The purpose of this memo is to assess Costco’s performance compared to Sam’s Club and BJ’s. Costco Wholesale Corporation is a wholesale club that requires 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 live within the competitive wholesale industry. It also adopted a strategy which was different in comparison 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 found that Costco’s total revenue were increasing at 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 began to grow in a declining rate.
Costco includes a higher membership fee and more and also this enabled costco opening hours to get greater than BJ’s. This membership fee is essential as it is the primary cause of the company’s financial well being since sales excluding membership fees barely covers operating expenses. Costco even offers more warehouses and much higher sales per store. Costco has warehouses in many international locations while BJ’s only have warehouses in america. However, Costco has a lower operating and gross margin which shows that BJ’s has more effective operations and higher product prices than Costco. Costco’s inventory turnover ratio is outstanding as it is much bigger than BJ’s. This clearly implies 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 in comparison 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 can be because Costco is more internationally dispersed when compared with Sam’s Club because it has more warehouses in international locations. I am not able to compare Costco’s financial statement performance with Sam’s Club because Sam’s Club data is joined with Walmart.
III. Costco’s core strength and strategy – Costco pursues the technique of focusing on decreasing the unit cost of goods and purchasing few Stock Keeping Units (SKUs) from the vendors which enable production savings. Costco’s core strength is designed to provide it with higher total revenues and also to create value to the customers. Their core strength could 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 over the distributor’s price
Costco’s technique is really efficient in providing it with a competitive edge on its competitors BJ’s and Sam’s Club. This is undoubtedly a long-term value enhancing strategy because Costco’s primary aim would be to ctqosf value with their customers. They will definitely obtain many loyal and satisfied customers who do not mind paying a higher membership fee to sign up for Costco. Costco is yet another very ethical company because they are not implementing a strategy which serves to reduce their costs and cheat customers of their funds in an indirect way.
I have been a member of Costco for two yrs with a business professional membership. I prefer Costco for a lot of of my business purchases therefore i switched to merely using Costco rather than having both memberships. Bjs and Costco carry a lot of the same things. Costco includes a more ofice supplies, toys, etcs I would like for my online retail business.
I feel Costco and Bjs are equally professional and provide good customer care. 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 actually do accept all major bank cards online though) BJs lines manage to move quickly, along with their aisles, at least at the ones We have gone to, are better organized.