Costco Business Analysis

Costco is a retail warehouse wholesale club that offers a wide variety of quality brand-name merchandise. The founders James Sinegal and Jeffrey Brotman opened the first warehouse in Seattle, Washington in 1983. Keeping costs down and passing the savings on to the members has been their operating philosophy. (Costco, n.d.) Today there are more than 600 warehouses worldwide with sales exceeding $64 billion. (Costco, n.d.) With a yearly membership fee ranging from $35.00 to $100.00, this provides not only businesses but also households the ability to receive a better price. With eliminating the costs of conventional retailers, Costco is able to provide the best possible price to all members.
The business is centered around retail sales
Costco strives for the best quality and price through their efficiency and low over-head. With the low-price/high-volume model they are able to control costs and pass the savings on to the consumers. (Costco, 2011) The main competitor of Costco is Sam’s Club and BJ’s Wholesale Club. While these warehouse clubs offer the same type of environment, Costco is still able to maintain its title of number one in the industry. This is partly due to the policy they have that no product gets marked up above 15% and the quality of the products the stores carry as compared to other clubs. (Wikipedia, n.d.) Wholesale clubs in general have performed better than smaller retail stores due to the appeal of savings to
The product that Costco sells is high quality with the lowest possible price to the consumers. By offering the best possible quality products consumers maintain a loyalty to the company. This is shown in the member retention rate of approximately 86%. (Widipedia, n.d) Pricing of products remains at the lowest rate possible due to the company policies and passing on the savings to the consumer. With consumers making more strict buying decisions this is imperative for the continued growth of the business. Costco, along with the other warehouse clubs have cut costs by placing all available stock within the store to avoid extra labor costs. In turn this has also created a more appealing environment for consumers, as there is rarely a problem with products being out of stock. All products are purchased directly from manufacturers and left on the pallets visible and in reach for consumers. The company in its entirety has made great strategic planning on the store setup and product placement. Only offering approximately 4,000 products at any given time is yet another way to keep prices low. From the product setup to display, Costco is constantly reviewing these for a more efficient running of the business. The business practices and core values of the company