Costco First Of The Warehouse Club Industry Essay

The strategic objective of Costco is based on the concept of offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories while producing high sales volumes and rapid inventory turnover. This rapid inventory turnover, when combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self service warehouse facilities, enables Costco to operate profitably at significantly lower gross margins than traditional wholesalers, discount retailers and supermarkets. (1)

The company’s first location was opened in 1976 under the name of Price Club. Originally it served only small businesses, but later on it found that it could increase its sales by extending its services to non-business members. The first warehouse operating under the name, Costco, began functioning in 1983 in Seattle, Washington. In 1993 Costco and Price Club merged. Today, the company operates under Costco Wholesale name and has its warehouses all across the world. As of the end of 2015 it has close to 700 warehouses in total located in United States, Canada, United Kingdom, Mexico, Japan, Australia, Spain, Taiwan and Korea. Costco’s common stock trades on the NASDAQ Global Select Market under the symbol

What is Costco’s business model? Is the company’s business model appealing? Why or why not?

Renee McDonald (“Plaintiff”) allegedly sustained personal injuries on October 8, 2015 while shopping at a store owned and operated by Costco (“Defendant”) in Brooklyn Park, Maryland. According to the plaintiff, while walking through the store, she tripped on mop water which caused her to fall to the ground and suffer “severe bodily injuries.” The Plaintiff claims that her fall was caused by the mop water. The mopped area had been secured with a yellow caution sign that warned customers of the wet floor. At the time of the Plaintiff’s fall, however, the sign had fallen down and was lying on the floor. Plaintiff alleges that the store did not have proper signage to warn of the hazardous condition.

It was in the twentieth century that the world was first introduced to a now well-known household name, Costco. In 1976 that the first Costco was opened, formerly known as Price Club, in San Diego. The philosophy of this company is simply stated, “Keep costs down and pass the savings on to our members.” (Costco.com) It has held onto its philosophy of keeping prices low for almost half a century. Costco is self defined as a “membership warehouse club.” (Costco.com) It provides a wide variety of brand name products in their warehouse-style store, and strives to provide all members with the lowest prices that they can offer. Today, Costco is a well known and loved company by consumers.

Costco as a company began operations in 1983 with its headquarters in Issaquah, Washington (Costo 1). It was founded in Washington, United States by James Sinegal and Jeffrey Brotman. Brotman comes from a family that had been involved in retail business before the establishment of Costco. Therefore assuming that his background may have prepared him for running Costco

In September 1983 Costco's first warehouse opened in Seattle, Washington. At this time, warehouse outlets had long existed, but the concept of a wholesale club was relatively new and promising. Dubbed "buyers' clubs" and begun in 1976, these warehouses were wholesalers that required shoppers to become members and pay an annual membership fee. The membership fee helped reduce already-low overhead, so that items could be sold at an average of 9 percent over cost from the manufacturer. At the time Costco was formed, membership warehouses were primarily a West Coast phenomenon; however, since then, their popularity has spread throughout the United States, across the borders to Canada and Mexico, and beyond to many other countries.

On September 15,1983 the world had witness the opening of Costco the first warehouse on Seattle, Washington by James Senegal and Jeffrey H. Brotman. The owners had started in distribution their wholesale by working for Price at both FedMart and Price Club and Brotman, an attorney from an old Seattle retailing family, had also been involved in retail distribution from an early age.

According to Blacktown City Council (2014), Costco Wholesale Corporation operates an international chain of membership warehouses which carry quality brand name merchandise at substantially reduced prices compared to other conventional wholesale or retail outlets. It began its operations in 1983 in Seattle, Washington and later merged with The Price Company in October 1993 operating under the name PriceCostco, had 206 locations generating $16 billion in annual sales (Costco Wholesale, 2015). As of December 2014, the Company operated a chain of 671 warehouses in 43 states, Washington, D.C., and Puerto Rico (474 locations), nine Canadian provinces (88 locations), Mexico (34 locations), the United Kingdom (26 locations), Japan (20 locations), Korea (11 locations), Taiwan (10 locations, through a 55%-owned subsidiary), Australia (seven locations) and Spain (one location). The Company’s online business also operates websites in the U.S., Canada, U.K., and Mexico (Costco Annual Report, 2014).

In 1976, Sol Price, the son of Jewish emigrants, began the first successful warehouse shopping company. He named it Price Club. It was a place where resourceful buying and operating practices gave members access to unrivaled savings. The store started out exclusively for business owners buying at wholesale prices and then re-selling for profit. Previous to Price-Club, Mr. Price owned a grocery outlet in San Diego named Fed-Mart. Fortunately, he hired a 15 year old bagger, by the name of Jim Sinegal. Jim became a protégé of Mr. Price, who was taught by example the workings of owning and operating retail and discount stores. Jim, along with Jeffrey Brotman, a graduate of the University of Washington, started their own business in 1983, on 4th Ave in South

Costco Wholesale Corporation (“Costco” or the “Company”) began operations in 1983 in Seattle, Wash. In October 1993, Costco merged with The Price Company, which had pioneered the membership warehouse concept in 1976, to form Price/Costco, Inc., a Delaware corporation. In January 1997, the Company changed its name to Costco Companies, Inc. On Aug. 30, 1999, the Company

Costco Wholesale opened its first store in Seattle, Washington in 1983. Founders Jeff Brotman and Jim Sinegal had a simple yet powerful idea: allow people to save on basic necessities and consumer staples while taking advantage of special offers on high-end luxury items and durable goods. With $71 billion in sales and more than $1 billion in net income for their latest fiscal year, Costco is the leading player in the warehouse club segment of the discount retail industry, the fifth largest retailer in North America and ninth in the world.�

Costco Wholesale Corporation, which began operations in 1983 in Seattle, originated the membership wholesale club retail concept. By providing low prices on consumables like fresh foods, health and beauty care items, high-quality apparel, electronics, jewelry and other general merchandise, the company pioneered the retail concept that encourages members to visit regularly to achieve savings. In the meantime, the retailer has been successful in encouraging members to spend the savings on impulse big-ticket, discretionary purchases.

Wal-Mart is sitting at number one on the Global Fortune 500 list. Sam Walton would never have thought that his creation of Wal-Mart in 1962 would lead to a global dynasty. By 1972 Wal-Mart went public which gave an infusion of money and capital for Mr. Walton that gave them 276 stores by 1980. In the mid 80's Wal-Mart expanded to having member only warehouse stores, Sam's Club. From there Wal-Mart opened supercenters that included full grocery and 36 departments of regular merchandise. By the end of the 1980's there were 1,402 stores and 123 Sam's Clubs (Wal-Mart corporate 2012).

The company currently has 375 stores in 41 countries. Products are also online through Company-owned websites. Merchandise is purchased from more than 1,000 vendors having factories in approximately 40 countries. No vendor accounted for more than 5 percent of total purchases in 2013 and approximately 98 percent of purchases are from outside the United