I think that the three major strategic issues that Costco faces are:
- the financial success is heavily relying on membership dues to remain profitable,
- there is a lot of competition, and finally
- Costco needs to sustain their target growth strategy.
Costco’s whole strategy to offer the lowest prices to its members relies heavily on the customers getting and retaining their membership year after year. Membership prices need to maintain steadily for the fact that if it becomes too costly, those customers are going to shop somewhere else.
The convenience of becoming a member is now available online, you can purchase it online and then process it at a Costco to receive cards. Once the payment goes through, the new member will receive an email with their number, and they can start shopping online. Currently, there are two types of memberships, regular members and business members, the basic one for each is $60 and includes one card and the ability to use the membership at all Costco locations worldwide.
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The next level up is $120 and includes everything from the first plus rewards on travel purchases, extra benefits, and the member can add others for $60 each. For businesses, there are also two levels, the $60 level includes the one card, being able to use the card at all Costco locations worldwide, the member can add others at $60 and the benefit of purchase for resale. For the $120 business plan, the member gets all the perks, a free card, their membership is valid at all locations worldwide, reward on travel purchases, extra benefits, the ability to add members at $60, and purchase for resale. Costco must find a way to continue to raise profits without losing customers to be able to compete with others like Walmart’s Sam’s Club.
As time changes and the shopping patterns of the customers evolve, the competition grows and there are more choices for the customer at low price ranges. Amazon is a great example of this, it is a site where you can find anything and everything at great prices and the customer doesn’t have to be a member to buy. Costco needs to expand its online presence and options for its members to be true competition in the online sector and are beginning to do this by allowing non-members to shop on Costco’s website but may have a 5 percent surcharge added on some orders. Costco’s growth strategy needs to continue to increase by expanding to underserved markets both domestically and internationally (Gamble, Thompson, & Peteraf, 2019).
Kirkland Signature brand has dramatically expanded its product line to now include organic products such as organic coffee, organic soy beverages, and organic salsa. The variety of products are well priced, quality products and great deals on treasure hunt items would get the members to visit and purchase these items at the store. Getting them in the door and keep them coming while meeting the changes in shopping habits is hard, but Costco is evolving and continues to increase membership from year to year.
