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Costo Case Study

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  • No matter what you do in life, half of the people will love you. Half the people will hate you. Charles Barkley
  • http://www.careerbuilder.com/JobSeeker/Jobs/JobDetails.aspx?IPath=QHKCV0B&ff=21&APath=2.21.0.0.0&job_did=JHR5G65WC5WXF8M1WWWC H I C A G O ✈ M I A M IIf you do me right. I'm gonna do right by you. And if you keep it tight, I'm gonna confide in you...http://www.youtube.com/watch?v=G24v9SuYPwc

Transcript

  • 1. Case Study Fadi Abubaker Jessica Dietrich Sonia Galvez Katie JenningsChristina Walthour
  • 2. Agenda• Company Overview• Key Issues• Alternatives• Recommendations• ConclusionSonia
  • 3. Company Overview• Founded in 1979 by James Senegal• Largest U.S membership warehouse club ▫ 54M Costco cardholders ▫ 550+ clubs  40 states  9 countries• Multi-channel retailer• #9 on TWICE’s “Top 100 Retailer”• Over $90B in global sales estimated in 2012Sonia
  • 4. Key Issues Market Profit Retail format Saturation Margins• Members-only • Similar to other • 2% thin-profit margin warehouse business: warehouse dealers • Leverage sales • Highly competitive • Smaller format • Constraints • Regional U.S. expansion mall locations Sonia
  • 5. Product MixFadi
  • 6. Market PositionFadi
  • 7. Life CycleFadi
  • 8. Costco On Track?Fadi
  • 9. Financial HighlightsFadi
  • 10. Financial Highlights (con’t)Fadi
  • 11. Strengths Weaknesses • Channel leader • Older locationsInternal • Affluent customer base • Low household penetration • Multi-channel offer • Low profit margins (<2%) • Popular private brands • Strong corporate culture Opportunities Threats • Global store growth • Real- estate issues • New concepts • CannibalizationExternal • Ancillary services • Competitive • Expand gluten-free product line single-category killers • Market saturation • Slow economic growth Christina
  • 12. Alternatives• Increase foreign market expansion• Increase merchandise mix• Acquire smaller warehouse clubs• Utilize mass marketing tactics• Increase markups• Offer shared membership• Shared membership• Relocate older locationsKatie
  • 13. Recommendations• Acquire BJ’s ▫ BJs is a small % of the market size ▫ Increase:  New market territory penetration  Revenue or profits  Economies of scale ▫ Limit competition• Offer Shared Membership ▫ 10-20% of loss of all shoppers ▫ $50-$500 membership cardsJessica
  • 14. Recommendations (con’t) International Expansion  8% of revenue from int’l sales  Expand 6-8 units per year  Analyze the market  Families, businesses  Europe, China, India Package Sizes:  Cater to various demographics  Not just known for bulk itemsJessica
  • 15. Conclusion• Markets ▫ One-stop shopping• Food, houseware, apparel (4,000 SKUs) ▫ Sams Club & BJs Execution $127M per club/$1B online Customer Service Direct DistributionJessica
  • 16. Questions???