won a court decision against the state of Washington allowing it to purchase wine directly from the producer, bypassing the state retail monopoly.
Costco also acts as an investment broker and travel agent. They have also introduced an automobile purchasing program where members can purchase new cars at specially arranged prices. They also have an agreement with Ameriprise for auto and home insurance.
In 2004 Costco offered a (single) original artwork by artist Pablo Picasso on their online store.

Kirkland Signature

Kirkland Signature logo

''Kirkland Signature'' is Costco's store brand, otherwise known in the retail industry as an "own-brand." It is found exclusively at Costco stores and is trademarked by the company. The name derives from the fact that Costco's corporate headquarters were located in the city of Kirkland, Washington between 1987 and 1996.^[11]
Costco introduced Kirkland Signature as its house brand in 1995. The idea was to identify categories in which a private label product could provide brand name quality at discounted prices.^[12]
To counteract the consumer confidence problem common in store branding, Kirkland Signature sometimes relies on Co-branding. According to Costco, while consumers may be wary of same-store-branding, they are less likely to be wary of brands that they are familiar with and trust.^[13]

Trivia

★ The very first Price Club location was an old airplane hangar, and is still in operation today (Warehouse #401 San Diego).

★ Prior to the 1993 Price Club/Costco merger, Wal-Mart founder Sam Walton wanted to merge Sam's Club with Price Club.^[14]

Working at Costco

While some former Price Club locations in California and the northeastern United States are staffed by Teamsters, the majority of Costco locations are not unionized. The non-union locations have revisions to their Costco Employee Agreement every three years concurrent with union contract ratifications in locations with collective bargaining agreements. Similar to a union contract, the Employee Agreement sets forth such things such as benefits, compensations, wages, disciplinary procedures, paid holidays, bonuses, and seniority. As of March 2007, non-supervisory hourly wages range from $11.00 to $19.50.
Product-demonstration (e.g., food samples) employees are employed by an outside company.
In the western USA, the company is called Warehouse Demo Services, Kirkland WA^[15]. Costco also uses Club Demonstration Services, based in San Diego, California. ^[16].

See also

★ Sam's Club - Competitor

★ BJ's Wholesale Club - Competitor

External links

★ Official website

★ How Costco Became the Anti-Wal-Mart - NY Times

★ Why Costco is so addictive

References

1. http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-shareholder
2. http://www.costco.co.jp/eng/costco.htm
3. http://www.costco.ca/Service/FeaturePageLeftNav.aspx?ProductNo=10045080&lang=en-CA
4. http://www.costco.com/Browse/ProductSet.aspx?Prodid=24743&whse=&topnav=&browse
5. http://media.corporate-ir.net/media_files/irol/83/83830/HistoricalHighlights.pdf
6. http://www.costco.com/Membership/MembershipPopup.aspx
7. http://pressroom.samsclub.com/content/?id=3
8. http://www.hoovers.com/sam%27s-club/--ID__56161--/free-co-factsheet.xhtml
9. http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-homeprofile
10. http://money.cnn.com/galleries/2007/fortune/0704/gallery.500top50.fortune/32.html
11. Business Spotlight: Costco Wholesale
12. Costco buying power makes dent in private-label wine market
13. http://www.findarticles.com/p/articles/mi_m0FNP/is_23_44/ai_n15969670
14. http://money.cnn.com/magazines/fortune/fortune_archive/2003/11/24/353756/index.htm
15. http://wdsdemos.com/
16. http://www.clubdemo.com/About_Us.htm