Presentation Type
Presentation
Faculty Mentor’s Full Name
Amy Minto
Faculty Mentor’s Department
College of Business
Abstract / Artist's Statement
This report examines how Costco Wholesale is able to serve as the world’s premier wholesale store. The competitive and rapidly changing business environment is forcing companies to become more efficient in every level of their operations. The wholesale stores industry survives by maintaining a high inventory turnover ratio, achieving high customer retention and satisfaction, and managing costs through strict supply chain management. Of all the companies analyzed in this report, Costco has the best market penetration and the most bargaining power with suppliers – i.e., more people are familiar with Costco than with its competitors, and suppliers are willing to conform to the wholesaler’s strict quality control metrics and pricing in order for Costco to carry their products. Costco’s strategy is to offer a wide breadth, not depth, of high-quality products at low markups. It minimizes losses by controlling entry and exits, restricting access exclusively to cardholders. That, combined with checking receipts at the door, reduces shoplifting. Costco also offers competitive wages and maintains a generous return policy. Costco has the lowest gross margins of any other company in its class, but it succeeds because it generates large revenues and effectively leverages debt. The wholesale warehouse stores industry is only four decades old, but in that amount of time it has changed the retail landscape in the U.S. and overseas by maintaining control over efficiencies at all levels of the company. While the industry has enjoyed phenomenal success in the past decade by capturing an impressive number of middle-class consumers, it will remain dominant only if it can capitalize on foreign expansion opportunities and adapt to compete with online retailers, economic conditions, and even less foreseeable threats, such as pandemics.
Category
Humanities
Costco Wholesale's Dominance in the Market
This report examines how Costco Wholesale is able to serve as the world’s premier wholesale store. The competitive and rapidly changing business environment is forcing companies to become more efficient in every level of their operations. The wholesale stores industry survives by maintaining a high inventory turnover ratio, achieving high customer retention and satisfaction, and managing costs through strict supply chain management. Of all the companies analyzed in this report, Costco has the best market penetration and the most bargaining power with suppliers – i.e., more people are familiar with Costco than with its competitors, and suppliers are willing to conform to the wholesaler’s strict quality control metrics and pricing in order for Costco to carry their products. Costco’s strategy is to offer a wide breadth, not depth, of high-quality products at low markups. It minimizes losses by controlling entry and exits, restricting access exclusively to cardholders. That, combined with checking receipts at the door, reduces shoplifting. Costco also offers competitive wages and maintains a generous return policy. Costco has the lowest gross margins of any other company in its class, but it succeeds because it generates large revenues and effectively leverages debt. The wholesale warehouse stores industry is only four decades old, but in that amount of time it has changed the retail landscape in the U.S. and overseas by maintaining control over efficiencies at all levels of the company. While the industry has enjoyed phenomenal success in the past decade by capturing an impressive number of middle-class consumers, it will remain dominant only if it can capitalize on foreign expansion opportunities and adapt to compete with online retailers, economic conditions, and even less foreseeable threats, such as pandemics.