Since its opening, Costco has expanded to become a global powerhouse in the retail business.
It is not only dedicated to providing quality products at the best value, but their formula
has proven to be very successful. How do they do it? Here are 10 Mind Blowing Facts about
Costco Wholesale.
Membership is Golden
Did you know that unlike many other retailers, Costco rarely makes a huge profit off the
merchandise it sells? They do make a small margin of profit by marking-up products from
8-10% over their cost. After deducting expenses such as real estate costs and employee wages,
Costco actually just breaks even. The founder once said, that his secret was simple, but
was reluctant to talk about it for fear of appearing idiotic. His bottom line was to
sell things as cheap as possible; that has always been Costco’s mission statement.
But we all know that what truly drives Costco’s profits up is their memberships. Eighty percent
of the company's gross profit actually comes from the membership fees alone from its 64
million members. Costco boasts a 90% membership-renewal rate in the US. That’s a lot of customer
satisfaction and the main reason why Costco continues to have such a devoted following.
Those memberships are a gold mine.
Kirkland Signature is named after a city.
Did you ever wonder why Costco named their private label and most popular brand of products
Kirkland? Well the answer is because Costco’s first corporate headquarters was situated
in Kirkland, Washington. The headquarters eventually moved to Issaquah, Washington,
but the name stuck. Kirkland Signature, the company's private label, was introduced in
1995 and it’s a known fact that the product line is comparable and even at times better
than most popular brands. The Kirkland Signature label accounts for almost a third of Costco
sales. The idea came about when some suppliers wouldn't lower the cost of their products,
making it impossible for Costco to give its customers a discount. Costco wanted to be
able to provide the lowest prices to its consumers and came up with their signature brand.
Horse & Buggy
Even though Costco is perceived as modern when it comes to big warehouse shopping in
this age of tech, they do have a few clients in Lancaster, Pennsylvania that still live
as if it’s 1820. Yes, parts of Pennsylvania are known as Amish Country. This Costco not
only caters to country and city folks but also to the large Amish population that live
nearby. Costco is not only price conscious, but also respectful and considerate towards
the Amish community who shop there frequently. Drive into the parking lot of this Costco
and you’ll be doing a double take. They have designated horse and buggy parking stalls
at the entrance of the store. Of course, not all of the parking lot spaces are horse stalls,
they do have parking for cars. The horse shelters have rails to tie up the horses so they don’t
get loose and run around in the parking lot, and roof shields to shelter them from bad
weather. Contrary to some beliefs about Amish people, they also need to shop. Yep, even
the Amish people need to get their snack fix.
Employees are Everything at Costco
Costco is known to have a terrific workplace environment. It has a labor force of about
245,000 employees who work either full-time or part time jobs. More than 80% of the employees
at Costco have health insurance and retirement plans. Costco employees rarely quit their
jobs. Turnover rate for those who have been there for over a year is 5%. Employees also
have plenty of other perks, like being able to shop at the store after hours. Most warehouse
employees usually work 5 days per week, or 24 hours a week, part-time. Most shifts are
4-5 hours instead of eight hours and many employees appreciate the work/life balance.
Costco does this for those who have either long commutes or have to pick up kids at daycare.
Costco also loves to promote staff from within. Seventy percent of its warehouse managers
either started out as cart pushers or cashiers. Another little tidbit, Costco doesn’t have
a public relations department. They do not believe in one. Which is an anomaly, because
most companies never work that way. Talk about confidence!
Costco Connection Magazine
Costco also has their own dedicated magazine called The Costco Connection. Its circulation
is about 14.3 million copies. It is solely geared towards its Executive Members. Don’t
fret, you can view it online for free if you are a non-member. Costco basically uses the
magazine to keep members hooked to their yearly subscription, with some other perks, of course.
The magazine is great, it features articles about the latest events, cooking, recipes,
travel offers, auto services, electronics and even book reviews. Many of their ads focus
on their in-house Kirkland Signature Brand, but other labels, too. There’s also a range
of home, health and lifestyle articles. The magazine targets its Executive members mostly
because they are the bigger spenders and shop more frequently than other members. They also
make up 40% of Costco's total membership base. The magazine not only gives members a sense
of being part of the Costco culture, it alerts them to products and services, promotes new
ideas and gives them first-hand knowledge on what is coming up. The magazine also drives
sales by 30%, as most of the magazine's subscribers buy a product after they have seen it advertised
in the magazine.
