Costco

For the China Ocean Shipping Company, see COSCO.

Costco Wholesale Corporation

Company type	Public (Nasdaq: COST)
Industry	Retail (Warehouse Club)
Founded	1983, Costco, Seattle, Washington
Headquarters	Issaquah, Washington
Key people	Jim Sinegal, Founder & CEO Jeffrey Brotman, Founder & Chairman Richard Galanti, CFO Dick DiCerchio, COO
Products	Retail (Specialty) Private Label - Kirkland Signature
Revenue	$64.4 billion USD (2007)
Operating income	6,708,000,000 United States dollar (2021)
Net income	5,844,000,000 United States dollar (2022)
Number of employees	132,000
Website	www.Costco.com

Costco Wholesale Corporation (Nasdaq: COST) is the largest membership warehouse club chain in the world based on sales volume, headquartered in Issaquah, Washington, United States and founded in Kirkland, Washington. with its flagship warehouse in nearby Seattle. Costco's Canadian operations are based in Ottawa, Ontario. It is the fourth biggest general retailer in the United States, after Wal-Mart, The Home Depot, and Kroger.

History

Entrance of a typical Costco warehouse club.

Founded by James Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington, on September 15, 1983. Sinegal had started in retailing by working for Sol Price at both FedMart and Price Club. Brotman, an attorney from an old Seattle retailing family, had also been involved in retailing from an early age.

In 1993, Costco merged with Price Club (called Club Price in the Canadian province of Quebec). Costco’s business model and size were similar to those of Price Club, which was founded by Sol and Robert Price in 1976 in San Diego, California. Thus, the combined company, PriceCostco, was effectively double the size of each of its parents. Just after the merger, PriceCostco had 206 locations generating $16 billion in annual sales. PriceCostco was initially led by executives from both companies, but then Sol and his son Robert Price founded Price Enterprises and left in 1994.

In 1997, the company changed its name to Costco Wholesale.

Costco today

Costco in California. Notice the electric car charging stations.

On those lazy Saturdays and Sundays, please check out Mr. Lobster at the seafood roadshow where he displays his lobster/salmon juggling for all his customers.

The main competitor in the membership warehouse space is Sam's Club. Although Sam's Club has more warehouses than Costco, Costco has higher total sales volume. Costco employs about 132,000 full- and part-time employees, including seasonal workers. It has 51.8 million members, representing 28.3 million households . For fiscal year 2007, which ended on September 2, 2007, the company's store sales totaled $64.4 billion. In 2006, $1.1 billion of the revenue was net profit. Costco is #29 on the Fortune 500.

In the United States, Costco is closed on the following holidays (most other major retailers stay open on all of these dates except Thanksgiving and Christmas):

• New Year's Day
• Easter
• Memorial Day
• Independence Day
• Labor Day
• Thanksgiving Day
• Christmas Day

Other retail formats

Costco currently operates two other retail formats, a home furnishings concept known as "Costco Home," and a strictly business operation known as "Costco Business Center."

There are currently two Costco Home locations (Washington State & Arizona, both in former HomeBase warehouse stores) with plans for a third on the west coast. Costco membership is required, and hours of operation are identical to that of regular Costco warehouses.

There are a handful of Business Centers, all of which offer delivery via a private fleet of trucks. Some locations have a retail selling floor open to Costco members who wish to shop in person, while others are strictly delivery only.

Plans for Costco Fresh, a gourmet supermarket, were abandoned in 2004. Many locations were fitted with a refrigerated room. A red sign hangs over the entrance to the room saying Costco Fresh.

Sales model

Typical Costco warehouse interior

Costco focuses on selling products at low prices, often at very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses. Furthermore, Costco does not carry multiple brands or varieties where the item is essentially the same except when it has a house brand to sell, typically under the Kirkland Signature label. This results in high volume of sales from single vendor, allowing further reduction in price, and reducing marketing costs. Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must bring their own bags or use the merchandise shipping boxes from the company's outside vendors.

