Costco's Business Analysis

1162 Words5 Pages
Costco is leading the retail world into the future with its progressive social responsibility. Although most businesses operate by paying employees less to increase profits, when Costco pays its employees more it ends up retaining employees and increasing efficiency. Costco keeps its prices low by purchasing stock in bulk and operating mostly on membership fees. With customers showing loyalty to its signature brand “Kirkland Signature” Costco hopes to increase the amount of items sold under the brand name which in turn increases impulse buying. Although Costco’s competition is Walmart: the world’s leader in retail, which also operates a membership warehouse by the name of Sam’s Club, Costco manages to continue leading the membership warehouse…show more content…
Buying in bulk allows Costco to purchase at the lowest price and in turn sell it for higher, but instead Costco returns those low prices to its customers, creating a cheap but quality environment for its customers and increasing customer relationships. Other companies have struggled with this because of the lack of space. Their retail floor is separate from their warehouse, creating a higher need for employees to stock things and limited storage space for merchandise. Costco solves this by selling their merchandise in the same space it is stored. Most pallets stack 20 feet high on steel shelves, while the other pallets lay open on the floor ready for customers. Restocking generally only involves driving a forklift and removing empty pallets. Costco operates under membership and has a renewal rate of nearly 90 percent. According to a CNBC report the primary customer visiting the stores is a college educated adult averaging about $100000 a year. Costco allows customers to bring their non-membership friends with them to shopping adventures, allowing it to reach those of lower income as well. Business to Business it offers items that smaller retail stores would benefit from, such as signs, electronics, office supply and bulk…show more content…
Often while a competing store will have an isle full of different types of toothpaste Costco will only have a pallet of 2 types. While this has the advantage of less competition between brands, it has the disadvantage of variety for customers to choose from. Costco’s membership base is also part of an aging population, as the younger generation becomes more predominant the other factors such as location and storage space of the customer becomes a problem. A car is also generally required for a trip to and from Costco. Opportunities for Costco are significant, even though there are few. Costco has a low presence in some geographical locations which gives them opportunities to expand to those areas. Adding their stores to areas where smaller stores and competing chains exist will allow them to provide a niche market as well as a price competitor to middle-upper class retail stores. Costco is also expanding online competing with the largest online retailer, Amazon. By expanding its online parts the company will be able to cater internationally to businesses. Costco’s dealer brand Kirkland signature has customer’s utmost loyalty and so, the brand is now being sold on Amazon. Its international physical locations also see a higher sign up rate than its US based stores, creating incentive to expand in countries such as
Show More
Related

  • Business Analysis: Costco's Marketing Environment

    2182 Words  | 9 Pages

    nation. All business firms, no matter what their industry may be, have some competition. The two main warehouse club competitors

    Read More

  • Canadian Tire Case Analysis

    4029 Words  | 17 Pages

    Canadian Tire fears a weak economy because it can greatly impact their MasterCard business and threat of new entrants. In the retail market, there are constantly new businesses entering the market and giving competition to retailers like Canadian Tire who may have difficulty to maintain their sales growth. “A cost-reduction program is accompanying the expansion. Canadian Tire has upgraded its supply chain, making it more efficient to get goods on the shelves. And because it buys from around the world

    Read More

  • Costco's Growth Strategies

    646 Words  | 3 Pages

    Description of COSTCO’s growth strategies After the analysis of COSTCO, we got a conclusion that COSTCO is a successful company with prosperous strategy. Their position as one of the major retailing leader in the United States allow them to have a powerful position in the industry. Thanks to its internationalization strategy, COSTCO owns more than 600 branches all around the world. Now, we are going to talk about COSTCO’S two aspects of growth strategies: Vertical integration and Diversification

    Read More

  • Costco International Expansion

    1643 Words  | 7 Pages

    progress. The ultimate goal of strategic expansion is to increase the productivity of a business. This increase in “productivity”, which can be measured either by the increase in profit or the increase in output by the company, according to the ILO will only be achievable

    Read More

  • Costco And Staffing Organization Case Study

    3011 Words  | 13 Pages

    substantially lower prices than are typically found at conventional wholesale or retail sources (Costco Wholesale Corporation, 2010). The warehouses are designed to help small-to-medium sized businesses reduce cost in purchasing for resale and for everyday business use (Costco Wholesale Corporation, 2010). In September 1983, Costco opened its first warehouse in Seattle with plans for a regional warehouse club operation in the Pacific Northwest (Costco Wholesale Corporation,

    Read More

More about Costco's Business Analysis

Open Document