Costco is a membership-only retail warehouse club founded in 1983. It is headquartered in Issaquah, Washington and operates over 600 warehouses worldwide. Costco has over 66 million members and $88.9 billion in annual revenues. It focuses on keeping prices low by maintaining high sales volumes, limiting selections, and streamlining operations. Costco's success is attributed to its low prices, quality Kirkland Signature brand, and commitment to customer and employee satisfaction.

1. Submitted by:
Priyanka Thakkar(54)
Ishani Chokshi(08)
Niti Patel(36)
Ankit Manek(23)

2. Introduction
• Founded in 1983
• CEO: James Sinegal
• Headquarters: Issaquah, Washington.
• Inception: Seattle, Washington 1983
• Stock Symbol: COST (NASDAQ)
• Founders: James Sinegal & Jefferey Brotman
• Seventh largest retailer in the world
• Fastest growing company in the history among American businesses

3. History
 “Warehouse retailing.”
 Meaning
 Price club-1st warehouse retailer

4. Costco
 Zero to Six years- $6 billion sales
 Philosophy -“keep members coming in to shop by wowing them
with low prices”.
 Does not engage in extensive advertisements or sale campaigns.
 Five Guiding Principles
 Take care of members
 Take care of employees
 Respect suppliers
 Reward shareholders
 Obey the law

5. Creative Exposure Consulting

6. Key Information
Number of warehouses Membership Data
605 (as of 6/29/12) 66.5 million cardholders
Areas of operation 36.4 million households
26.4 million Gold Star
438 locations: 40 U.S. States
10 million Business
82 locations: Canadian
22 locations: United Kingdom
8 locations: Taiwan Warehouse sizes
7 locations: Korea 73,000 to 205,000 square feet
13 locations: Japan (average 143,000 square feet)
3 location: Australia Annual revenues
32 locations: 18 Mexican states (FY11 - Ended 8/28/11):
Number of employees $88.9 billion
(worldwide)
160,292 full and part-time

7. Departments & Services

8. Departments & Services

9. Costco Connection
Magazine
Creative Exposure Consulting

10. Kirkland Signature
• In 1995, Costco created the Kirkland Signature label, named
after the city of Kirkland, Washington, where the Home Office
was located at the time.
• Kirkland Signature is a $4 bn brand.
• Toilet Tissue is the most popular Kirkland Signature product.

11. Kirkland Signature Products
Some of the most popular items include
• Toilet tissue
• Spring water
• Assorted nuts
• Jeans
• Belgian chocolates
• Vodka
• Washing powder
• Cookware sets
• Bed linen
• Wine

12. Kirkland Signature Products

13. Membership
• Costco has two types of membership, Business and Individual,
both membership types can be upgraded to Executive
membership program- which allows to earn a 2% reward on
most purchases, along with other benefits.
• Business members generally paid an annual membership fee
of $100 for the primary membership card.
• Individual members generally paid an annual membership fee
of $50.

14. Product Diversification
 Core - Costco Wholesale
• Warehouse Clubs and Superstores
• Premium private-label products
 Specialty - Consumer Services
• Travel
• Optical
• Automotive
 Financial Services
• 401(K)
• Loans
 Insurance
 Pharmacy
 Recycle electronics

15. Costco’s POD
Pricing
• Top-quality national and regional brands at lower prices
• They markup on brand-name merchandise at 14 % (compared
to 20 to 50 percent markups at other discounters and many
supermarkets).
• Markups on Costco’s 400 private-label is 15%.

16. Justification by James Sinegal :
We’re very good merchants, and we offer value. The
traditional retailer will say: “I’m selling this for $10. I wonder
whether we can get $10.50 or $11.” We say: “We selling this
for $9. How do we get it down to $8?” We understand that
our members don’t come and shop with us because of the
window displays or the Santa Claus or the piano player. They
come and shop with us because we offer great values.

17. Product Selection
• Typical supermarkets stocked about 40,000 items
• A Wal-Mart Supercenter or a SuperTarget have as many as
150,000 items.
• Costco’s merchandising strategy was to provide members
with a selection of only about 4,000 items.

18. Justification by James Sinegal:
If you had ten customers come in to buy Advil, how many are
not going to buy any because you just have one size? Maybe
one or two. We refer to that as the intelligent loss of sales.
We are prepared to give up that one customer. But if we had
four or five sizes of Advil, as most grocery stores do, it would
make our business more difficult to manage. Our business can
only succeed if we are efficient. You can’t go on selling at
these margins if you are not.

19. Treasure-Hunt Merchandising
• About one-fourth of its product offerings are constantly
changing.
• The idea is to entice shoppers to spend more than they might
by offering irresistible deals on luxury items.

20. Justification by James Sinegal,
Of that 4,000, about 3,000 can be found on the floor all the
time. The other 1,000 are the treasure-hunt stuff that’s
always changing. It’s the type of item a customer knows they
better buy because it will not be there next time, like
Waterford crystal. We try to get that sense of urgency in our
customers.

