Costco

Sue Ekstrom

MBA 591

02/10/2015

Costco

Jim Sinegal, co-founder and long-time CEO of Costa Wholesale, was the driving force behind Costco’s climb to become the third largest retailer in the United States as well as the seventh largest retailer in the world, and the clear leader of the discount warehouse and wholesale club industry. Sinegal spent his time touring Costco stores, making sure that everything was done to the best of their abilities as well as making sure to meet his employees face to face. This was Sinegal’s way of instilling confidence in employees and exhibiting his control over the details of every one of his stores.

Costco strives on keeping prices low and only stocks merchandise that is priced to reflect this strategy. They often buy goods at bargain prices as “one-off” and/or bulk deals. This allows the company to price their goods at an exclusive cost. One of the key components of Costco’s pricing factors is to limit their mark-up on brand-name merchandise at 14%, which is a major difference from their competitors who mark-up their prices on brand names at about 20 to 50%. Brands such as their own “Kirkland Signature” are capped at 15%. Costco believes that the lower costs will allow for a faster turnover and allow customers the freedom to make impulsive buys.

By keeping a small selection of active items (nearly 3,600) including brand names and store brand goods, Costco is known for selling limited quantity options and typically in bulk. Even though they have less product selection, their product selection covers a wide range of selection such as; rotisserie chicken, prime steaks, caviar, flat-screen televisions, digital cameras, fresh flowers, fine wines, caskets, baby strollers, toys and games, musical instruments, ceiling fans, vacuum cleaners, books, DVDs, and many other selections. Having a limited selection of products is a great strategy that is utilized by Costco because it allows the business to be less difficult to manage and more...