costco

History

Founded by James Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington on September 15, 1983. 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, effectively doubling the size of the combined company, PriceCostco, which at that time had 206 locations generating $16 billion in annual sales.

Originally led by executives from both companies, Sol and his son Robert Price founded Price Enterprises and left PriceCostco in 1994. The company’s name was changed to Costco Wholesale in 1997.

Costco today

Costco employs about 118,000 full- and part-time employees, including seasonal workers, and for fiscal year 2005, ended in August, the company's store sales totaled $51.9 billion of which $1.063 billion was net profit.

As of August 2006, Costco has 483 locations:

• 354 in the United States and Puerto Rico
• 68 in Canada
• 29 in Mexico
• 18 in the United Kingdom
• 5 in South Korea
• 5 in Japan
• 4 in Taiwan

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 cheapest 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 gift cards, called Costco cash also do not require a membership. To keep costs low, only American Express cards, PIN-based debit cards, cash, and checks are accepted. 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%.^[1]

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.

Products

Over 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.

In pop culture

The 2006 comedy Employee of the Month was filmed in a Costco warehouse. It stars Dane Cook.

See also

• Sam's Club
• BJ's Wholesale Club

External links

• Official website
• How Costco Became the Anti-Wal-Mart - NY Times