Why Costco is So Addictive

1. Why Costco is So Addictive Vida Atchulo Jeff Briggs

3. Costco – The Company With $59 billion in sales from 488 warehouse locations, Costco, No. 28 in the Fortune 500, is the fourth-largest retailer in the country and the seventh-largest in the world. While Wal-Mart (Charts) stands for low prices and Target (Charts) embodies cheap chic, Costco is a retail treasure hunt, where one's shopping cart could contain a $50,000 diamond ring resting on top of a 64-ounce vat of mayonnaise. Despite having 82 fewer outlets than its nearest rival, Wal-Mart's Sam's Club, Costco generates about $20 billion more in sales.

4. Costco and Public Relations “In reality, Costco is succeeding the old-fashioned way, by earning respect for the product value it delivers and for its corporate values.” “It is also significant that as part of its business model Costco spends no money on PR or advertising.” Nasdaq Ad. Jim Sinegal, the CEO and founder of Costco Wholesale, was awarded the 2006 Botwinick Prize in Business Ethics.

5. Costco and Their Employees Costco's average pay, for example, is $17 an hour, 42 percent higher than its fiercest rival, Sam's Club. And Costco's health plan makes those at many other retailers look Scroogish. Wall Street, though, doesn't want Costco to be so generous to its employees. Bill Dreher of Deutsche Bank, complained last year that at Costco "it's better to be an employee or a customer than a shareholder."

6. Costco and Their Employees Mr. Sinegal (Costco CEO) rejects Wall Street's assumption that to succeed in discount retailing, companies must pay poorly and skimp on benefits, or must ratchet up prices to meet Wall Street's profit demands. Good wages and benefits are why Costco has extremely low rates of turnover and theft by employees, he said. "This is not altruistic," he said. "This is good business."

7. Costco – Price Competition Costco refuses to mark up any item more than 14 percent, in contrast to supermarkets and department stores, which often carry markups of 25 percent and 50 percent, respectively. "We always look to see how much of a gulf we can create between ourselves and the competition," Sinegal says. "So that the competitors eventually say, 'F*** 'em, these guys are crazy. We'll compete somewhere else.' " Despite the microscopic margins, Costco earned $1.1 billion last fiscal year through its membership fees - $50 per year of pure profit - and its spartan approach to costs.

8. SWOT Analysis Strengths: Major seller of items in bulk Cheap Varied (cars, jewelry, beans, mayo) Weaknesses: Can be hard to find a store in certain areas Membership is required

9. SWOT Analysis Opportunities: Open up to more niche markets Many cities for expansion that could use a Costco Threats: Sam’s Club Bi-Mart BJ's Wholesale Club

10. Sources http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/30/8391725/index.htm http://www.findarticles.com/p/articles/mi_m0EIN/is_2005_Oct_18/ai_n15698316 http://www.nextbillion.net/blogs/2006/10/10/columbia-business-schools-social-enterprise-conference-csr-pr-and-the-need-for-triple-bottom-line-metrics

11. Sources http://www.cslproductions.com/money/talk/archives/2005_12.shtml