Costco Wholesale Corporation: Mission, Business Model, and Strategy
CASE STUDY
Costco Wholesale Corp.: Mission, Business Model, and Strategy
In 2008, Costco’s sales totaled almost $71 billion at 544 warehouses in 40 states, Puerto Rico, Canada, the United Kingdom, Taiwan, Japan, Korea, and Mexico. More than 50 of Costco’s warehouses generated sales exceeding $200 million annually and 2 stores had sales exceeding $300 million. Sales per store averaged $130 million annually, about 75 percent more than the $75 million per store average at Sam’s Club, Costco’s chief competitor in the membership warehouse retail segment.
The membership warehouse concept was pioneering by discount merchandising sage Sol Price who opened the first Price Club in San Diego in 1976. Originally conceived as a place where small local business members could obtain needed merchandise at very economical prices, Sol Price soon concluded that his fledgling Price Club operation could achieve far greater sales volumes and gain buying clout with suppliers by also granting membership to individuals—Price’s decision to add individual memberships was the trigger that launched the deep discount warehouse club industry on a steep growth curve. Within a few years, Sol Price’s Price Club stores emerged as the unchallenged leader in member warehouse retailing, operating primarily on the West Coast.
The wholesale club and warehouse segment of retailing in 2008 was estimated to be a $120 billion business in the U.S., and it was growing about 20 percent faster than retailing as a whole. There were 1,200-plus warehouse locations across the U.S. and Canada; most every major metropolitan area had one, if not several, warehouse club operations. The three main competitors were Costco Wholesale, Sam’s Club (713 warehouses in six countries— the U.S., Canada, Brazil, Mexico, China, and Puerto Rico), and BJ’s Wholesale (177 locations in 16 states). Costco had close to a 53 percent share of warehouse club sales across the U.S. and Canada, with Sam’s Club (a division of
Costco Wholesale Corp.: Mission, Business Model, and Strategy
In 2008, Costco’s sales totaled almost $71 billion at 544 warehouses in 40 states, Puerto Rico, Canada, the United Kingdom, Taiwan, Japan, Korea, and Mexico. More than 50 of Costco’s warehouses generated sales exceeding $200 million annually and 2 stores had sales exceeding $300 million. Sales per store averaged $130 million annually, about 75 percent more than the $75 million per store average at Sam’s Club, Costco’s chief competitor in the membership warehouse retail segment.
The membership warehouse concept was pioneering by discount merchandising sage Sol Price who opened the first Price Club in San Diego in 1976. Originally conceived as a place where small local business members could obtain needed merchandise at very economical prices, Sol Price soon concluded that his fledgling Price Club operation could achieve far greater sales volumes and gain buying clout with suppliers by also granting membership to individuals—Price’s decision to add individual memberships was the trigger that launched the deep discount warehouse club industry on a steep growth curve. Within a few years, Sol Price’s Price Club stores emerged as the unchallenged leader in member warehouse retailing, operating primarily on the West Coast.
The wholesale club and warehouse segment of retailing in 2008 was estimated to be a $120 billion business in the U.S., and it was growing about 20 percent faster than retailing as a whole. There were 1,200-plus warehouse locations across the U.S. and Canada; most every major metropolitan area had one, if not several, warehouse club operations. The three main competitors were Costco Wholesale, Sam’s Club (713 warehouses in six countries— the U.S., Canada, Brazil, Mexico, China, and Puerto Rico), and BJ’s Wholesale (177 locations in 16 states). Costco had close to a 53 percent share of warehouse club sales across the U.S. and Canada, with Sam’s Club (a division of