Costco
From Wikipedia, the free encyclopedia
| Costco Wholesale Corporation
<tr><td colspan="2" style="text-align:center; padding:16px 0 16px 0;"> | |
| Type | Public (NASDAQ: COST) |
|---|---|
| Founded | 1983 (Seattle, Washington) |
| Headquarters | Issaquah, Washington
<tr><th style="text-align:right; padding-right:0.75em;">Key people</th><td>James Sinegal, Founder & CEO |
Costco Wholesale Corporation (NASDAQ: COST) is a membership warehouse club chain and headquartered in Issaquah, Washington, United States, with its flagship warehouse #1 in nearby Seattle.
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[edit] History
Founded by James Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington on September 15, 1983 [1]. Sinegal began by working for Sol Price at both FedMart and Price Club. Brotman, an attorney from an old Seattle retailing family, was also involved in retailing from an early age.
Costco’s business model was similar to that of Price Club, which was founded by Sol Price in 1976 in San Diego, California. Both companies charged a membership fee and catered primarily to small-business owners.
The two retailers were similar in size when they merged in 1993; thus, the combined company, PriceCostco, was effectively double the size of each of its parents. At that time, PriceCostco had 206 locations generating $16 billion in annual sales.
PriceCostco was initially led by executives from both companies, but then Sol and his son Robert Price founded Price Enterprises and left in 1994. The company changed the name to Costco Wholesale in 1997 [2]. Their main competitor is Sam's Club.
[edit] Costco today
Costco employs about 124,600 full- and part-time employees, including seasonal workers, and for fiscal year 2006, ended in September, the company's store sales totaled $58.96 billion of which $1.1 billion was net profit.
As of November 29, 2006, Costco has 502 locations:
- 370 in the United States and Puerto Rico
- 70 in Canada
- 30 in Mexico
- 18 in the United Kingdom
- 5 in South Korea
- 5 in Japan
- 4 in Taiwan
[edit] Sales model
Costco focuses on selling products at low prices, often at very high volume. These goods are usually bulk-packaged and marketed primarily to large families and small businesses. Costco is only open to members and their guests, except for purchases of liquor, gasoline and prescription drugs in some U.S. states due to state law and liquor license restrictions. Memberships must be purchased in advance; the lowest cost membership costs $50 for one year (as of 5/1/2006). Purchases made at Costco's website do not require a membership; however, a 5% surcharge is added to purchases made by non-members. Purchases made with "Costco Cash" gift cards also do not require a membership. To avoid credit card processing fees, Costco only accepts American Express, PIN-based debit cards, cash, and checks. Guests of members are not allowed to pay by check.
Most products are delivered to the store on shipping pallets, and the pallets are used to display products for sale on the retail floor. This contrasts with other retailers that break down pallets and stock individual products on shelves. Costco caps its profit margin on most products at 14% or 15%.
Costco is also known for its idiosyncratic inventory practices. Stores carry only selected products within a few product categories. Some product categories are not rotated often, so customers can expect certain brands of snacks or beverages to be in stock indefinitely. In many other categories, products appear and disappear over short periods of time.
[edit] Costco cash
Costco Cash is a card that members can charge with money to make non-cash purchases at all Costco warehouses in the United States. Because Costco gas stations take only Costco Cash, debit cards, and American Express, people who normally pay for gas by check or cash must purchase a Costco Cash card inside the actual Costco building before filling up.
[edit] Products
Image:Costcohotdogstand.jpgOver the years, Costco has gradually expanded its range of products and services. Initially it preferred to sell only boxed products that could be dispensed by simply tearing the shrinkwrap off a pallet. It now sells many other products that are more difficult to handle, such as fresh produce, meat, seafood, fresh baked goods, flowers, clothing, books, software, home electronics, jewelry, art, hot tubs, and furniture. Many stores have tire garages, pharmacies, hearing aid centers, optometrists, photo processors, and gas stations.
Some locations have liquor stores, often kept separate in order to comply with liquor license restrictions. In 2006, Costco won a court decision against the state of Washington allowing it to purchase wine directly from the producer, bypassing the state retail monopoly.
Costco also acts as an investment broker and travel agent. They have also introduced an automobile purchasing program where members can purchase new cars at specially arranged prices. They also have an agreement with Ameriprise for auto and home insurance.
Costco also developed its own line of products under the Kirkland Signature brand name.
[edit] Business Model
It is reported that Costco pays its on-the-floor employees an average of $16/hour, which CEO Jim Sinegal believes will encourage them to work more productively. His personal paycheck is $350,000, much less than those of other major corporations. As a result, Costco's sales per square foot are greater and its employee turnover rate is lower compared to its rival wholesale companies.
[edit] In popular culture
The 2006 comedy Employee of the Month was filmed in a Costco in Albuquerque, New Mexico [3].
The popular comic strip FoxTrot by Bill Amend features Costco in a number of strips as "Costclub", where either the things bought from there are either depicted in huge quantities, or with one of the main characters buying too much there when he shops alone.
