Promotion Strategy: Costco Wholesale
Introduction and Competitive Landscape
Our general findings about Costco are that it is an all-around great, moneymaking, expanding company. To start off, Costco is a membership warehouse that offers its customers low prices on exclusive, private-label products in a wide assortment of merchandise categories that generate high sales volumes and quick inventory turnover. A combination of this turnover, resourceful distribution, merchandise with “no-frill” and a self-service warehouse gives this company extensively lower gross margins than your typical, everyday warehouse or supermarket. To prove that Costco is a moneymaking company all one has to do is glance at the sales figures. Even though 2010 was a rough year for everyone economically, Costco managed to acquire $76.3 billion in sales, which is a nine percent increase from last year’s sales. Not only did the company’s sales increase but also their net earnings exceeded $1.3 billion along with their earnings per share increased by 18%. Since Costco is acquiring more than enough revenue they decided to expand their company even more, and open 14 new units in 2010, which are all located in the U.S. and in Canada. Apparently consumers were looking forward to the opening of new Costco’s, because eight of the new buildings had opening day sales that surpassed $500,000 and three of the stores made close to a million dollars in sales within that first day. Since Costco has had great success with the opening of its stores in 2010, they plan to open 28 new stores by the end of 2011 (Greenhouse). Even though customers must pay a membership fee of $50 to shop at Costco, it is worth the time and amount of money they will save. Customers can save time by shopping at Costco because they have everything you need in one stop. Their assortment of products includes; sundries (snack foods, alcoholic and nonalcoholic beverages, cleaning supplies), hard lines (major appliances, electronics, office supplies, sporting goods, seasonal items), food (dry and packaged foods), soft lines (apparel, jewelry, home furnishings), fresh food (meat, bakery, deli, produce), along with gas stations, pharmacy and a one-hour photo. Our overall thought about Costco is that they seem to be doing something right with the amount of people who shop there and amount of sales earned every year (Greenhouse). An interesting fact about Costco is that they are one of the first companies to grow from zero to $3 billion in sales in less than six years. To increase their profits they decided to combined Costco and Price Club in 1993. By combining the company and being under the name PriceCostco, they established over 206 locations and had accumulated over $16 billion in annual sales. The man behind the store is Jim Sinegal (Greenhouse). He founded Costco Wholesale Club in 1983 and has been the president and chief executive since 1993. Jim Sinegal has a very simple philosophy of keeping costs down and passing the savings on to the members. Since 1997, the company has expanded into more than 570 locations around the world. In 1997 the very first Costco opened in Japan in Hisayama. They now have nine stores in Japan which include: one in Fukuoka, Chiba, Machida City, Hyogo, Yokohama, Kawasaki, Sapporo and two in Saitama (Costco.com). Current Promotion Strategy
Costco’s target market is small businesses and upper/middle class families. Since the U.S. has about 24.6 million people who are married with children under the age of 18, along with 24.7 million small companies, it gives Costco a reason to target these two areas in the U.S. The average income for a typical U.S. consumer is $48,201, however, the average income for Costco’s target consumer is over $100,000. Because of this is it makes it hard for Costco to reach the prospective market since the average income is mu Costco has many different strategies that help them compete against other...
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