Costco Warehouse is a members-only, warehouse-format international shopping chain that offers bulk shopping for large families and businesses. It sells products of various brands at discounted prices.
Former executive Vice President of Price Club Jim Sinegal left the company to form Costco Wholesale Corporation with Jeffery Brotman in 1983. Sol and Robert Price, founders of Price Club, created the “warehouse retailing” business model that Costco follows: products are sold in bulk at warehouses typically located in the outskirts of a city. Costco purchases directly from the manufacturer, taking delivery at its warehouse stores, thereby eliminating the need to double-handle products.
In 1993, Costco Wholesale Corporation contracted a partial merger with Price Club, which resulted in PriceCostco Inc., whose primary objective was global expansion. But sales dropped despite new locations in Mexico, South Korea and England. Price and Sinegal could not agree on major issues, particularly how to recover losses and the general growth of the company. As a result, the merger was dissolved in 1994. Sinegal maintained ownership of PriceCostco Inc. and Price formed Price Enterprises. PriceCostco Inc. was renamed Costco Wholesale in 1997.
Costco requires a membership to shop. The annual membership fee is $50 in the United States, and includes an additional card for spouse. Businesses can purchase up to six additional cards for $40 each. The Executive Membership fee is $100 a year and provides a multitude of merchant services for the business owner, in addition to a 2 percent annual rebate up to $500.
According to Sinegal, “Costco is able to offer lower prices and better values by eliminating virtually all the frills and costs historically associated with conventional wholesalers and retailers, including salespeople, fancy buildings, delivery, billing and accounts receivable. We run a tight operation with extremely low overhead which enables us to pass on dramatic savings to our members.”
Costco sells brand name products including groceries, appliances, toys, hardware, jewelry, health and beauty aids, furniture, office supplies, electronics, clothing and tires. Kirkland Signature items are also represented at Costco, including items such as juice, housewares, clothing and detergent. A division of Costco, Costco Wholesale Industries runs manufacturing businesses that include optical laboratories, food packaging and distribution of jewelry.
Headquarters: Issaquah, Washington
Number of Stores: 648 worldwide, including 509 in the U.S. and Puerto Rico
Annual Revenue: $105.1 billion, of which $65 billion in the U.S.
Number of Employees: 174,000 worldwide, including 107,000 in the U.S.
Geography: U.S., Puerto Rico, Mexico, Great Britain, South Korea, Canada, Taiwan, Japan, Australia
Demography: Bulk goods to large families and businesses
Number of Members: 90.8 million cardholders/6.2 million businesses
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