Costco Wholesale Corporation (NASDAQ:COST http://quotes.nasdaq.com/asp/SummaryQuote.asp?symbol=NaodW29-item48ae23a2352638e
1&selected=COST ) is a membership warehouse club chain, headquartered in Issaquah, Washington with its flagship Warehouse #1 in nearby Seattle.
As of August 2004 it has 441 locations:
Costco employs about 103,000 full- and part-time employees and had 2003 revenues of $41.69 billion.
Costco tends to charge relatively low prices for goods which it sells in bulk sizes primarily to large families, small businesses, and the families of owners of small businesses. As a warehouse club, Costco is not open to the general public, but only to those who have paid a sizable fee in advance for a club membership card and the guests of cardholders. This guarantees it a captive market.
Costco is famous for keeping overhead low and returning savings to consumers in the form of lower prices (and therefore it never holds sales). At its headquarters, many of its senior executives use the same furniture they used when they started the company. Its facilities are working warehouses and are spartan in terms of decoration, with the exception of the colorful marketing banners. Most products come in on shipping pallets and are dispensed directly from pallets, in contrast to most retailers who take the additional trouble to break down pallets and stock individual products on shelves. Costco caps its profit margin on most products and allows itself higher margins only on its Kirkland Signature store brand.
Costco is also famous for its idiosyncratic inventory practices. Unlike many retailers, Costco does not try to maintain a full range of every single type of product and every single major brand within each product category. Rather, it carries only a few very popular categories and a few popular products within each one.
With some categories, it does not rotate products often, so one can expect certain brands of snacks or beverages to be in stock indefinitely. In many other categories it is constantly seeking the best deals available at a given point in time, so products will appear for a few weeks or months and then mysteriously disappear. This encourages consumers to regularly visit their local warehouse for surprise deals.
Over the years, Costco has gradually expanded its range of products and services. Initially it preferred to sell only products that come in boxes and could be dispensed by simply tearing the shrinkwrap off a pallet. It now sells many other products that are more difficult to handle, like fresh produce, meat, seafood, fresh baked goods, flowers, clothing, books, software, jewelry, art, and furniture. Many stores have tire garages, pharmacies, optometrists, and gas stations.
Costco has a very generous product return policy, allowing customers to return most products indefinitely. Computers, which most retailers are loathe to accept for refund, have a six-month return period.
Finally, Costco is well-known for its hot dog stands. These began as stand-alone impromptu arrangements outside of warehouses but are now built directly into current warehouses as actual mini-restaurants. They have added other types of food like pizza.
Costco merged with its competitor Price Club in 1993, becoming PriceCostco until 1997, when it changed its name back to Costco.
External links
- Official website http://www.costco.com/
- Costco Investor Relations website http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-irhome
Last updated: 02-13-2005 23:22:09
Last updated: 05-03-2005 09:00:33
