Costco
![]() | |
Company type | Public (Nasdaq: COST) |
---|---|
Industry | Retail (Warehouse Club) |
Founded | 1983 (Seattle, Washington) |
Headquarters | ![]() |
Key people | James Sinegal, Founder & CEO Jeffrey Brotman, Founder & Chairman Richard Galanti, CFO Dick DiCerchio, COO |
Products | Retail (Specialty) Private Label - Kirkland Signature |
Revenue | $60.2 billion USD (2006) |
1,969,000,000 United States dollar (2008) ![]() | |
1,283,000,000 United States dollar (2008) ![]() | |
Total assets | 68,994,000,000 United States dollar (2023) ![]() |
Number of employees | 132,000 |
Website | Costco U.S. Costco Canada |
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,[1] with its flagship warehouse in nearby Seattle.[2] Costco's Canadian operations are based near Ottawa, Ontario, and Vancouver, British Columbia.
History
Founded by James Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington on September 15, 1983.[3] Sinegal began by working for Sol Price at both FedMart and Price Club. Brotman, an attorney from an old Seattle retailing family, was also involved in retailing from an early age.
Costco’s business model was similar to that of Price Club, which was founded by Sol and Robert Price in 1976 in San Diego, California.[4] Both companies charged a membership fee and catered primarily to small-business owners.
The two retailers were similar in size when they merged in 1993; thus, the combined company, PriceCostco, was effectively double the size of each of its parents. At that time, 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. The company changed the name to Costco Wholesale in 1997.[5]
Costco today
![](http://upload.wikimedia.org/wikipedia/commons/thumb/f/f1/Costcowholesalewarehouse.jpg/220px-Costcowholesalewarehouse.jpg)
The main competitor in the membership warehouse space is Sam's Club. Although Sam's Club has more warehouses[6] than Costco, Costco has higher total sales volume.[7] Costco employs about 132,000 full- and part-time employees,[8] including seasonal workers, and for fiscal year 2006, ended on September 3, 2006, the company's store sales totaled $60.2 billion[8] of which $1.1 billion was net profit.[9] Costco is #32 on the Fortune 500.[9]
As of May 5, 2007, Costco has 510 locations:[8]
- 376 in the United States and Puerto Rico
- 71 in Canada
- 30 in Mexico (50-50 joint venture)
- 19 in the United Kingdom
- 5 in South Korea
- 5 in Japan
- 4 in Taiwan, ROC
In the United States, Costco is closed on New Year’s Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
In India, Costco is exploring a joint venture entry into the heavily regulated wholesale retail sector with Bombay Dyeing Ltd. The discussions are on nascent stage. It is difficult to gain foot hold in India's retail market due to tough regulations.
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 shelved in 2004.
Sales model
![](http://upload.wikimedia.org/wikipedia/commons/thumb/c/c5/Costcointerior.jpg/220px-Costcointerior.jpg)
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 substantially the same. This results in high volume of sales from single vendor, allowing further reduction in price, and reducing marketing costs.
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; in the United States the lowest cost membership costs US$50 for one year (as of May 5, 2007).[8] 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. To avoid credit card processing fees, Costco only accepts American Express (not in the UK), PIN-based debit cards (Interac in Canada), cash, and checks. Guests of members are only allowed to pay cash.
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%.
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 normally pay for gas by check or cash must purchase a Costco Cash Card inside the actual Costco building before filling up.
Products
![](http://upload.wikimedia.org/wikipedia/commons/thumb/f/f6/Costcohotdogstand.jpg/220px-Costcohotdogstand.jpg)
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, home electronics, jewelry, art, hot tubs, and furniture. Many stores have tire garages, pharmacies, hearing aid centers, optometrists, photo processors, and gas stations.
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.
Kirkland Signature
Kirkland Signature is Costco's store brand, otherwise known in the retail industry as an "own-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.[10]
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. [1]
Trivia
![]() | This article contains a list of miscellaneous information. |
- The very first Price Club location was an old airplane hangar, and is still in operation today (Warehouse #401 San Diego).
- The price of a kosher hot dog and a soft drink at the food court is still $1.50, the same as it was when (pre-merger) Costco first opened in 1983.
- Prior to the 1993 Price Club/Costco merger, Wal-Mart founder Sam Walton wanted to merge Sam's Club with Price Club.[11]
- In 2006, former Buckingham Nicks drummer Gary Hodges and bassist Tom Moncrieff helped form a rock band named Sinai 48 after the Kosher Polish hotdogs sold in the Costco food court. The four member band consists of three members of Hebrew descent.[citation needed]
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 2007, non-supervisory hourly wages range from $11.00 to $19.50.
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 WA[12].
See also
External links
- Official website
- Costco Canada, in English and French
- How Costco Became the Anti-Wal-Mart - NY Times
- Why Costco is so addictive
Notes
- ^ http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-shareholder
- ^ http://www.costco.co.jp/eng/costco.htm
- ^ http://www.costco.com/Browse/ProductSet.aspx?Prodid=24743&whse=&topnav=&browse
- ^ http://media.corporate-ir.net/media_files/irol/83/83830/HistoricalHighlights.pdf
- ^ http://www.costco.com/Membership/MembershipPopup.aspx
- ^ http://pressroom.samsclub.com/content/?id=3
- ^ http://www.hoovers.com/sam%27s-club/--ID__56161--/free-co-factsheet.xhtml
- ^ a b c d http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-homeprofile
- ^ a b http://money.cnn.com/galleries/2007/fortune/0704/gallery.500top50.fortune/32.html
- ^ "Business Spotlight: Costco Wholesale". Retrieved 2006-10-26.
- ^ http://money.cnn.com/magazines/fortune/fortune_archive/2003/11/24/353756/index.htm
- ^ http://wdsdemos.com/