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Costco Wholesale Corporation, doing business as Costco, is an American multinational corporation which operates a chain of membership-only warehouse clubs. As of 2015, Costco was the second largest retailer in the world after Walmart, and as of 2016, Costco was the world’s largest retailer of choice and prime beef, organic foods, rotisserie chicken, and wine.
Costco’s worldwide headquarters are in Issaquah, Washington, a suburb east of Seattle; the company opened its first warehouse in Seattle 36 years ago in 1983. Costco Wholesale Corp., which often leads the retail pack on pay, just boosted its starting wage to as much as $15.50 an hour. The warehouse retail chain’s success is in part due to its ability to maintain a stable, satisfied workforce. The company didn’t immediately respond to a request seeking comment. Costco Chief Financial Officer Richard Galanti said in an October conference call that the average hourly wage of its workers was $22.50.
As of July 10, 2019, Costco had a total of 776 warehouses: 539 in the United States and Puerto Rico, 100 in Canada, 39 in Mexico, 28 in the United Kingdom, 26 in Japan, 16 in South Korea, 13 in Taiwan, 11 in Australia, two in Spain, one in Iceland, one in France, and one in China.
- Best Buy Co. Superstores (1983–1984)
- Best Buy Superstores (1984–1989)
- NASDAQ: COST
- NASDAQ-100 Component
- S&P 100 Component
- S&P 500 Component
- Price Club
- July 12, 1976; 43 years ago (as Price Club)
- San Diego, California
- September 15, 1983; 36 years ago (as Costco)
- Seattle, Washington
- James Sinegal 1983
- Jeffrey Brotman 1983
- Sol Price 1976
- Issaquah, Washington, United States
- Jeffrey Brotman 1983
- Sol Price 1976
- 770 (March 2019)
- United States, Canada, United Kingdom, Australia, Mexico, Japan, China, Taiwan, Spain, France South Korea, Iceland
- Hamilton E. James
- Craig Jelinek
- (President and CEO)
- Kirkland Signature
- Cash & Carry
- Warehouse club
Costco make your shopping experience a pleasurable one.
How Costco App Works?
Now Digital Membership Card is available on the Costco App.
- Download the Costco app from the App store or the Google Play Store
- Launch the Costco app, and then tap the Digital Membership Card icon at the bottom of the screen. The login page will appear.
- Login to your Costco.com account: Follow instructions on the login page to sign in with an existing Costco.com account. Or, create a new Costco.com account.
- Verify your membership. If you have not previously verified your membership online, you will be prompted to do so. You will be asked to confirm who you are through a series of questions
- View your digital membership card: After successfully verifying your membership, the Digital Membership Card will appear on your screen.
- Use the app at your local warehouse: Launch the app when you enter the warehouse and to begin checkout at the register.
Business Strategy of Costco App:
- Target Upper-Middle Class
- Offering High Quality Products at Discount Prices
- Increase Membership Base
- Keep Employees/Suppliers Happy
- Open New Warehouses Offering Additional Services
- Word-of-Mouth Marketing
Costco has two types of membership, Business and Individual, both membership types can be upgraded to Executive membership program- which allows to earn a 2% reward on most purchases, along with other benefits.
- Business members generally paid an annual membership fee of $100 for the primary membership card.
- Individual members generally paid an annual membership fee of $50.
What is the Costco Business Model?
Costco’s business model is to generate high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise. Costco’s business model is built upon customer memberships, who join and renew annually. This directly shows customer loyalty as satisfied customers will renew annually. Costco’s business model is great, all customers want to find good quality bargains and Costco is setup to keep their customers coming back to find them. Here goods are usually bulk-packaged and marketed primarily to large families and businesses. Most products are delivered to the warehouse on shipping pallets and these pallets are used to display products for sale on the warehouse floor. If Costco feels the wholesale price of any individual product is too high, they will refuse to stock the product. For example, in November 2009, Costco announced that it would stop selling Coca-Cola products, because the soft-drink maker refused to lower its wholesale prices. Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must use a shopping cart, bring their own bags, or use empty merchandise shipping boxes from the company’s vendors.
