Costco Membership Strategy Case Study

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Membership-only warehouse club. In this model, consumers pay an annual membership fees to access low-cost products available at the store. Non-members are allowed to use Costco’s Cash Card for purchasing but without it, they cannot purchase. This unique feature allows consumers to strengthen good bond and trust (Vanessa, 2015). Limited Stock Keeping Units (SKU). There are two benefits of keeping fewer stock keeping units. Firstly, having fewer products to order, track and display signifies cost savings for the store. Since, warehouses stores’ space is limited, it will take more man hours, longer time to organize and negotiate for the products for a larger product selection. Secondly, limited SKU increases its purchasing power. Due to limited retail space, suppliers must bid for their products to be in the store’s shelves. This competition drives down the price and, since competition among the brand is almost nonexistent,…show more content…
It is the foundation strategy for Costco which entails lowest prices possible by using no-frills approach. This approach means non-essential features of products have been removed to keep the price low. As demand theory states, consumers’ demand increases with the decrease in prices, Costco maximizes sales volume combining it with membership strategy (Gregory, 2015). Loss Leader Strategy. A business strategy in which a business offers a product or service at a price that is not profitable for the sake of offering another product/service at a greater profit or to attract new customers (Vanessa, 2015). Costco keep same loss leader for all time and does not advertise unlike other companies. They use consumers’ psychology of impulsive purchasing by displaying loss leader products deep inside the store, so that consumers can look around various products while shopping. This model builds up concrete trust from the consumers and attracting potential consumers for sale boost. In fact, boost in sale boost profitability of the

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