Costco is the world’s fourth-largest and America’s second-largest retailer; founded in 1976 by James Sinegal (also former CEO) and Jeffrey H. Brotman (also former Chairman). Since then, Costco has undoubtedly had endless streams of success and expansion internally which has aided them in being able to open 800 warehouses globally which are inclusive of countries such as the U.S., the UK, Mexico, Japan, Taiwan, Canada, and more. However, what is Costco doing that other retailers are not?
Costco membership
Costco is a membership-only warehouse chain. The membership element may limit the reach of consumers but the customer base is at an all-time high. The retailer does charge for its membership which accounts for a large proportion of Costco’s annual profit. In 2019, Costco made $3.35 billion just off of membership fees alone which was a 7% increase from 2018 and they finished 2019 with an entire net income of $3.36 billion (the USA only).
The aspect of membership-only creates an exclusivity element for those who shop at Costco and in turn, leads to customer-loyalty; Costco also offers their customers exclusive deals, special benefits in the form of low prices, discounts, and many other benefits.
The membership also comes with a range of services Costco also provide which include a concierge service which provides a service to customers who have purchased electronics in the case they have any questions and ultimately it is to avoid a return of the said item; they have an auto program as Costco regularly teams with several automobile manufacturers to offer special deals to existing customers; Costco also acts as investment brokers and travel agents to Costco Canada’s Business Executive Members.
The success of Costco
Costco’s success can also be displayed through the time and money they have invested in their employees. In 2004, Costco’s co-founder and now retired CEO, James Sinegal, visualized a strategy that put Costco’s employees at the forefront of Sinegal’s progressive vision; said progressive vision-enabled Costco to be able to pay its workers $17 an hour. Wall analysts were not big fans of centering a business around its employees and or customers as they felt that the focus should be more insistent on shareholders instead.
Costco chose to ignore analysts and in turn, they have gone from strength to strength having put time and money into their employees and customers. Additionally, advertisements are not something Costco deem to be necessary to gain more traction with new potential members, the saving from not having to advertise aids Costco in being able to fund business expansion plans, customer benefits, and bonuses for staff members.
Furthermore, Costco’s transition to e-commerce has also largely aided them in its ongoing success. As Costco mostly sells their items in bulk and not individually, it can be difficult for some of its customer’s transport goods from store to home especially with young children present. The transition to e-commerce has enabled Costco customers to have groceries delivered at their convenience.
Conclusion
Conclusively, it is evident that Costco has built a multi-billion retailer in seemingly a short amount of time and the success of the business comes down to being customer and employee-centered. The focus on customers and employees has largely aided Costco in being able to attain excellent customer service, customer loyalty, and employee loyalty.
Both customers and employees can reap the rewards of the business through exclusive deals, bargains, and discounts, which if a consumer, would not be possible without membership. The membership fee for Costco’s customer also accounts for a large proportion of their annual income which makes up a considerable percentage more than what Costco make annually in sales.
It is clear that Costco’s global expansion and business model has allowed them to provide different services through concierge services, business services, auto programs, and more; and thus, they’ve been to become the fourth-largest retailer in the world through the aforementioned services and being customer and employee-centered. Thus, setting them aside from other competing retailers.
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