Competition Among Warehouse Clubs
COMPETITION AMONG THE NORTH AMERICAN WAREHOUSE CLUBS
Costco
All wholesale clubs (Costco, Sam’s Club, and BJ’s Wholesale) offer low prices to attract members and provide them with considerable cost savings enough to more than cover membership fees. The rivalry among them is vigorous and will remain so. All 3 club rivals are aggressively pursuing top-line revenue growth; chiefly by opening new stores, attracting more members at both new and existing stores, and endeavoring to grow sales revenues and shopper traffic at existing stores. The industry is becoming somewhat mature and that intensifies rivalry.
Costco began operations in Seattle Washington in 1983 and by the end of 1984, there were nine stores in five states, serving more than 200,000 members. The company went public in 1985, selling shares to the public and raising additional capital for expansion. Costco became the first ever U. S. company to reach $1 billion in sales in less than six years. Of the 1,250 warehouse club locations in the United States, Canada and Mexico, Costco has about 56% share of warehouse club sales.
Costco’s strategy was aimed squarely at selling top-quality merchandise at prices consistently below what other wholesalers or retailers charged. The company stocked only those items that could be priced at bargain levels and thereby provide members with significant cost savings. The philosophy was to keep members coming in to shop by wowing them with low prices and thereby generating big sales volume. The key elements of Costco’s strategy were ultra-low prices, a limited selection of nationally branded and private-label products, a “treasure hunt” shopping environment, strong emphasis on low operating costs, and a three-pronged growth initiative to boost sales and profits. The three-pronged growth initiative included open more new warehouses; build an even large, fiercely loyal membership base; and employ well-executed merchandising techniques to induce
Costco
All wholesale clubs (Costco, Sam’s Club, and BJ’s Wholesale) offer low prices to attract members and provide them with considerable cost savings enough to more than cover membership fees. The rivalry among them is vigorous and will remain so. All 3 club rivals are aggressively pursuing top-line revenue growth; chiefly by opening new stores, attracting more members at both new and existing stores, and endeavoring to grow sales revenues and shopper traffic at existing stores. The industry is becoming somewhat mature and that intensifies rivalry.
Costco began operations in Seattle Washington in 1983 and by the end of 1984, there were nine stores in five states, serving more than 200,000 members. The company went public in 1985, selling shares to the public and raising additional capital for expansion. Costco became the first ever U. S. company to reach $1 billion in sales in less than six years. Of the 1,250 warehouse club locations in the United States, Canada and Mexico, Costco has about 56% share of warehouse club sales.
Costco’s strategy was aimed squarely at selling top-quality merchandise at prices consistently below what other wholesalers or retailers charged. The company stocked only those items that could be priced at bargain levels and thereby provide members with significant cost savings. The philosophy was to keep members coming in to shop by wowing them with low prices and thereby generating big sales volume. The key elements of Costco’s strategy were ultra-low prices, a limited selection of nationally branded and private-label products, a “treasure hunt” shopping environment, strong emphasis on low operating costs, and a three-pronged growth initiative to boost sales and profits. The three-pronged growth initiative included open more new warehouses; build an even large, fiercely loyal membership base; and employ well-executed merchandising techniques to induce