Costco
From Wikipedia, the free encyclopedia
| Costco Wholesale Corporation | |
 |
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| Type | Public (NASDAQ: COST) |
|---|---|
| Founded | 1983 (Seattle, Washington) |
| Headquarters | Issaquah, Washington |
| Key people | James Sinegal, Founder & CEO Jeffrey Brotman, Founder & Chairman Richard Galanti, CFO Dick DiCerchio, COO |
| Industry | Retail (Warehouse Club) |
| Products | Retail (Specialty) Private Label - Kirkland Signature |
| Revenue | $59 billion USD (2006) |
| Employees | 127,000 |
| Website | Costco U.S. Costco Canada |
Costco Wholesale Corporation (NASDAQ: COST) is the largest membership warehouse club chain in the world based on sales volume, headquartered in Issaquah, Washington, United States, with its flagship warehouse in nearby Seattle. Costco's Canadian operations are based near Ottawa, Ontario, and Vancouver, British Columbia.
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[edit] History
Founded by James Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington on September 15, 1983 [1]. 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; thus, the combined company, PriceCostco, was effectively double the size of each of its parents. At that time, PriceCostco had 206 locations generating $16 billion in annual sales.
PriceCostco was initially led by executives from both companies, but then Sol and his son Robert Price founded Price Enterprises and left in 1994. The company changed the name to Costco Wholesale in 1997 [2].
[edit] Costco today
The main competitor in the membership warehouse space is Sam's Club. Although Sam's Club has more warehouses than Costco, Costco has higher total sales volume. Costco employs about 127,000 full- and part-time employees, including seasonal workers, and for fiscal year 2006, ended in September, the company's store sales totaled $59 billion of which $1.1 billion was net profit. Costco is #28 on the Fortune 500.
As of January 29, 2007, Costco has 504 locations:
- 371 in the United States and Puerto Rico
- 70 in Canada
- 30 in Mexico
- 19 in the United Kingdom
- 5 in South Korea
- 5 in Japan
- 4 in Taiwan
In the United States, Costco is closed on New Year’s Day, Easter, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.
[edit] Other retail formats
Costco currently operates two other retail formats, a home furnishings concept known as "Costco Home," and a strictly business operation known as "Costco Business Center."
There are currently two Costco Home locations (Washington State & Arizona, both in former HomeBase warehouse stores) with plans for a third on the west coast. Costco membership is required, and hours of operation are identical to that of regular Costco warehouses.
There are a handful of Business Centers, all of which offer delivery via a private fleet of trucks. Some locations have a retail selling floor open to Costco members who wish to shop in person, while others are strictly delivery only.
Plans for Costco Fresh, a gourmet supermarket, were shelved in 2004.
[edit] 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 businesses. Costco is only open to members and their guests, except for purchases of liquor and gasoline in some U.S. states due to state law; and prescription drugs due to federal law. Memberships must be purchased in advance; the lowest cost membership costs $50 for one year (as of 3/15/2007). 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 Costco Cash Cards also do not require a membership, and there is no surcharge. To avoid credit card processing fees, Costco only accepts American Express (not in the UK), PIN-based debit cards, cash, and checks. Guests of members are not allowed to pay by check.
Lighting costs are reduced on sunny days, as most Costco locations have several skylights. During the day, electronic light meters measure how much light is coming in the skylights and turn off an appropriate percentage of the interior lights. During a typical sunny day, it is very common for the center section of the warehouse to have no interior lights burning.
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%.
[edit] Costco Cash Cards
Costco Cash Cards can be purchased in the warehouse and members can load them with money to make non-cash purchases at all Costco warehouses in the United States. Because Costco gas stations take only Costco Cash, debit cards, and American Express, people who normally pay for gas by check or cash must purchase a Costco Cash Card inside the actual Costco building before filling up.
[edit] 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, dairy, 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 some states (such as Texas), the liquor store must be owned and operated by a separate company with separate employees. 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. They also have an agreement with Ameriprise for auto and home insurance.
Costco also developed its own line of products under the Kirkland Signature brand name.
[edit] In popular culture
- In the 6th season of The Sopranos, Tony Soprano met with Phil Leotardo in a Costco. A Kirkland Signature logo on one of the boxes is clearly visible in the background.
- The 2006 comedy Employee of the Month was filmed in a Costco in Albuquerque, New Mexico [3]. The Costco that was used as the background was right across the street from a Sam's Club.
- The 2006 satire Idiocracy features a sprawling futuristic version of Costco, in which greeters welcome patrons by saying "Welcome to Costco, I love you."
- The popular comic strip FoxTrot by Bill Amend features Costco in a number of strips as "Costclub", where either the things bought from there are either depicted in huge quantities, or with one of the main characters buying too much there when he shops alone.
- In the Chaos Theory episode of The Grim Adventures of Billy & Mandy, several of the main characters take a trip to a store known as "Costmo", where they claim that you have to write down everything you want on a list, or else you'll become drawn in by the inexpensive prices and end up buying vast quantities of items you don't need.
- On the Will and Grace episode "Bathroom Humor", Jack is surprised to discover that Karen purchases Costco brand bulk soap.
- In the movie The Ringer Jeffy played by Johnny Knoxville goes to Costco on a date with his love interest Lynn played by Katherine Heigl.
- In one "Seinfeld" episode, The Rye, Kramer asks Jerry to assist him carrying his items from The Price Club up to his apartment. Jerry criticizes Kramer for having a 48 pack of Eggo Waffles.
- In the movie The Pacifier, starred by Vin Diesel, the Fireflies sell their cookies outside of a Costco store, whose logo is clearly visible above them.
- In The Simpsons episode Homer and Apu Marge and Apu shop at a Costco based store called Monstro Mart. The sign shows:"Welcome to Monstro-Mart, where shopping is a baffling ordeal".
- In one episode of Family Guy, Lois and Meg go to a store called "Costmo" where they try to remove a four pack of pianos from a shelf and Meg is crushed when pianos fall on top of her.
[edit] Trivia
- The very first Price Club location was an old airplane hangar, and is still in operation today (Warehouse #401 San Diego).
- The price of a kosher hot dog and a soft drink at the food court is still $1.50, the same as it was when (pre-merger) Costco first opened in 1983.
- Prior to the 1993 Price Club/Costco merger, Wal-Mart founder Sam Walton wanted to merge Sam's Club with Price Club. [1]
[edit] Working at Costco
While some former Price Club locations in California and the northeastern US are staffed by Teamsters, the majority of Costco locations are not unionized. The non-union locations have revisions to their Costco Employee Agreement every three years concurrent with union contract ratifications in locations with collective bargaining agreements. Similar to a union contract, the Employee Agreement sets forth such things such as benefits, compensations, wages, disciplinary procedures, paid holidays, bonuses, and seniority. As of March 2007, non-supervisory hourly wages range from $11.00-19.50.
Product demonstration (e.g. food samples) employees are employed by an outside company.
[edit] See also
[edit] External links
[edit] Notes
Seattle-based Fortune 500 Corporations (by size):
Washington Mutual • Amazon.com • Nordstrom • Starbucks • Safeco
Seattle-based Fortune 1000 Corporations (by size):
Companies listed above, plus: Alaska Airlines • Expeditors International • Plum Creek Timber
Puget Sound-based Fortune 1000 Corporations (by size):
Companies listed above, plus: Costco Wholesale • Microsoft • Weyerhaeuser • Paccar • Puget Energy
Major Seattle- and Puget Sound-based non-public or externally owned corporations:
Nintendo of America • R.E.I. • T-Mobile USA • WestFarm Foods
