To Examine Costco's Wholesale Business Model
To examine Costco’s wholesale business model, Mission, and strategy related to the year 2008 and how those factors relates into industry success.
Summary
•Revenues of 71 Billion
•550 Warehouses Operates in:
–40 States
–9 Countries
•$137 million average sales/warehouse
•141,000 square feet/warehouse
•143,000 employees worldwide
•More than 1.4 million transactions/day
Background
CEO: James Sinegal
Headquarters: Issaquah, WA
Inception: Seattle, WA 1983
Stock Symbol: COST (NASDAQ)
Founders: James Sinegal & Jefferey Brotman
Corporate Strategy
•Cost strategy
oPenetration Pricing
oBelow the Line Promotion
oNo frills
•“Diversion” Buying Strategy
o“Treasure hunt" shopping experience
Products
•Sundries which include candy, snack foods, alcoholic and non-alcoholic beverages, and cleaning supplies •Hardliners which include major appliances, hardware, electronics, and sporting goods •Soft liners including apparel, jewelry, and small appliances •Fresh food sales, like meat and baked goods
•Other items which include gasoline, pharmacy sales, and Costco's one-hour photo development.
Customers (Who)
•Costco targets independent small business owners who have typically $100,000 or more of personal income •Actual average Costco customer is women in large householders with income of $50,000 or more •Most popular with Hispanic and Asian ethnic groups
•Typically customer visits 8-11 times per year
Customer Needs (What)
•Quality Products
•Relatively Low Prices
•Convenience
•Reliability
Membership (How)
•Gold Star Member = $ 50
•Business Member = $ 50
•Executive Member = $ 100
•Membership fees allow Costco to maintain low margins
Products (How)
•Costco focuses on selling products at low prices, at very high volume. •Goods are usually bulk-packaged
–Marketed primarily to large families and businesses....
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