Intro of Company wid its PODs n retailing strategies

1. Submitted by:
Priyanka Thakkar(54)
Ishani Chokshi(08)
Niti Patel(36)
Ankit Manek(23)

2. Introduction
• Founded in 1983
• CEO: James Sinegal
• Headquarters: Issaquah, WA
• Inception: Seattle, WA 1983
• Stock Symbol: COST (NASDAQ)
• Founders: James Sinegal & Jefferey Brotman
• Seventh largest retailer in the world
• Fastest growing company in the history among American businesses

3. History
 Sol Price, along with his son Robert —pioneered what is now
termed “warehouse retailing.”
 In this business model, business owners operate warehouse
stores located in the city outskirts, where buildings and real
estate property are priced lower.
 Consumer products are bought directly from the
manufacturers and delivered straight to these warehouse
stores, where they are sold by the bulk at cheaper prices than
that in department stores.

4. Costco
 Only company to achieve $6 billion in sales from zero in six years.
 Founder Jim Sinegal coined as the inventor of the wholesale Club
concept.
 Philosophy is to “keep members coming in to shop by wowing them
with low prices”.
 Does not engage in extensive advertisements or sale campaigns.
 Five Guiding Principles
 Take care of members
 Take care of employees
 Respect suppliers
 Reward shareholders

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6. Key Information
Number of warehouses Membership Data
605 (as of 6/29/12) 66.5 million cardholders
Areas of operation 36.4 million households
26.4 million Gold Star
438 locations: 40 U.S. States
6.4 million Business
82 locations: Canadian
3.6 million Business add ons
22 locations: United Kingdom
8 locations: Taiwan Warehouse sizes
7 locations: Korea 73,000 to 205,000 square feet
13 locations: Japan (average 143,000 square feet)
3 location: Australia Annual revenues
32 locations: 18 Mexican states (FY11 - Ended 8/28/11):
Number of employees $88.9 billion
(worldwide)
160,292 full and part-time

7. Departments & Services
• Tobacco • Cooler & Delivery
• Beers, Wines and Spirits • Frozen Food
• Office • Health & Beauty
• Confectionery • Electronics
• Soft Drinks • Sporting Goods
• Catering and Cleaning • Lawn & Garden
• Butchery • Toys & Seasonal
• Automotive & Tyre Bay • Apparel
• Grocery • Cookware
• Hardware • Small Appliance
• Bakery • Domestic
• Service Delivery

8. Departments & Services

9. Costco Connection Magazine
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10. Kirkland Signature
• In 1995, Costco created the Kirkland Signature label, named
after the city of Kirkland, Washington, where the Home Office
was located at the time.
• Kirkland Signature is a $4 billion brand and Accounts for 24
percent of Food & Sundries sales in the U.S.A. and 20 percent
globally.
• Toilet Tissue is the most popular Kirkland Signature product
(approx. $300 million globally).
• Costco continues to grow the Kirkland Signature brand, and
prides itself on maintaining its high standards for quality value
and price.

11. Kirkland Signature Products
Some of the most popular items include
• Toilet tissue
• Spring water
• Assorted nuts
• Jeans
• Belgian chocolates
• Vodka
• Washing powder
• Cookware sets
• Bed linen
• Wine

12. Kirkland Signature Products

13. Membership
• Costco has two types of membership, Business and
Individual, both membership types can be upgraded to
Executive membership program- which allows you to earn a
2% reward on most purchases, along with other benefits.
• Business members generally paid an annual membership fee
of $50 for the primary membership card.
• Individual members generally paid an annual membership fee
of $50.

14. Product Diversification
 Core - Costco Wholesale
• Warehouse Clubs and Superstores
• Premium private-label products
 Specialty - Consumer Services
• Travel
• Optical
• Automotive
 Financial Services
• 401(K)
• Loans
 Insurance
 Pharmacy
 Recycle electronics

15. Costco’s POD
Pricing
• Costco was known for selling top-quality national and regional
brands at prices consistently below traditional wholesale or
retail outlets
• to cap its markup on brand-name merchandise at 14 percent
(compared to 20 to 50 percent markups at other discounters
and many supermarkets).
• Markups on Costco’s 400 private-label (Kirkland Signature)
items could be no higher than 15 percent.

16. Jim Sinegal explained the company’s approach to pricing as
follows:
We’re very good merchants, and we offer value. The
traditional retailer will say: “I’m selling this for $10. I wonder
whether we can get $10.50 or $11.” We say: “We selling this
for $9. How do we get it down to $8?” We understand that
our members don’t come and shop with us because of the
window displays or the Santa Claus or the piano player. They
come and shop with us because we offer great values.

17. Product Selection
• Typical supermarkets stocked about 40,000 items
• A Wal-Mart Supercenter or a SuperTarget might have as many
as 150,000 items for shoppers to choose from
• Costco’s merchandising strategy was to provide members
with a selection of only about 4,000 items.

18. Sinegal explained the reason for the deliberately limited
selection as follows:
• If you had ten customers come in to buy Advil, how many are
not going to buy any because you just have one size? Maybe
one or two. We refer to that as the intelligent loss of sales. We
are prepared to give up that one customer. But if we had four
or five sizes of Advil, as most grocery stores do, it would make
our business more difficult to manage. Our business can only
succeed if we are efficient. You can’t go on selling at these
margins if you are not

19. Treasure-Hunt Merchandising
• Product line consisted of approximately 4,000 items, about
one-fourth of its product offerings were constantly changing.
Costco’s merchandise buyers remained on the lookout to
make one-time purchases of items that would appeal to the
company’s clientele and that would sell out quickly.
• The idea was to entice shoppers to spend more than they
might otherwise by offering irresistible deals on luxury items.

