Internal Analysis: SWOT
* Positive Business Strategy – The way Costco operates is providing items in bulk at low prices in membership only warehouses. This has caused an increase in sales with the current recession, which also leads to growth during the slow economic times. * Treasure Hunt Merchandising – Costco changes about a quarter of their items to sell regularly. For example, customers may find Ragu one week, and Prego the next, it just depends on who Costco strikes a better deal with. They also offer deals on name brand products that last only a limited time. * High Membership Renewal Rate – In 2007, it was reported that Costco had an 87% membership renewal rate. The company also boasts that it registered a strong increase in membership numbers, which also includes the amount of Executive membership status upgrades. * Takes Care of Employees and Gain Employee Loyalty – Employees at Costco on average make about $15.97/hr versus $10.30/hr (Wal-Mart employee) in Metro areas.Wal-mart refuses to even release Sams Club average wages. Costco employees also put a higher percentage back into the company, by shopping where they work. They also receive exceptional benefits. * Low Markup – There is nothing sold at Costco that is marked up more than 14% of what Costco paid. In fact, the average markup is actually 10% versus 20%, which is Wal-mart’s average markup, and versus 50%, which is the average department store markup. * Good return Policy/Customer Service – Costco will accept the return of almost any items it sells without a receipt or obligated store credit. This keeps customers from dealing with the usual hassle of a return. * Strong Management – Most of Costco’s management staff and vice presidents started out in the company with entry level jobs. This way they are familiar with business operations already and can better manage a staff and the business and also boosts moral to current employees knowing there are opportunities for advancement. * Wide Geographic Coverage – At the end of fiscal year 2010, it was reported that there are 573 Costco warehouses. In the United States and Puerto Rico alone there are 417, in Canada 79, Mexico 32, United Kingdom 22, Japan 9, Korea 7, Taiwan 6, and 1 in Australia. * Increase in Revenue – Costco has reported that they had $76.3 billion in revenue in 2010, which happens to be a 9% increase from last year. * Easy Online Ordering – Costco’s homepage is set up in a way that makes shopping online a breeze. They show the products that can be ordered at a variety of different angles and sizes along with prices and quantity to order. Weaknesses:
* Amount of Items Offered in Store - A Costco generally offers about 4000 different items that may vary by region. That amount is similar to other warehouse clubs, but in comparison to Wal-mart it is quite puny. * Most everything is Supersized – Supersizing reduces packaging costs, but instead of having several selections of items, customers may only have one or a few. For example, a can of peaches only comes in two sizes: 106-ounce cans, or a pack of 6 fifteen ounce cans. Supermarkets may offer up to 20 different items to select from. * No Frills – Costco does not offer many of the things we take for granted when shopping at a supermarket. Such as bags, signs in the aisles, and acceptance of credit cards. Also, the warehouse is lit with skylights and not considered to have good lighting. * No Advertisements – Costco does almost no advertising at all. They rely heavily on word of mouth, which could be resulting in lower membership numbers than they could potentially have. * Online Sales Limited – Costco only offers online shopping to their 159 million American members and their 16.11 million Canadian members. However, they do not offer online shopping to any other members and are greatly missing out on sales. For example, there are 57.2 million internet user members in Japan. *...
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