Costco

Sarah CasavanKati McCoyJanelle Powell

Overview

As of Sept. 2006: Operated 458 Warehouse clubs

358 in the US (37 states and Puerto Rico) 68 in Canada 18 in UK (15 in England, 3 in Scotland) 5 in Korea 4 in Taiwan 5 in Japan

Mission Statement

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

In order to achieve mission they conduct business with the following Code of Ethics in mind

Code of Ethics

1. Obey the law. 2. Take care of members. 3. Take care of employees. 4. Respect suppliers. 5. Reward shareholders.

Business Plan offer members very low prices on a limited

selection of nationally branded and selected private label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover

Enables them to operate profitably at significantly lower gross margins than traditional wholesalers, mass merchandisers, supermarkets and supercenters.

Warehouses typical warehouse 140,000

square feet Floor plans are designed for

economy and efficiency in the use of selling space, the handling of merchandise and the control of inventory.

By strictly controlling the entrances and exits of warehouses and using a membership format, they have limited inventory losses to less than two-tenths of one percent of net sales in each of the last three fiscal years well below those of

typical discount retail operations.

Warehouses Carry an average

of 4,000 SKUs as opposed to typical discount retailers and supermarkets that usually carry 40,000 to 60,000 SKUs Only provide

products that they can provide at a deep discount

Advertising Limit marketing and

promotional activities to new warehouse openings, occasional direct mail marketing to prospective new members and direct marketing programs (such as the Costco Connection) to existing members promoting selected merchandise.

Create much lower advertising costs compared to most retailers

Membership

designed to reinforce customer loyalty and provide a continuing source of membership fee revenue, which allows them to offer low prices.

Members can utilize their memberships at any Costco warehouse location.

have two primary types of members: Business, and Gold Star (indiv.) Can also upgrade to an Executive membership Businesses, including individuals with a business

license, retail sales license or other evidence of business existence, may become Business members.

Executive memberships are more expensive ($100 annually instead of $50), but offer additional savings

Energy ManagementConservation To keep prices low, they try to keep costs

low Energy is a significant cost, so they already try

to conserve as much as possible As new technology is developed, Costco

continues to look for new ways to improve Benefits customers as well as communities

Utilize sky-lights to decrease light usage Constantly watch for new technology

offering greater light at lower cost Use minimal lighting (compared to others)

Conservation Installed solar panels in one of their California Warehouses

Has been successful in lowering lighting and cooling usages and costs

Plan in install in additional warehouses Reducing Fuel Consumption

Training drivers in “fuel-efficient methods” Using Hybrid trucks – scheduled for testing in Spring 2007

Encourage employees to carpool wherever practical Commute Trip Reduction (CTR) program

twelve years ago at corporate office with eighteen vans. Today, we have fifty-two vans (vans, fuel, maintenance and

insurance provided by four transit agencies), Offer employees subsidies to vanpool and employees who

purchase monthly bus passes.

SWOT Analysis - Strengths Offer items at a deep

discount Lower advertising costs Many locations Food Samples – make

shopping enjoyable Food Vendors – don’t have to

leave for lunch/dinner – shoppers stay longer Hot dogs, pizza, churros, ice

cream, chicken bake, etc. Conservation efforts Return Policy

No receipt, no questions asked

SWOT - Weaknesses Membership only

Membership prices No advertising Most have bad

parking Warehouse layout High Turnover Only offering

products in bulk

SWOT - Opportunities Expansion (into

other states) Advertising Continued

Conservation Efforts

SWOT - Threats

WinCo Sam’s Club Other retailers in respective markets

(Wal-Mart, Target, Lowe’s, Home Depot, etc.)

Sources

http://media.corporate-ir.net/media_files/irol/83/83830/reports/70072002.pdf

http://media.corporate-ir.net/media_files/NSD/cost/reports/our_mission.pdf