20. According to Jim Sinegal,
“Of that 4,000, about 3,000 can be found on the floor all the
time. The other 1,000 are the treasure-hunt stuff that’s always
changing. It’s the type of item a customer knows they better
buy because it will not be there next time, like Waterford
crystal. We try to get that sense of urgency in our customers.”

21. Competitive Advantage
 Finding and negotiating bargains
On quality merchandise
 Building relationships with
Manufacturers
Suppliers
 Ingenuity
Cost cutting
Conservation
 Human Resources
Employing the best talent

22. SWOT Analysis
S Strengths Weaknesses
W  Burden of high wages paid
 Low Prices
 Strong Brand to workers
 CEO’s retirement
 Operating Efficiency  Low price margins
 Exceptional Workforce  E-commerce activities
 Strong membership  Small Marketing budget
compared to discount
retailers and super
markets
O Opportunities Threats
 Appeal to conscientious T
shopper  Aggressive price
 Expand into foreign competition by rivals
stable markets  Political complications in
 Mergers & Acquisitions foreign markets
 Massive supplier pool  Cannibalization

23. Strategic Issues
Remain focused on core business
Maintain First Mover Status
Increase internationalization opportunities

24. Costco Strategy for the
Future
• The primary objective of Costco Corporation is the administration
of the network of subordinate warehouses, which provide quality
goods for competitive prices.
• The level of the prices established within the network is usually
lower than those offered by the local competitors.
• Thus, the company assists local retailers to reduce cost and
successfully operate in the competitive environment. Besides, the
company serves not only legal persons; any physical person may
become the customer of Costco Warehouse as well.

25. Costco Advantages
• Convenience: Costco supermarket is maximum fifteen
minutes drive from the point the customer is.
• Price: Costco stores attract numerous clients because of its
business strategy of providing items in bulk and at low prices .
o Sweater
• At other store- $20
• At Costco-$15(Brand Nike)

26. Competitors
• Sam’s Club
• BJ’s Wholesale Club
(both of which have similar business strategies to Costco)

27. Customer
• Costco targets independent small business owners who have
typically $100,000 or more of personal income
• Actual average Costco customer is women in large
householders with income of $50,000 or more
• Typically customer visits 8-11 times per year
• Goods are usually bulk-packaged
o Marketed primarily to large families and businesses.
• Does not carry multiple brands or varieties
o House brand to sell, under the Kirkland Signature label.
• Results in high volume of sales from single vendor, allowing
further reduction in price, and reducing marketing costs.

28. Costco's Biggest Concern
• Over expansion
• Cannibalization of existing store locations
As a result, the company has announced it will slow its
domestic expansion plans and will look to international
markets for future growth.

29. Retailing Strategy
Target Market Strategy
• Primary target market is small businesses
• Marketing teams contact local businesses, trying to
persuade them into purchasing a business membership
• Direct mail marketing to attract potential customers
that meet their customer profile
• Dependence of members using word-of-mouth to
attract new members to the company

30. Retailing Strategy
Products
• Low prices on selected private and a limited selection of
nationally branded products in a wide range of
merchandise categories
• Kirkland Signature: currently carries 330 private label
items which make up 15% of their sales (2006)
• Some offerings rotate in and out of the warehouse based
on season, and other factors.

31. Retailing Strategy
Promotions
• Advertising: Costco limits its advertisement to direct mail to
potential new customers.
• Public Relations: Costco allows their customers to sample
many of their products as they walk through their warehouse.
• Personal Selling: When a Costco warehouse opens in a given
location, marketers contact businesses around the area to see
if they would be interested in becoming a member.
• Sales Promotion: Costco limits its marketing and promotional
activities to new warehouse openings.

32. Retailing Strategy
Price
• Aggressively buy from a handful of vendors.
• Drive the cost down for members and sell in volume.
• Individual memberships.
• Business memberships.

33. Retailing Strategy
Personnel and Customer Service
• Keeps labor costs low by squeezing more sales out of
fewer people.
• Limits the amount of employees they have on the sales
floor.
• No commissioned sales people that work at Costco:
customers do not feel pressured by Costco workers to
purchase a given product.

34. Retailing Strategy
Presentation
• Warehouse-type setting.
• Merchandise is generally stored on racks above the
sales floor and displayed on pallets containing large
quantities of each item.
• First things: the most expensive products
(diamonds, flashy toys).
• Understand their customers in a given location.

35. Customer Relationship
Management
Services
• Unconditional double guarantee
o On merchandise: Every product sell with a full
refund
o Refund membership fee in full at any time
dissatisfied
• Unlimited Drink Bar
• Feedback Box
• Serve members free breakfast to know customers
• Focus on satisfying all the need of members

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40. Bibliography
• http://www.thehistoryofcorporate.com/companies-by-
industry/traderetail/costco-wholesale/
• http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-homeprofile
• http://www.costco.co.jp/eng/costco.htm
• http://www.costco.co.uk/
• http://shop.costco.com/en/Membership/Welcome/Departments.aspx
• http://www.thepensters.com/araplelei/costco-strategy-for-the-
future.html
• http://www.wikinvest.com/stock/Costco_Wholesale_(COST)
• http://articles.economictimes.indiatimes.com/2007-01-
15/news/28381035_1_costco-wholesale-corp-retail-outlets-sam-s-club
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41. THANK YOU