21. Competitive Advantage
 Finding and negotiating bargains
On quality merchandise
 Building relationships with
Manufacturers
Suppliers
 Ingenuity
Cost cutting
Conservation
 Human Resources
Employing the best talent

22. SWOT Analysis
Strengths Weaknesses
Low Prices Burden of high wages paid
Strong Brand to worker
Low price margins
Operating Efficiency E-commerce activities
Exceptional Workforce Small Marketing budget
Strong membership compared to discount
retailers and super markets
Opportunities Threats
Appeal to conscientious
Aggressive price
shopper
Expand into foreign stable competition by rivals
markets Political complications in
Mergers & Acquisitions foreign markets
Massive supplier pool Cannibalization

23. Strategic Benefits
 Remain focused on core business
 Maintain First Mover Status
 Increase internationalization opportunities

24. Costco Strategy for the
Future
• The primary objective of Costco Corporation is the administration
of the network of subordinate warehouses, which provide quality
goods for competitive prices.
• The level of the prices established within the network is usually
lower than those offered by the local competitors.
• Thus, the company assists local retailers to reduce cost and
successfully operate in the competitive environment. Besides, the
company serves not only legal persons; any physical person may
become the customer of Costco Warehouse as well.

25. Costco Advantages
• Convenience: Costco supermarket is maximum fifteen
minutes drive from the point the customer is.
• Price: Costco stores attract numerous clients because of its
business strategy of providing items in bulk and at low prices .
o Sweater
• At other store- $20
• At Costco-$15(Brand Nike)

26. Competitors
• Sam’s Club
• BJ’s Wholesale Club
(both of which have similar business strategies to Costco)

27. Customer
• 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
• Typically customer visits 8-11 times per year
• Goods are usually bulk-packaged
o Marketed primarily to large families and businesses.
• Does not carry multiple brands or varieties
o House brand to sell, under the Kirkland Signature label.
• Results in high volume of sales from single vendor, allowing
further reduction in price, and reducing marketing costs.

28. Costco's Biggest Concern
• Over expansion
• Cannibalization of existing store locations
As a result, the company has announced it will slow its
domestic expansion plans and will look to international
markets for future growth.

29. Retailing Strategy
Target Market Strategy
• Primary target market is small businesses
• Marketing teams contact local businesses, trying to
persuade them into purchasing a business membership
• Direct mail marketing to attract potential customers
that meet their customer profile
• Dependence of members using word-of-mouth to
attract new members to the company

30. Retailing Strategy
Products
• Low prices on selected private and a limited selection of
nationally branded products in a wide range of
merchandise categories
• Kirkland Signature: currently carries 330 private label
items which make up 15% of their sales (2006)
• Some offerings rotate in and out of the warehouse based
on season, and other factors.

31. Retailing Strategy
Promotions
• Advertising: Costco limits its advertisement to direct mail to
potential new customers.
• Public Relations: Costco allows their customers to sample
many of their products as they walk through their
warehouse.
• Personal Selling: When a Costco warehouse opens in a given
location, marketers contact businesses around the area to
see if they would be interested in becoming a member.
• Sales Promotion: Costco limits its marketing and promotional
activities to new warehouse openings.

32. Retailing Strategy
Price
• Aggressively buy from a handful of vendors.
• Drive the cost down for members and sell in volume.
• Individual memberships.
• Business memberships.

33. Retailing Strategy
Personnel and Customer Service
• Keeps labor costs low by squeezing more sales out of
fewer people.
• Limits the amount of employees they have on the sales
floor.
• No commissioned sales people that work at Costco:
customers do not feel pressured by Costco workers to
purchase a given product.

34. Retailing Strategy
Presentation
• Warehouse-type setting.
• Merchandise is generally stored on racks above the
sales floor and displayed on pallets containing large
quantities of each item.
• First things: the most expensive products (diamonds,
flashy toys).
• Understand their customers in a given location.

35. Customer Relationship
Management
Services
• Unconditional double guarantee
o On merchandise: Every product sell with a full
refund
o Refund membership fee in full at any time
dissatisfied
• Unlimited Drink Bar
• Feedback Box
• Serve members free breakfast to know customers
• Focus on satisfying all the need of members

36. Recommendations
• Should avoid coming to India as it has to start everything from
scratch:
o Awareness
o Supplier Relationship
o Huge Promotional Campaigns
o Cut-throat competition
o Government Policies
Creative Exposure Consulting

38. Creative Exposure Consulting

39. Creative Exposure Consulting

40. Creative Exposure Consulting

41. Bibliography
• http://www.thehistoryofcorporate.com/companies-by-
industry/traderetail/costco-wholesale/
• http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-homeprofile
• http://www.costco.co.jp/eng/costco.htm
• http://www.costco.co.uk/
• http://shop.costco.com/en/Membership/Welcome/Departments.aspx
• http://www.thepensters.com/araplelei/costco-strategy-for-the-
future.html
• http://www.wikinvest.com/stock/Costco_Wholesale_(COST)
• http://articles.economictimes.indiatimes.com/2007-01-
15/news/28381035_1_costco-wholesale-corp-retail-outlets-sam-s-club

42. THANK YOU