To Examine Costco's Wholesale Business Model

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The Objective…
To examine Costco’s wholesale business model, Mission, and strategy related to the year 2008 and how those factors relates into industry success.

Summary
Revenues of 71 Billion
550 Warehouses Operates in:
40 States
9 Countries
$137 million average sales/warehouse
141,000 square feet/warehouse
143,000 employees worldwide
More than 1.4 million transactions/day

Background
CEO: James Sinegal
Headquarters: Issaquah, WA
Inception: Seattle, WA 1983
Stock Symbol: COST (NASDAQ)
Founders: James Sinegal & Jefferey Brotman

Corporate Strategy
Cost strategy
oPenetration Pricing
oBelow the Line Promotion
oNo frills
“Diversion” Buying Strategy
o“Treasure hunt" shopping experience

Products

Sundries which include candy, snack foods, alcoholic and non-alcoholic beverages, and cleaning supplies •Hardliners which include major appliances, hardware, electronics, and sporting goods •Soft liners including apparel, jewelry, and small appliances •Fresh food sales, like meat and baked goods

Other items which include gasoline, pharmacy sales, and Costco's one-hour photo development.

Customers (Who)
Costco targets independent small business owners who have typically $100,000 or more of personal income •Actual average Costco customer is women in large householders with income of $50,000 or more •Most popular with Hispanic and Asian ethnic groups

Typically customer visits 8-11 times per year

Customer Needs (What)

Quality Products
Relatively Low Prices
Convenience
Reliability

Membership (How)
Gold Star Member = $ 50
Business Member = $ 50
Executive Member = $ 100
Membership fees allow Costco to maintain low margins

Products (How)
Costco focuses on selling products at low prices, at very high volume. •Goods are usually bulk-packaged
Marketed primarily to large families and businesses....
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