Costco
| Type | Public (NASDAQ: COST) |
|---|---|
| Founded | 1983, Costco, Seattle, Washington |
| Headquarters |  Issaquah, Washington |
| Key people | James Sinegal, Founder & CEO Jeffrey Brotman, Founder & Chairman Richard Galanti, CFO Dick DiCerchio, COO |
| Industry | Retailing (Warehouse club) |
| Products | Merchandise Private label brands - Kirkland Signature |
| Market cap | $24 billion USD[1] |
| Revenue | $64.4 billion USD (2007) |
| 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. It is the fourth biggest general retailer in the United States, after Wal-Mart, The Home Depot and Kroger.
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Location
It is headquartered in Issaquah, Washington, United States and was founded in Kirkland,[2] with its flagship warehouse in nearby Seattle.[3] Costco's Canadian operations are based in Ottawa, Ontario.[4]
History
Founded by James Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington, on September 15, 1983.[5] 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.[6] 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.
Prior to the 1993 Price merger, Wal-Mart founder Sam Walton wanted to merge Sam's Club with Price Club.[7]
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).
In 1997, the company changed its name to Costco Wholesale.[8]
Costco today
The main competitor in the membership warehouse space is Sam's Club. Although Sam's Club has more warehouses[9] than Costco, Costco has higher total sales volume.[10] Costco employs about 132,000 full- and part-time employees,[11] including seasonal workers. It has 51.8 million members, representing 28.3 million households [11]. For fiscal year 2007, which ended on September 2, 2007, the company's store sales totaled $64.4 billion[11]. In 2006, $1.1 billion of the revenue was net profit.[12] Costco is #29 on the Fortune 500.[12] The ACSI (The American Customer Satisfaction Index) named Costco number one in the retail industry with a score of 81 in 2006. [13]
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
- Christmas
Costco became the first company ever to grow from zero to $3 billion in sales in less than six years.
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. A new Business Center, located in an existing Costco location, is planned for Las Vegas, Nevada.
Plans for Costco Fresh, a gourmet supermarket, were abandoned in 2004.
Sales model
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).[11] 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), 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). As Costco's margins are low in comparison to other retailers, they cannot accept the fee without raising prices. This is an unusual relationship for American Express, which typically charges higher fees to retailers than MasterCard or Visa.
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 powered on.
Most products are delivered to the store on shipping pallets and these 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
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. Pizza is also available in most locations as cheese, pepperoni, or combination. Frozen yogurt is also served in chocolate, vanilla, or swirled together. Also offered are very berry smoothies, mocha latte freezes, chicken bake sandwiches, turkey wraps, twisted churros, and chicken caesar salad.
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. A Costco Membership is not required to purchase an in-store item with a Costco Cash Card. A non-member may not purchase or re-load a Costco Cash Card, however, they may spend more than the total value of their cash card provided they do not write a check for the remaining balance.
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 done through the manufacturer according to the terms of the warranty. Costco has negotiated with manufacturers to extend the manufacturers warranty to two years for new TVs and computers. Costco also offers a free "concierge" service to members that purchase electronics, to help answer questions regarding setup and use and avoid potential returns due to not understanding how to use the products.
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, computer software, vacuums, Home appliances, home electronics, solar panels, jewelry, tires, 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.
Costco Optical ranks as the fourth-largest optical company in the US.[14] 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
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.[15]
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.[16]
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.[17]
Kirkland Signature products are generally rated highly. Consumer Reports magazine has 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.
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 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.[18] Costco also uses Club Demonstration Services, based in San Diego, California.[19]
Locations
As of 26 September 2008[update], Costco has 543 locations.
- 398 in the United States and Puerto Rico
- 75 in Canada
- 31 in Mexico (50-50 joint venture)
- 20 in the United Kingdom
- 8 in Japan
- 6 in South Korea
- 5 in Taiwan
- 2 future locations in Australia, the first of these has started construction in Melbourne's Docklands precinct[20]
The world's largest Costco is located in Hillsboro, OR, USA.[21]
See also
- Sam's Club
- BJ's Wholesale Club
Notes and references
This article was originally based on material from the Free On-line Dictionary of Computing, which is licensed under the GFDL.
- ↑ "Company Profile for Costco Wholesale Corporation (COST)". Retrieved on 2008-10-23.
- ↑ Costco - Shareholder Info
- ↑ What is costco?
- ↑ Costco Contacts
- ↑ Costco - Why Become A Costco Member?
- ↑ http://media.corporate-ir.net/media_files/irol/83/83830/HistoricalHighlights.pdf
- ↑ Sol Price On Off-Price - November 24, 2003
- ↑ Costco Membership
- ↑ Sam's Club
- ↑ SAM'S CLUB - Company Overview - Hoover's
- ↑ 11.0 11.1 11.2 11.3 Costco - Company Profile
- ↑ 12.0 12.1 Fortune 500: The Top 50 - 29. Costco Wholesale (29) - FORTUNE
- ↑ ACSI - Scores By Company Popup
- ↑ Costco Story
- ↑ "Business Spotlight: Costco Wholesale". Retrieved on 2006-10-26.
- ↑ "Costco buying power makes dent in private-label wine market". Retrieved on 2007-03-30.
- ↑ A private label success story | DSN Retailing Today | Find Articles at BNET.com
- ↑ Warehouse Demo Services (WDS) - Costco Product Demonstrations
- ↑ Club Demonstration Services
- ↑ Costco to move into Melbourne Herald Sun October 28, 2007. Retrieved on October 28, 2007
- ↑ Employment Department Success Stories Costco Cuts Recruitment Costs, Then Ribbon
External links
- Official website
- Company History
- How Costco Became the Anti-Wal-Mart - NY Times
- Why Costco is so addictive
- "The Cult of Costco"
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