Most of foreign retailers still have a hard time in local markets. However, it is said that Costco is one of the first entrant which is successful outside the home market with the same strategy.
I found that there are three major issues between Costco and other companies through six articles which I read: basic business strategies, cost management, and advertisement. The first issue is about basic business strategies. Costco’s key strategies include low prices, limited selection, and a treasure hunt strategy. One of the most noticeable strategy of Costco is treasure hunt strategy. Concretely, visiting Costco itself gives excitement and surprise like visiting amusement park, and increase spending per visit consequently.
On the other hand, Target has a management approach with innovative design and improvement characteristics of cultural public relation system. The second issue is cost management. Costco reduces costs by limiting its products. Compared to Costco, Target uses many kinds of high-quality products. Cost cut enables to sell at a lower price, and finally contributes to lower production costs. Both Costco and Target try to increase efficiency of supply chain management due to reduce cost. In order to survive in market, the most important point is each company has different strategy and superiority.
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In fact, Costco has own private brand “Kirkland”. Private brand has various merits. First of all, it can gather and manage a wide variety of customer information. Needless to say, the more amount of information they get, the more accurate customer analysis would be possible. Secondly, desirable shelf space can be ensured. This leads to improve bargaining power to distribution companies, and expand the possibility to discount. Thirdly, cost for stock can be saved. Because of private brand which produce themselves, they are able to limit its amount. The final issue is advertisement. Costco’s advertisement is absolutely focused on “word-of-mouth”. Relatively, Costco doesn’t spend a lot of money on advertising.
Actually, Costco’s membership system has relation to act word-of-mouth. This means members who visited Costco tell others its charm after their visiting, or take their friend as companion. The other approaches are regular distribution of coupons, and sending mails to members directly. In contrast to Costco, many other companies such as sears, target, Walmart and Coca-Cola spend money for enterprise marketing. For instance, Coca-Cola uses primary advertisement including TV. To sum up, Costco stimulates consumer’s purchase action, and succeeds even in foreign market without changing strategies.