Costco’s business model has the following characteristics:
- High volume, high inventory turnover, high quality and wide range or product offerings, purchasing directly from manufacturers.
- They are known for their low gross margins ~15%, which gives them a competitive price advantage.
- They work with manufacturers to create unique bulk packaging, which strengthens this advantage (i.e. nowhere else can you find a comparably packaged /priced product).
- Membership model reinforces customer loyalty. Fees related to membership supplement their revenue stream.
- 23% – Sundries (including candy, snack foods, tobacco, alcoholic and nonalcoholic beverages and cleaning and institutional supplies)
- 18% – Hardlines (including major appliances, electronics, health and beauty aids, hardware, office supplies, garden and patio, sporting goods, toys, seasonal items and automotive supplies)
- 21%- Food (including dry and institutionally packaged foods)
- 10% – Softlines (including apparel, domestics, jewelry, housewares, media, home furnishings, cameras and small appliances)
- 12% -Fresh Food (including meat, bakery, deli and produce)
- 16% – Ancillary and Other (including gas stations, pharmacy, food court, optical, one-hour photo, hearing aid and travel)
A Glimpse at Costco Business Model Few Key Ingredients
The value proposition of the Costco business model is quite strong. The company offers low prices to its members with a limited selection of nationally-branded and private-label products in a wide range of merchandise categories.
While those items will produce high sales volumes, they will also be driven by fast inventory turnover.
Costco offers to merchandise in a few key categories:
- Foods which comprise dry foods, packaged foods, and groceries
- Sundries which comprise snackfoods, candy, alcoholic and non-alcoholic beverages, and cleaning supplies
- Hardlines which comprise major appliances, electronics, health and beauty aids, hardware, and garden and patio
- Fresh Foods comprising meat, produce, deli, and bakery
- Softlines comprising apparel and small appliances
- Ancillary which comprises gas stations and pharmacy
The Costco Mobile App is the easiest way to save time and money on the go. We’ve completely re-thought our mobile app and made it easier for members to access the incredible values found only at Costco.
• New! Your membership card is now available on the Costco app. Enter the warehouse and begin checkout at the register by using the Digital Membership Card on your phone.
• SAVINGS: With the Costco Mobile App you’ll always have the latest warehouse savings right on your device.
• SHOP: Members can shop Costco.ca’s unique, expanded selection, offering thousands of items not found at your local warehouse, delivered straight to your door.
• WAREHOUSE INFO: See details about your nearest Costco including hours of operation and holiday hours, and navigate straight to the warehouse.
• SHOPPING LIST: Keep track of the items you want to pick up on your next trip to Costco.
• PHOTOS: Order prints, wall decor or photo gifts anywhere, anytime.
Costco is an interesting store in the way they operate and is completely different than a traditional supermarket or grocery store.
What Makes Costco Different?
- In the US, Costco’s average Warehouse has annual sales of $168m. In contrast, the average Sam’s is $91m. That’s $3.1m per week at Costco vs $1.8m per week at Sam’s.
- Costco has 3,700 active SKUs in their core WH business area. Compare that to a Walmart Supercenter with 140,000 SKUs.
- Costco’s high sales are achieved without any advertising (no newspapers, radio, TV or billboards), apart from targeting marketing when opening a new WH. New members are added due to positive word-of-mouth of existing members.
- 91% of all members currently renew their membership in US/Canada (ie, the attrition rate is only 9%).
- Top management pays extremely close attention to daily sales, new member sign-ups, member renewals, average spend per visit and average number of member visits per month.
- Costco constantly works at bringing items to market at the lowest cost. Rather than increasing profits by raising its margins, it chooses to increase profits by selling more volume at lower margins. If Costco cannot obtain an item at the lowest cost, it will not stock it.
- Culture is not the most important thing it’s the only thing. The same attitude about price, margin and productivity, etc, is seen throughout the whole company.
- Costco wants to build an institution that will be here 50-60 years from now.
- Warehouse Mangers are the key to Costco’s success. Their job requirement is to develop people. The company can be judged on its WH managers, 76% of whom started as hourly employees, reflecting its promote-from-within corporate value.
Want the next big mobile application development like Costco? Get in touch with us and know how we can help you.
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