Costco Stores – Browse Even Further In Order To Make An Educated Call..

The objective of this memo is to evaluate Costco’s performance compared to Sam’s Club and BJ’s. Costco Wholesale Corporation is actually a wholesale club that needs customers to buy annual memberships in order to 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. It also adopted a strategy which was different when compared with its major competitor, Sam’s Club This enabled Costco to be the largest wholesale club in the business in 2001.

Costco’s Performance with regards to BJ’s – Once I compared Costco’s total revenues with BJ’s total revenues in Exhibit 5 of FIN 197 Seminar in Finance case book, I discovered that Costco’s total revenue were increasing with an increasing rate with the exception of year 2000 to 2001. BJ’s on the contrary, had growing revenues until 1999 when their revenues then started to grow in a declining rate.

Costco includes a higher membership fee and more and also this enabled costco holiday hours to be higher than BJ’s. This membership fee is vital as it is the main reason for the company’s financial well being since sales excluding membership fees barely covers operating expenses. Costco also has more warehouses and much higher sales per store. Costco has warehouses in many international locations while BJ’s just have warehouses in the united states. However, Costco includes a lower operating and gross margin which demonstrates that BJ’s has more efficient operations and higher product prices than Costco. Costco’s inventory turnover ratio is outstanding as it is much larger than BJ’s. This clearly demonstrates that Costco has an excellent operating efficiency.

Costco’s Performance with regards to Sam’s Club – Sam’s Club, on the contrary, has more members and warehouses when compared with Costco that makes it Costco’s largest competitor. However, Costco had larger total revenues, sales per store and operating income due to the strategy. This is also because Costco is more internationally dispersed when compared with Sam’s Club as it has more warehouses in international locations. I am 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 centering on reducing the unit cost of goods and buying few Stock Keeping Units (SKUs) from the vendors which enable production savings. Costco’s core strength was created to provide it with higher total revenues as well as to create value to the customers. Their core strength may be separated into two:

• Targeting a wealthier selection of small businesses and middle class shoppers which is different 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 using a competitive advantage 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 for their customers. They are going to definitely obtain many loyal and satisfied customers that do not mind paying an increased membership fee to sign up for Costco. Costco is also a very ethical company as they are not implementing a strategy which serves to reduce their costs and cheat customers with their cash in an indirect way.

We have been part of Costco for a couple of yrs using a business professional membership. I personally use Costco for many of my company purchases so I switched to merely using Costco instead of having both memberships. Bjs and Costco carry the majority 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 provide good customer service. BJs has the advantage of accepting MFR coupons and accepts all major credit cards! Costco only accepts checks and American Express within their warehouses (they are doing accept all major charge cards online though) BJs lines seem to move quickly, along with their aisles, at the very least at the ones I actually have been to, are better organized.