Prime Beef
Did you know that Costco is one of the largest meat purveyors in the world? It sells $4.5
billion dollars worth of meat every year and another $4 billion worth of produce. Costco
has some of the best cuts, even though it is packaged to feed an army. Costco’s Vice
President of Meat Operations, Charlie Winters, got his start working for his family’s slaughter
house in Minnesota, he was the pioneer behind Costco’s popular meat department and prides
himself in selling only the best. Costco does indeed sell USDA approved prime beef, which
is what you find in most top steakhouses, but it’s hard to find in your local supermarkets.
But buyer beware, it is very expensive. Also, rumor has it that their bacon is one of the
best and tastes better than most generic brands, it is also cheaper. If cooking is not your
thing, you’ve gotta try the rotisserie chicken at $4.99. They are the best. Costco sells
over 100,000 of them every day - more than 37 million a year!
Costco loves Nuts
Cashews are mostly native to Brazil, but these days you can find them growing in many other
parts of the world. Costco sells $300,000 dollars worth of them every week. Costco sources
its cashews mainly from Africa and Vietnam. They not only sell cashews, but all kinds
of nuts, such as almonds, pistachios, pecans, walnuts, pine nuts, and even macadamia nuts
at very affordable prices compared to most retailers. Costco also sells them in bigger
quantities compared to other retailers. If you haven’t noticed, Costco's cashew containers
are also square and not round. They do this in order to maximize space on pallets. If
your favorite nut brand does not come packaged in plastic containers, you could probably
find them in 2 pound Kirkland Signature Brand bags. Costco is known for carrying high quality
nuts, so you will never make a bad investment. They are always fresh and of the best quality
for the price point. If you are worried about buying nuts in bulk and them going rancid
on you, freezing them will extend shelf life. You can make lots of pecan pies and give them
out to your neighbors. They will love you for it!
Howard Hughes Connection
It all began with Sol Price and his son, Robert, who opened their first store in San Diego,
California in 1976. It was supposed to be a new concept in large retail warehousing.
The large warehouse was located on Moreno Boulevard in six old airplane hangars previously
owned by Howard Hughes. Yes, the wealthy, reclusive, eccentric business tycoon. It
became known as Price Club Warehouse #401, and is still in operation today, though the
name is now Costco Warehouse #401. The idea came about after Price was forced out of a
chain of discount department stores that he founded called FedMart. He came up with the
idea shortly afterwards and drew up the concept of a warehouse-type store on a paper napkin.
He then got some of his friends to invest the $1.25 million dollars needed to start
up Price Club. The first week upon opening, sales were very disappointing. To try and
remedy this, Price suggested his employees park near the entrance to make it look like
there were more customers. It paid off, as sales improved and Price Club was off and
running.
Triggers and Treasures
Costco has 762 warehouses worldwide, in 11 countries, and it keeps going strong. The
average size of a Costco warehouse is about 145,000 square feet, with some newer warehouses
being a little larger. The largest is in Salt Lake City Utah, at 235,000 square feet. But
all that space does not necessarily translate to more products. In fact, the typical Costco
warehouse only stocks about 4,000 types of items. In contrast to the average supermarket
which sells about 40,000 types of items. So, what is it with Costco and its selection? You
would think they would have a plethora of items to choose from; the more the better,
right? Well, this is a deliberate strategy by Costco. The Costco belief is that you don’t
need too many choices. They have done all the thinking for you and have chosen the best
products at the best price. They are very good at getting wholesale bargains, which
they then relay back to you. Three-quarters of Costco's products are what it calls "triggers”,
staples such as paper towels, detergents, and cereals. The remaining one-quarter are
"treasures”, items that make shopping an adventure. Another strategy that Costco uses
is to frequently change up the items offered or sometimes completely discontinuing products
altogether. One day it’s there and another day it’s gone, possibly for good. This creates
a sense of urgency to purchase more products. This concept is thrilling for some; it's called
the "Costco effect”. It keeps you hooked and sometimes it gets you to buy more than
you really want to spend.
The Merge
Costco opened its first warehouse in Seattle, Washington in 1983; it was started by Jim
Sinegal and Jeffrey Brotman. Jim Sinegal was Sol Price’s protégé at FedMart. Jeffrey
Brotman came from a retailing family and at an early age started as a grocery bagger.
Together they created Costco and within the same year they had opened two other big warehouses,
one in Spokane and the other in Oregon. About eight years later, an American businessman
named Sam Walton opened his own version of a large discount retail department store,
he decided to name his store Walmart. He made Sol Price an offer to merge with him,
but Price refused. However, in 1993, Costco and Price Club agreed to a merge instead.
Sol Price felt that Costco and Price Club were more in line with the same concept which
would make a merge easier. Together they had 206 locations and made $16 billion dollars
in annual sales. In 1994, all of the locations were rebranded again to Costco Wholesale Corporation.
Tap that screen for another great video and to all our subscribers, thanks and be sure
to ring that notification bell.