Consumer choices for products and services differ greatly. Not unlike the consumer changes and differences, our retail marketplace has also evolved. Long gone are the five and dime stores, general hardware stores, corner pharmacies or even small town candy stores. Even grocery needs are fulfilled differently today than previously. It is likely that the changes from just a few decades ago will continue over the next ten years or more. One significant change has been the growth of the warehouse club – a discount retail model that has captivated the buying public. The warehouse club market is a 438 billion dollar industry that achieved 4.5% annual growth rates from 2008-2013 (Everett, 2013). A market share leader in the warehouse and wholesale space, Costco Wholesale Corporation, operates with a successful strategic approach. The work herein documents Costco's strategies, links to other strategic concepts, the firm's success, the industry maturity level and expected strategic industry changes. .
Costco's Primary Business Strategies.
Strategy is about making choices and leading with decisions about where to play and how to win (Martin, 2014). Costco operates with five strategic principles in mind – each governing where to play and how to win. Pricing, Product Selection, Treasure Hunt Merchandising, Low Cost Emphasis and Growth are the five key elements supporting Costco's success. Each is examined more closely here.
Costco, since the early days of co-founder Jim Sinegal, has maintained an ultra-low pricing strategy. The warehouse club business model is simple: offer its paid members savings well in excess of their membership fee ("Warehouse Club Industry Guide," 2014). Purchasing a massive amount of limited selection items and doing so directly from the manufacturer or from gray market intermediaries has helped achieve this outcome. Low markups for these products keep customers returning, knowing that a value can be obtained.