Founded by Jim Sinegal & Jeff Brotman in 1983

4th Largest retailer in the US 7th Largest in the World

Wholesale Club & Warehouse Industry: - Industry estimated to be $110 Billion total - Industry growing 20% faster than retailing as a whole

 Costcos

Industry Standing:

Costco has 55% share of US & Canada Sams Club: 36% share BJs Wholesale Club: 9% share Annual sales per store average $128M Two times larger than chief competitor Sams

Club ($67M)

 Primary Competition:

Sams Club BJs Wholesale

Factors of Competition: price, merchandise quality, location & membership services.

Secondary Competition:

Retail Discounters: Wal-Mart & Dollar General General Merchandise Chains: Target & Kohls Low-Cost Specialty Stores: Lowes, Home Depot, Staples, Best Buy, Circuit City, Barnes & Noble

Mission:

To continually provide our members with quality goods and services at the lowest possible prices

Goals:
Obey the Law Take Care of Members Take Care of our Employees Respect our Suppliers Reward our Shareholders

Business Model:
Generate high sales volumes Rapid inventory turnover High Productivity of well compensated employees Direct Purchasing from Manufacturers or Grey Market to obtain lowest price points for products.

Appealing :

Yes !!!!

By gaining 2% early payment Discounts Less working capital requirement Offer national brand and select private-label 20% less price

Costco has three components; Low pricing Limited product line and limited selection Treasure Hunt shopping environment and high quality product.
Best compensation packages enable to low price

products by boosting its employees productivity level and reducing employee turnover.

High Sales Volume & Rapid Inventory Turnover:

Allows Costco to sell and receive cash for inventory before

it had to pay many of its merchandise vendors.

Efficient Purchasing: Direct purchasing from Manufacturers in high volume

Efficient Distribution: Many products routed directly to warehouse stores

Decentralized Management:
This ensures each store is in touch with their local clientele and offers products that appeal to them.

Pricing: Philosophy: keep wowing customers with low prices. Product Selection :

Provide members with a selection of only about 4,000 items in a wide variety of categories. (compared to 150,000 to Wal-Mart & Target).

Treasure Hunt Merchandising

Out of the 4,000 items, about 1/4th of product offerings are constantly changing.

Ancillary Businesses
To encourage member to visit more frequently To compete with other Warehouse retailers for superior Service offerings.

CORPORATE EXPANSION Domestic:

Opened 68 new warehouses in the U.S. between 2002-2006, 16 new stores in the beginning of 2007 with plans to open another 20-24 warehouses by the close of the year.

International:
Opened 14 warehouses Internationally by 2007 In 2007 Costco had 102 wholly owned warehouses outside the U.S

Sinegal is an effective CEO as shown by his goals to keep Costco as the fourth largest retailer in the United States and the eighth largest wholesales in the world. Jim effectively crafted and executed its plans and is liable to be at top ranking . All stakeholders are motivated.
Crafting a strategy that aligns with the stated vision and objectives. The strategy of a company is all about how the company will achieve its objectives for growth. It is never acceptable to simply do business the way it has always been done because the market changes, the industry evolves, and numerous other external factors make it absolutely necessary for a business to evolve to retain or gain market share

 The three components of the companys strategy are low

pricing, limited product selection and what the company calls treasure-hunt merchandising, or high-end products acquired in closeouts and liquidations.

Costco is beating both Sams Club and BJs wholesale in

net sales and market share

One other differentiating factor is that it places a premium

on a comfortable shopping experience with aisle markers, self checkout, express lane and video sales aids.

 Costcos mission statement is to focus on bringing high

quality goods and services to the market at the lowest possible prices every day, but to do it with integrity at every level of the company while valuing the interests of the stakeholders

To achieve the price leadership they reduce handling and

storage cost, they maintain in-stock positions without being overstocked and transition seasonal merchandise, they utilize just-in-time principles when ordering merchandise to minimize the cost of inventory, keep best value pack product to assure low prices through volume buying, expense reduction and low gross margins etc.

 Unlike their competitor Costco pay well to their

employees.

They have unique way or mechanism that helps them

keep the price lower than that of competitors and they can still afford to pay 48 percent higher salaries to their employees than their major competitors mainly Wal-Mart.

Take Care of Our Employees

Our employees are our most important asset Sinegal They are the key to executing the strategy successfully.

Provide Competitive Wages

Starting hourly wage: $12 Average hourly wage: $17-18

Results of Taking Care of Employees:

120,000 employees spreading a positive message about Costco High employee retention (6% turnover rate) Higher productivity from workers

Membership Strategy Adjustments:

Non-Member Day
A quarterly event that allows non-members a trial day at the

store. Purpose: allowing trial raises probability of a prospect becoming a club member

Household Plan
$20 for every additional household member Purpose: use existing increasing membership rates relationships to leverage new ones

Credit Cards:
Current payment methods: cash, check, debit, and

Costco Credit Recommended: Allow The Use Of Credit Cards Accept credit cards but charge a 2% fee purchasing by credit.

Competitors Have Found This Successful:

Sams Club: A week after the initial acceptance of

MasterCard, the average checkout sales increased 35%

Advertising:
TV Brand Advertising Awareness & Reminder Ads In the Northeast and West Coast regions where locations are clustered in order to receive marketing efficiencies Seasonal TV advertising & periodic direct mail promotions of Treasure Hunt items

Competitor Use of Advertising:

Sams Club: spends $50 million annually on national TV

ads, companion print ads, and direct mail promotions

Growth Opportunities:
We recommend entering into China & Brazil next:

Sams Club has taken the Pioneering Costs of introducing

Warehouse Retail into these societies

China is predicted to have a five-fold increase in urban

consumer spending over the next 20 years to $2.3 trillion a year.

Strength
Low product and services Internal (Home grown) top management team in majority Employees turnover within a year of recruitment is just six percent Unique ability to keep overhead cost low resulting in low prices of goods and services Loyal and affluent customer base High inventory turnover comparing to its competitors Consistent return on sales and return on assets Incredible return policy

Opportunities

Costcos operations is mainly targeted in countries where there is high GDP and high disposable income of the consumers (Canada, U.S.A and Japan) with low inflation rate in the countries Serves the democratic countries with political and governmental stability Rapid growth in membership Possibility of international expansion Advantage of economic downturn Increasing brand awareness Positive image in terms of employees pay and social responsibility

Weakness
Comparatively less attractive store layout for luxury items Weak advertisement base leading to the inability of reaching full range of membership base. Declining or inconsistent profit margins Not widely scattered around the world than its competitors Location is not attractive in terms of real-estate No self-checkout Primary focus on business customers rather than individual customers

Threat
Costco cannot attract people who are below poverty line due to its membership fees and bulk purchase Not well diversified in terms of geography (presence) High competition from Sams Club and BJ Highly dependent on United States and Canadian market. Largely dependent on vendors for timely supply of quality merchandise at reasonable price High market expectation in terms of price, quality and financial performance

Thank

You !