Costco: Marketing Audit
I. Company Description
In September of 1983, Costco Wholesale Corporation began operations in Seattle, Washington. The company was founded by James Sinegal, current President and CEO of Costco, and Jeffrey Brotman, Chairman of the Board of Directors. In October of 1993 Costco merged with a Delaware company called The Price Company to form Price/Costco, Inc. The Price Company was the first to establish the concept of a membership warehouse. In 1999, the company changed its name to Costco Wholesale Corporation and moved themselves back to Washington. Costco is currently one of the largest retail stores in the industry.
II. Business Mission
Costco’s mission statement is to focus on bringing high quality goods and services to the market at the lowest possible prices every day, but to do it with integrity at every level of the company while valuing the interests of the stakeholders (Annual Report 2006). The mission statement is well understood throughout the organization. Costco offers their customers with low prices on selected private and a limited selection of nationally branded products in a wide range of merchandise categories. Businesses and families can rely on Costco to offer high quality goods and services at every day low prices. Rapid inventory turnover, high sales volume per warehouse, leveraging an efficient operating structure, reduced handling of merchandise, and making themselves the low cost operator in retail are all key elements that make the company so successful (Annual Report 2006). Costco defines its business in terms of benefiting their customers. Creating value to a Costco membership card is a top priority throughout the company. In addition to offering low prices on top-quality goods and a variety of convenient services, Costco strives to be a valuable asset to every community where they do business. This means providing good jobs at good pay, being involved in community activities and charities, contributing to local tax revenues, offering a profitable business opportunity to their suppliers, and most importantly, taking care of our members (Costco Story).
III. Marketing Objective
High sales volume per warehouse- Costco is known as one of the largest retailers in the industry. One Costco warehouse reached more than $300 million in sales, and the average sales per warehouse was $127 million. Their sales have doubled and even tripled some of the nearest club competitors in the industry (Annual Report 2006). •
Be the current low cost operator in retail- Costco has many ways that can help them continue to be the low cost operator in retail. Costco stores are set up with as little frills as possible. Many items are kept in their original packages or left their pallets when they were shipped to the store. This helps to reduce Costco’s overhead costs. Also, Costco has a lot of buying power which allows them to buy more products at once for lower prices per item. This can help them save money and allow their members to save money as well (Costco Story). •
Open 33 to 35 new warehouses in 2007 (Annual Report 2006)- The $1.4 to $1.6 billion that Costco intends on spending during 2007 for real estate, construction, remodeling, and equipment for warehouse clubs and related operations will help Costco with their goal opening the new warehouses, in the US and Canada. •
Increase the number of warehouse club memberships- If the number of warehouse club membership’s increase, then there is a greater chance of a sales increase for Costco. Also, a larger membership allows the company to buy items in bigger quantities and to pass along savings to customers. “Customers who buy more items may feel that the membership fee is worth paying, because the cost is spread over all the products they buy” (Julie Bick 2007).
IV. Situation Analysis
Warehouse clubs and supercenters have grown in popularity over the last several decades. As they continue...
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