Currently membership fees at Costco are $50 per year for Goldstar and Business Memberships, which can be upgraded to Executive membership for an additional $50 per year. Along with the additional benefits the executive membership has (e.g. car purchasing savings, home loans, car insurance, check printing services) executive members also receive an annual "2% Rewards Check" of up to $500.00 from Costco on all purchases made (excluding select items such as gasoline, alcohol, and tobacco).

Costco is only open to members and their guests, except for purchases of liquor and gasoline in some U.S. states due to state law; and prescription drugs due to federal law. Memberships must be purchased in advance for one year (as of May 5, 2007). Purchases made at Costco's website do not require a membership; however, a 5% surcharge is added to purchases made by non-members. Purchases made with Costco Cash Cards also do not require a membership, and there is no surcharge. Canadian and United States Costco locations only accept American Express (not in the UK and only Samsung credit cards in South Korea), PIN-based debit cards (Interac in Canada), cash, and checks. Guests of members are not allowed to write checks. American Express is the only accepted credit card (in the United States and Canada) because they do not charge Costco retailer fees (a percentage of revenue from total sales made on "X" credit card; Visa for example) as Costco's margins are low in comparison to other retailers, they cannot accept the fee without raising prices. The relationship between Costco and American Express is an interesting one as American Express retailer fees are usually the highest.

Lighting costs are reduced on sunny days, as most Costco locations have several skylights. During the day, electronic light meters measure how much light is coming in the skylights and turn off an appropriate percentage of the interior lights. During a typical sunny day, it is very common for the center section of the warehouse to have no interior lights burning.

Most products are delivered to the store on shipping pallets, and the pallets are used to display products for sale on the retail floor. This contrasts with other retailers that break down pallets and stock individual products on shelves. Costco caps its profit margin on most products at 14% or 15%, but generally limits price markup on products from 8%-10%.

Food service

A food concession stand at the Costco warehouse in Overland Park, Kansas

Most Costco locations have either a food court or a hot dog cart. Both offer a quarter-pound kosher hot dog or Polish sausage and 20 fluid oz drink (with free refill) for $1.50, the same price as when (pre-merger) Costco opened in 1983.

Costco Cash Cards

Costco Cash Cards can be purchased in the warehouse and members can load them with money to make non-cash purchases at all Costco warehouses in the United States. Because Costco gas stations take only Costco Cash, debit cards, and American Express, people who can only pay for gas by check or cash must purchase a Costco Cash Card inside the building before filling up.

Return policy

Costco memberships can be refunded in full at any time before they expire. Costco guarantees almost all of their products with a full refund at any time. Exceptions include televisions, projectors, computers, cameras, camcorders, digital audio players, and cellular phones; these may be returned within 90 days of purchase for any reason for a refund. After 90 days those returns must be due to an unrepairable break down. Costco gives a free two-year warranty for new TVs and computers in addition to the manufacturer warranty.

Online

The domain costco.com attracted at least 58 million visitors annually by 2008 according to a Compete.com survey.

Products

Over the years, Costco has gradually expanded its range of products and services. Initially it preferred to sell only boxed products that could be dispensed by simply tearing the shrinkwrap off a pallet. It now sells many other products that are more difficult to handle, such as fresh produce, meat, dairy, seafood, fresh baked goods, flowers, clothing, books, software, vacuums, appliances, home electronics, jewelry, art, fine wine, hot tubs, and furniture. Many stores have tire garages, pharmacies, hearing aid centers, optometrists, photo processors, and gas stations. Optometrists working at Costco locations will see patients without Costco memberships. However to fill prescriptions through the optical department, membership is required.

Some locations have liquor stores, often kept separate in order to comply with liquor license restrictions. In some states (such as Texas), the liquor store must be owned and operated by a separate company with separate employees. In 2006, Costco won a court decision against the state of Washington allowing it to purchase wine directly from the producer, bypassing the state retail monopoly.

