Costco Wholesale Corporation's Business Strategies

Costco Wholesale Corporation
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Costco Wholesale Corporation
Abstract
Costco Wholesale Corporation is a highly reputable retailer in the United States of America (USA) and worldwide. Indeed, it competes with Amazon and Walmart. Costco differentiates its merchandise from those provided by its competitors. The firm limits its stock-keeping units and offers luxury products on discounts for a limited period. Costco’s primary business strategy is to offer a broad range of high-quality products at discounted prices that customers cannot get elsewhere. Scarcity brings the idea of a treasure hunt, where customers are obliged to purchase highly discounted commodities when the offer lasts. Most importantly, Costco believes that employees are a significant asset and that their needs should be met first for them to serve the clients well. As such, the company continues to perform well and is a step ahead of its competitors.
Jeff Brotman and Jim Sinegal established Costco Wholesale Corporation in 1983. Currently, in the USA, Costco is among the largest retailers behind Amazon and Walmart. The company is headquartered in Issaquah, Seattle. Costco is a successful enterprise that generated revenues of about $129 billion in 2017 from its 740 locations worldwide. It had gross margins of 11.3% in the same year, and the operating margins were 3.19%. In addition, it had a return on invested capital (ROIC) of around 15.8% (Hill, 2018). Costco’s design of its floor space maximizes its selling space, inventory control, and handling of merchandise. The firm’s primary strategy is to offer a variety of high-quality products at affordable prices that its customers cannot get from elsewhere. Costco maintains high performance by ensuring that it provides a broad range of high-quality products at a slightly lower price than its competitors.
Costco’s business strategy has significantly contributed to the firm’s success. The company focuses on a limited selection of products and gives its customers a significant discount. In particular, discounted products attract new clients and help a firm to keep its existing customers. Costco has a way of differentiating its products portfolio from those of its competitors. For example, Costco uses a merchandising mix, which is a brilliant idea of rotating luxurious goods. The firm brings products, such as Louis Vuitton luggage, Rolex watches, large paper packs, and soda cases (Hill, 2018). The most significant thing about Costco is that it surprises its clients in a way that they keep returning to find out whether there are new and discounted products to purchase. Besides, the luxurious products are offered at a discount for a short period. Clients ought to keep visiting Costco in search of high-quality merchandise provided at a low price. The idea of selling products at a lower price than its competitors has helped Costco succeed. In reality, customers are always attracted to retailers that offer high-quality discounted products. Costco uses price wars to stay ahead of its business rivals. For instance, at one point, the firm sold denim jeans for $29.99 when other department stores retailed the same product for $50 (Hill, 2018). However, despite offering products at affordable prices, Costco does not forget to retain its value and meet customers’ needs entirely.
Scarcity, private-label power, marketing, and membership model are other strategies that Costco uses to remain at the top. Costco evaluates its stock-keeping units carefully to decrease operational costs by simplifying in-store management and streamlining the supply chain. For instance, when Walmart is offering 150,000 items, Costco provides 4,000 items (Hill, 2018). The most intelligent idea applied by Costco is offering some products, such as Waterford crystal, periodically. When customers come across these discounted high-quality products that they know might not be there tomorrow, they are obliged ...