How Costco Keeps on Clicking

Costco is one of the world’s master retailers with a unique strategic approach. It has a no-frills, deep-discount philosophy — yet, it still treats its employees really well (as we have reported before).
In recognition of Costco’s prowess, the company is the subject of a recent Businessweek cover story by Brad Stone. Here are some of the highlights of his story:
  • “Costco, the second-largest retailer in the U.S. behind Wal-Mart, is an anomaly in an age marked by turmoil and downsizing. Known for its $55-a-year membership fee and its massive, austere warehouses stocked floor to ceiling with indulgent portions of everything from tilapia to toilet paper, Costco has thrived over the last five years. While competitors lost customers to the Internet and weathered a wave of investor pessimism, Costco’s sales have grown 39 percent and its stock price has doubled since 2009.”
  • “Costco pays its hourly workers an average of $20.89 an hour, not including overtime (vs. the minimum wage of $7.25 an hour). By comparison, Walmart said its average wage for full-time employees in the U.S. is $12.67 an hour. Eighty-eight percent of Costco employees have company-sponsored health insurance. Costco workers with coverage pay premiums that amount to less than 10 percent of the overall cost of their plans. It treats its employees well in the belief that a happier work environment will result in a more profitable company.”
  • “The Issaquah (Wash.) headquarters, 20 miles from Seattle, radiate frugality. The floor of the executive wing is covered in faded blue carpet, and in the boardroom, six faux-wood tables are jammed together. On the walls are several Van Gogh and Picasso prints (less than $15 at Art.com), along with two badly staged photographs of the company’s board of directors.”
  • “No-frills is the defining style of Costco around the world. Each store stocks around 4,000 different products, and almost everything is marked up 14 percent or less over cost. Items like diapers, suitcases, and wine, which it sells under its in-house Kirkland Signature brand, get a maximum 15 percent bump. All of the stock sits on industrial shelving or in piles that spill from pallets.”
  • “After accounting for expenses such as real-estate costs and wages, Costco barely ekes out a profit on many of its products. Eighty percent of its gross profit comes from membership fees; customers renew their memberships at a rate of close to 90 percent, the company says. It raised its fee by 10 percent in 2011 to few complaints.”
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This entry was posted in Global Retailing, Part 1: Overview/Planning, Part 2: Ownership, Strategy Mix, Online, Nontraditional, Part 3: Targeting Customers and Gathering Information, Part 5: Managing a Retail Business, Part 6: Merchandise Management and Pricing, Part 7: Communicating with the Customer, Part 8: Putting It All Together and tagged , , , , , , , , , , , , . Bookmark the permalink.

1 Response to How Costco Keeps on Clicking

  1. Pingback: The 25 Most Popular Posts by Retailing: From A to Z by Joel Evans | Retailing: From A to Z by Joel Evans

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