Costco's Business Analysis

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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

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