Analysis Of Costco

1820 words - 7 pages

Costco was founded on September 15th, 1983 by Jeffery Brotman and James Sinegal (Chesley). It became renowned for its warehouse club retail model, pioneered by former competitor Price Club. After a major merger in 1993 with Price Club, Costco expanded to 206 locations, doubling the size of the company (“Costco Wholesale Historical Highlights”). The decision was based on the fact Costco and Price Club shared similar business philosophies, operations, and the looming threat of being taken over by Sam’s Club. Operating as PriceCostco, international expansion began with development of stores in Mexico, the opening of two stores in England, and the licensing of a Price Club in South Korea ("Costco Wholesale Corporation").
During 1994, Costco suffered a partial break up due to internal discrepancies between owners James Sinegal and Robert Price (Chesley). This resulted in PriceCostco's commercial real estate properties and other assets being spun off as Price Enterprises, Inc., headed by Robert Price ("Costco Wholesale Corporation"). Costco then operated as PriceCostco until 1997, when the company changed its name to Costco Wholesale and all remaining Price Club locations were rebranded Costco, becoming the Costco known today (“Costco Wholesale Historical Highlights”).
Nature of Business
Costco Wholesale Corporation is an international chain of membership warehouses operating on the concept that offering members lower prices will produce high sales volume and rapid inventory turnover (“Annual Report” 4). While Costco warehouses are designed to help reduce costs for small-to-mid-sized companies, memberships are also available for individuals (“Company Profile”). The two memberships offered by Costco include Business and Gold Star (individual), both of which are eligible for an Executive Membership (“Annual Report” 6). Costco attempts to keep its members loyal by providing “a broad range of high quality merchandise at prices consistently lower than they can obtain elsewhere (4).” To help keep these costs low, Costco eliminates many of the costs associated with traditional multi-step distribution channels by purchasing most of its merchandise from the manufacturer and having it delivered to either one of its depots or directly to a Costco warehouse (4). When delivered to a depot, the merchandise is usually shipped to a Costco warehouse within 24 hours (4).
Product Line/Services Offered
The products and services Costco offers have gradually expanded over the years. Initially, stock was primarily composed of non-perishable boxed products that were dispensed by tearing the shrink-wrap off pallets ("History of Costco”). The selection has grown to include a vast variety of products, including home appliances, dairy, seafood, flowers, fresh produce, baked goods, art, clothing, books, computer software, meat, home electronics, coffins, tires, wine, furniture, and jewelry ("Costco Wholesale Corporation"). Select locations offer a liquor section as well,...

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