Costco Case Study Essay Example
Costco Wholesale Case Study
David Barker
Author Note
David Barker is a student of Business at Thomas Nelson Community College.
Costco’s business model is “to generate high sales volumes and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories” (Thompson, 2008). Buying name brand and high quality products at the lowest prices available is very appealing to consumers. A good shopper is always on the lookout for getting the ‘most bang for the buck’ and stretching the dollar to get the best deal.
The chief elements that make up Costco’s strategy are low prices, a limited selection of certain highly-sought out products, and a “treasure hunt” experience. Keeping markup prices limited to less than 20% of retailer competition is definitely an attractive offering to all consumers. Maintaining a smaller selection than most retailers offered was maintained by offering a smaller selection of products that was expected to be highly sought after by shoppers and reducing the number of choices of a particular product. Approximately 25% of all merchandise was not restocked, thus enticing returning customers to be on the lookout for new and exciting bargains. Much of these sought after, yet limited offered products are considered luxury bargain deals that Costco hopes people won’t pass up on.
Jim Sinegal honed his skills for discount merchandising early on while working for Price Club. The simple vision of Sinegal had of “Our business is to give the customer the best value we can” (SlideShare, 2011) is the basic outlook that went into setting the company’s objectives. Utilizing the basic vision and objectives, as well as his experience while working under his mentor, Sol Price, Costco crafted and implemented their strategy which allowed them to become “the first U.S. company ever to reach $1 billion in sales in less than six years”
David Barker
Author Note
David Barker is a student of Business at Thomas Nelson Community College.
Costco’s business model is “to generate high sales volumes and rapid inventory turnover by offering members very low prices on a limited selection of nationally branded and select private-label products in a wide range of merchandise categories” (Thompson, 2008). Buying name brand and high quality products at the lowest prices available is very appealing to consumers. A good shopper is always on the lookout for getting the ‘most bang for the buck’ and stretching the dollar to get the best deal.
The chief elements that make up Costco’s strategy are low prices, a limited selection of certain highly-sought out products, and a “treasure hunt” experience. Keeping markup prices limited to less than 20% of retailer competition is definitely an attractive offering to all consumers. Maintaining a smaller selection than most retailers offered was maintained by offering a smaller selection of products that was expected to be highly sought after by shoppers and reducing the number of choices of a particular product. Approximately 25% of all merchandise was not restocked, thus enticing returning customers to be on the lookout for new and exciting bargains. Much of these sought after, yet limited offered products are considered luxury bargain deals that Costco hopes people won’t pass up on.
Jim Sinegal honed his skills for discount merchandising early on while working for Price Club. The simple vision of Sinegal had of “Our business is to give the customer the best value we can” (SlideShare, 2011) is the basic outlook that went into setting the company’s objectives. Utilizing the basic vision and objectives, as well as his experience while working under his mentor, Sol Price, Costco crafted and implemented their strategy which allowed them to become “the first U.S. company ever to reach $1 billion in sales in less than six years”