Costco also acts as an investment broker and travel agent. They have also introduced an automobile purchasing program where members can purchase new cars at specially arranged prices. They also have an agreement with Ameriprise for auto and home insurance.

In 2004 Costco offered an original artwork by artist Pablo Picasso on their online store. More recently a "100 point" 1982 Mouton Rothchild wine has been offered as well as other rare wines in rotation.

Kirkland Signature

File:Kirkland logo.gif

Kirkland Signature logo

Kirkland Signature branded bottled water

Kirkland Signature is Costco's store brand, otherwise known in the retail industry as an "own-brand" or "house brand". It is found exclusively at Costco stores and is trademarked by the company. The name derives from the fact that Costco's corporate headquarters were located in the city of Kirkland, Washington, between 1987 and 1996.

Costco introduced Kirkland Signature as its house brand in 1995. The idea was to identify categories in which a private label product could provide brand name quality at discounted prices.

To counteract the consumer confidence problem common in store branding, Kirkland Signature sometimes relies on co-branding. According to Costco, while consumers may be wary of same-store-branding, they are less likely to be wary of brands that they are familiar with and trust.

Kirkland Signature products are generally rated highly. Consumer reports have given high ratings for several products including batteries and laundry detergent. A number one rating was given to Kirkland Signature anodized cookware which sells for significantly less than some comparable products.

Trivia

• The very first Price Club location was an old airplane hangar, previously owned by Howard Hughes, and is still in operation today (Warehouse #401 San Diego).
• Prior to the 1993 Price Club/Costco merger, Wal-Mart founder Sam Walton wanted to merge Sam's Club with Price Club.
• In 2002, Costco surpassed $600 million in sales of wine becoming the largest wine retailer in the United States.
• Costco became the first company ever to grow from zero to $3 billion in sales in less than six years.
• Costco Optical ranked as the fourth-largest optical company in the US.
• The ACSI (The American Customer Satisfaction Index) named Costco number one in the retail industry with a score of 81 in 2006.
• A Costco Warehouse in Albuquerque, New Mexico was used in the filming of the 2006 film Employee of the Month, starring Dane Cook and Jessica Simpson. In the movie, the warehouse is given the name Super Club.
• The world's largest Costco is located in Hillsboro, OR, USA. (2008)

Working at Costco

While some former Price Club locations in California and the northeastern United States are staffed by Teamsters, the majority of Costco locations are not unionized. The non-union locations have revisions to their Costco Employee Agreement every three years concurrent with union contract ratifications in locations with collective bargaining agreements. Similar to a union contract, the Employee Agreement sets forth such things such as benefits, compensations, wages, disciplinary procedures, paid holidays, bonuses, and seniority. As of March 2008, non-supervisory hourly wages range from $11.00 to $19.75 in the United States and 11.00 to 21.85 in Canada.

Product-demonstration (e.g., food samples) employees are employed by an outside company. In the western USA, the company is called Warehouse Demo Services, Kirkland, Washington. Costco also uses Club Demonstration Services, based in San Diego, California.

Locations

Costco in the world

As of June 18, 2008, Costco has 537 locations.

• 393 in the United States and Puerto Rico
• 75 in Canada
• 31 in Mexico (50-50 joint venture)
• 19 in the United Kingdom
• 8 in Japan
• 6 in South Korea
• 5 in Taiwan
• Costco has announced that it will begin to open stores in Melbourne, Australia in mid 2009, and in Sydney and the Gold Coast in late 2009. Membership will be A$50 on an annual basis.

See also

• Sam's Club - Competitor
• BJ's Wholesale Club - Competitor

References

This article is based on material taken from the Free On-line Dictionary of Computing prior to 1 November 2008 and incorporated under the "relicensing" terms of the GFDL, version 1.3 or later.

External links

• Official website
• How Costco Became the Anti-Wal-Mart - NY Times
• Why Costco is so addictive
• "The Cult of Costco"
• Company History