Costco Stores – Look Into The Recommendations..

The purpose of this memo is to assess Costco’s performance compared to Sam’s Club and BJ’s. Costco Wholesale Corporation is actually a wholesale club that will require customers to buy annual memberships so that you can shop at their stores. Costco’s main competitors were Sam’s Club and BJ’s Wholesale. Costco bought Price Club in 1993 which enabled it to survive within the competitive wholesale industry. Additionally, it adopted a method that was different in comparison with its major competitor, Sam’s Club This enabled Costco to be the largest wholesale club in the market in 2001.

Costco’s Performance in terms of BJ’s – After I compared Costco’s total revenues with BJ’s total revenues in Exhibit 5 of FIN 197 Seminar in Finance case book, I found that Costco’s total revenue were increasing at an increasing rate except for year 2000 to 2001. BJ’s on the contrary, had growing revenues until 1999 when their revenues then begun to grow with a declining rate.

Costco includes a higher membership fee and more which enabled to become greater than BJ’s. This membership fee is vital since it is the key contributor to the company’s main point here since sales excluding membership fees barely covers operating expenses. Costco also has more warehouses and a lot higher sales per store. Costco has warehouses in lots of international locations while BJ’s have only warehouses in the united states. However, Costco has a lower operating and gross margin which implies that BJ’s has more efficient operations and better product prices than Costco. Costco’s inventory turnover ratio is outstanding as it is much larger than BJ’s. This clearly implies that Costco comes with an excellent operating efficiency.

Costco’s Performance in terms of Sam’s Club – Sam’s Club, on the other hand, has more members and warehouses when compared with Costco making it Costco’s largest competitor. However, Costco had larger total revenues, sales per store and operating income due to its strategy. This is also because Costco is a lot more internationally dispersed in comparison to Sam’s Club as it has more warehouses in international locations. I am just unable to compare Costco’s financial statement performance with Sam’s Club because Sam’s Club information is joined with Walmart.

III. Costco’s core strength and strategy – Costco pursues the strategy of focusing on decreasing the unit cost of goods and purchasing few Stock Keeping Units (SKUs) from its vendors which enable production savings. Costco’s core strength is made to provide it with higher total revenues and to create value to the customers. Their core strength can be divided into two:

• Targeting a wealthier selection of small businesses proprietors and middle class shoppers which differs from Sam’s Club.

• Refusing to mark up products greater than 14 percent on the distributor’s price

Costco’s strategy is really efficient in providing it having a competitive edge over its competitors BJ’s and Sam’s Club. This is undoubtedly a long term value enhancing strategy because Costco’s primary goal would be to ctqosf value to their customers. They will definitely obtain many loyal and satisfied customers who do not mind paying a higher membership fee to join Costco. Costco is another very ethical company because they are not implementing a method which serves to lower their costs and cheat customers of their funds in an indirect way.

I actually have been a member of Costco for a couple of yrs having a business professional membership. I prefer Costco for most of my company purchases therefore i switched to simply using Costco as opposed to having both memberships. Bjs and Costco carry most of the same things. Costco features a more ofice supplies, toys, etcs I want for my online retail business.

I feel Costco and Bjs are equally professional and offer good customer service. BJs has the main benefit of accepting MFR coupons and accepts all major charge cards! Costco only accepts checks and American Express in their warehouses (they do accept all major bank cards online though) BJs lines seem to move quickly, along with their aisles, at least in the ones I have gone to, are better organized.