Costco Wholesale strategy is based on best-cost provider strategy that focuses on offering their members low prices, a limited selection of nationally branded and private-labeled products with the occasional “treasure hunt” big-ticket items, and low operating cost (Gamble, Thompson, & Peteraf, 2019).
The low pricing, membership strategy combination is a great success for Costco with membership fees creating the large percentage of the revenue for Costco, the company can pay low prices for items and have a low mark up on brand-name merchandise of about 14% and private-name goods at 15% (Gamble, Thompson, & Peteraf, 2019). The low prices keep the customers coming along with the variety of products, which totals about 3,700. Costco’s product line, Kirkland, has a growing percent of the products carried, about 20%, which includes dress shirts, laundry detergent, and even beer. Costco carries products that cover all the needs and wants of their members; from a rotisserie chicken, televisions, washers, and dryers, to most recently caskets, that will be received within three days of placing orders, creating a one-stop-shop.
There have been axillary services such as pharmacies, gas stations, food courts, optical centers, photo centers, and hearing aid centers opened by Costco and highly regarded by the members for the low prices offered (Gamble, Thompson, & Peteraf, 2019). Costco also found the winning combination of having dozens of featured items at incredibly low prices. The idea was to have members spend more by offering big-ticket items. The store has been known to have great deals on Movado watches, Coach bags, diamond rings, and cashmere sport jackets (Gamble, Thompson, & Peteraf, 2019).
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Members learned to buy these items when found because the next time they would come into Costco that item would no longer be available. Costco eliminated all the frills that are commonly associated with retailers, including salespeople, fancy buildings and décor. Warehouses are located on high traffic routes in or near upscale suburbs. Most of the Costco locations are a metal pre-engineered design, concrete floors, with minimal interior décor. These warehouses are designed with floor plans that are efficient and economically maximize selling space, the handling of merchandise, and controls inventory (Gamble, Thompson, & Peteraf, 2019).
I believe that Costco’s strategy is being successful and is executed excellently. By saving cost in all areas, Costco has been able to pass on the savings to its members, building a loyal customer basis. As Costco continues to grow and expand its strategy has been successful at holding about 59% of the warehouse club sales in the United States and Canada (Gamble, Thompson, & Peteraf, 2019).
