Costco History

Topics: Costco, Sam's Club, James Sinegal Pages: 6 (1827 words) Published: March 28, 2013

The History of Costco Wholesale
DeAna Castro
Wilmington University
MGT 6501

Costco is a members only, international retail chain discount warehouse Club. They combine high quality merchandise with low prices. Costco began in 1976 as Price Club and restructured in 1997 as Costco Wholesales. Costco’s passion, mission, and ethics have been the key to the leading membership warehouse retail giant to supply their customers with low prices. Their low cost business strategies and dedication to their employees, suppliers and shareholders have proven success.

The History of Costco
The history of Costco began in July, 1976, in San Diego, California, and its name was Price Club. It was cofounded by Sol and Robert Price. The newly designed business was the first ‘warehouse’ business of it’s kind. This retail business originally targeted other business owners, but blended retail and wholesale. Price Club had unbeatable low prices and sold bulk items. Three years later, 1979, Price Club expanded two new locations. They acquired 200,000 members and profited 1 million dollars. Price Cub showed a loss of profits the first year, but the expansion proved profitable.

Jim Sinegal is a key player to the success of Costco because he started his career being mentored by Sol Price. He worked in the warehouse business at Price Club and another warehouse business called Fedmart, both owned by Sol Price. (Cardon). In 1983, Jim Sinegal and Jeff Brottman would open their own warehouse club near Seattle Washington, and it was called Costco (Daft, 2012 pp. 605). One year later, Costco expanded to nine warehouses in five states.

It was not long before Price Club realized they could achieve larger cliental if they served a selected audience of ‘non-business’ members. This payed off by the year 1984, Price Club sales would be greater than one billion dollars and is the first company to achieve this mark in a six year period. Almost ten years later, 1993, Costco and Price Club, would merge and become PriceCostco. This merge was nicely matched because they were very similar in business model and size. The combined companies included 206 locations and generated $16 billion in annual sales. Jim Sinegal would also become Costco’s President and chief executive (Priceviewer). The merger only lasted about four years and, in 1997, PriceCostco became Costco. Jim Sinegal remained President and chief executer (Carden, 2011).

Costco’s Mission statement: To continually provide our members with quality goods and services at the lowest possible prices in order to achieve our mission we will conduct our business with the following Code of Ethics in mind: Obey the law, Take care of our members and our employees, and respect our vendors/suppliers. “If we do these four things throughout our organization, then we will realize our ultimate goal, which is to reward our shareholders.” Jim Sinegal. (Costco, 2011)

Costco’s operating philosophy is to keep costs down, and pass the savings on to their customers. To offer high quality brand name merchandise at prices below any other avenue of retail. They accomplish this several ways. They buy high volumes of merchandise directly from manufactures and not distributers. The merchandise is shipped directly to a selling warehouse and not a storage area, and this also reduces freight costs. Costco warehouses are located on sites where property costs are minimum not on high real estate locations. Merchandise, or stock, is placed directly on a selling floor and on the pallets that they are delivered on. By doing this, labor and handling, costs are reduced to save the customer money. Sales and service employees are kept at a minimal to also reduce overhead costs. Last, because Costco’s has such an incredibly large membership base they have influence and power to haggle prices with their manufacturers and suppliers. “Costco is able to offer lower prices...
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