Costco is a leading multibillion-dollar worldwide retailer with warehouse club operations in 11 nations. It is a recognized leader in its field, devoted to quality in each area of its business and reputed for its supreme business ethics. In spite of its large size and quick global expansion, it constantly offers an environment wherein the employees thrive and succeed (Costco 2023). Costco is an American operative of discount provisions of the type identified as the wholesale clubs or warehouse clubs, wherein huge amounts of merchandise are sold at intensely discounted rates to club associates that pay yearly membership fees. It is one of the chief retailers in the entire sphere based in Washington.
As per 2022 data, Costco is the 5 th major retailer across the globe and is the prime retailer of organic foods, prime and choice beef, wine and rotisserie (Livingstone and Knezevic 2020). The Costco store conveys supermarket items and an ever-changing assortment of other merchandise, including a few indulging goods. The stock tends to be loaded high in the resounding warehouse enclosing over 140000 sq. feet of floor space. Its stock is traded on NASDAQ with the ticker symbol COST (Chen 2021). It was founded in 1983 and it is present in over 848 locations. It serves Canada, Australia, Japan, Korea, Mexico, New Zealand, the United Kingdom, Taiwan, Spain, Sweden, China, France and the US.
In the United States, the major competitors of Costco which are operating membership warehouses are Sam's Club which is a subsidiary company of Walmart and BJ's Wholesale Club (Zheng 2020). Costco employs over 304000 full and part-time employees. Costco constitutes to be a membership-only warehouse that produces a major proportion of its proceeds from retail sales and a smaller proportion from membership payments. Consumers must purchase memberships to access the warehouse and undertake purchases. It is implemented through direct sourcing and competent inventory management techniques. The company divides its business into three major segments – United States operations, Canadian operations and other global operations. Costco majorly focuses on getting members to arrive at the warehouse for purchase, rather than ordering online. But because of the COVID-19 outbreak, the online sales of Costco have increased dramatically, with higher sales growth in 2020 in comparison to the past 5 years combined (Raval and Bhatt 2021).
The main purpose of the research is to analyze the competitive position of the corporation in respect of its competitors and the considerations that the corporation must consider while trying to make a positive social impact.
Costco is one of the main operators of concession retail stores in the world. In latest years, customers have started to position the rising burden on retailers to offer inexpensive merchandise, pouring the competition within this segment. The COVID-19 outbreak has thrown up specific issues for comprehensive retailers. The demand for cut-rate goods has sustained to develop, and supply chain problems have arisen because of the closing down of borders and restrictions (Reeves et al. 2020). With hundreds of sites globally and a well-framed corporate model, Costco is in a robust situation to overcome the long-term issues of the pandemic and remain to strive. Furthermore, Costco’s distribution network and supply chain are powerful and robust. The corporation has been ranked 79 th position on the Forbes list of the most valuable brands in the world.
The top competitors of Costco include Walmart, Target, Amazon, BJs Wholesale Club, Kroger Company and Home Depot. In 2021, Costco Wholesale grew revenue and earnings by over 17.5% and 25.1% year over year, correspondingly indicating no symbols of a slowdown anytime soon (Weinstein et al. 2022). The solid balance sheet, consistent growth and exclusive competitive advantages have rewarded the company with a premium valuation from investors. Costco presently trades at 43.3 times earnings, positioning the valuation of the corporation much greater in comparison to business peers. With close participants such as Kroger and BJ's Wholesale Club trading at 32.7 times earnings and 20.1 times earnings correspondingly. At present, most corporations are keen on investing in shaping their brand among customers, which helps patrons to recognize their products. Target, Walmart and Costco, all are playing in pricing their items, selecting a superlative position to position their product among the brand and executing their innovative ideas towards retailing sector to hold their market share (Kumar et al. 2022). Target and Walmart are the foremost players in the retail sector. Walmart is the largest retail corporation and Costco is also progressively growing. Target is another rival firm that competes with Costco in retailing and Target has a business model of bulky department outlets that assist customers to sense like a mall. Target lay emphasis on everyday lower prices on fashionables and necessity products. Their brand is acknowledged by the finest marketing strategy with gigantic and wide store size. Also, Walmart is recognized by their consumer as saving money and leading a better life. However, Walmart intends to have some bad appearances such as not adequately treating the employees, low compensation, gender biases and lack of equality, placing stress on suppliers and products with cheap rates linked with their quality also. On the other hand, Costco has an effective public image such as treating their employees well and paying them the best salaries. Perhaps, the greatest achievement of Costco and its most substantial strength lies in its satisfied workforce. In 2021, the corporation raised its least wage to $16 an hour, the uppermost among its competitors. Moreover, Costco provides generous benefits and perks to its personnel like complete health and dental insurance (Dyer 2020).
Costco deliberately has made entry into overseas markets by prudently deliberating local market conditions, risk factors, requirements and probable growth. In most nations, Costco has united with local retail companies. It helped in obtaining a preliminary foothold in local marketplaces. Binding up with local cohorts aids in disabling government guidelines, setting up the local infrastructure and upkeeping distinct forms of risks in overseas marketplaces. Costco has acquired a benefit from its competitors through the localization process. The corporation has succeeded in most foreign markets by fulfilling the demand of local customers. The corporation provides a treasure hunt atmosphere where shoppers can find unique, rare deals on items that inspires visiting frequently, walk the entire store and buy urgently. The relentless emphasis of Costco on consumers is vibrant by the notion that the regular markup on produce is just %, far lesser than 24% at Walmart and over 35% at Home Depot (Kim et al. 2020). As a major proportion of profit arrives from affiliation fees, which totalled over $4 billion over the straggling 12 months, the firm is capable enough to keep a cap on prices.
Complementing superior quality goods at lesser costs with effective buyer service is one of the major competitive advantages of Costco. Consumer service encompassed a 'no questions asked' return strategy, no-cap cashback, anytime membership termination and numerous payment selections. Attributes like these made consumers satisfied and made the company stand out against competitors. Gratified consumers led to free and competent word-of-mouth promotion. Costco also undertakes coupon elevations and direct email advertising, which helps in keeping marketing costs very minimal.
The corporation's exclusive business and worldwide extension strategies have led to its victory. Despite substantial competition in the retail sector, Costco has constructed a stronger brand image by providing superior quality goods at lower rates with higher level consumer service, together with other major factors.
Costco has made a commitment towards transitioning to a lower-carbon business model that is sustainable for the planet. It undertakes wide-ranging measures to function in an efficient manner and in an environmentally responsible way. It emphasized decreasing resource consumption and other discharges and environmental-related areas (Costco 2023).
The primary charitable efforts of Costco Wholesale lay emphasis on programs supporting education, children and human and health services in communities where it carries out its business (Costco 2023). One of the ways in which Costco is known as a socially answerable corporation is in the manner it treats its workers. The corporation places a higher worth on its personnel and operates to inspire them to do what is correct and to upkeep their well-being and optimistic self-esteem. Moreover, the warehouse club has been recognized across the United States for its determination to offer personnel with greater wages than competitors identifying that constructing a loyal workforce nurtures victory for the business.
With regard to the environment, Costco mentions that it is operating towards a net optimistic influence for the societies it caters to. It has various paths towards accomplishing this, like safeguarding the number of forests and treasured ecologies that are crucial towards the health of the planet. It aims at working to preserve those ecologies, reestablishing any possible and supporting native people. Its measures also consist of safeguarding natural water sources by decreasing the usage of chemicals. A few of the corporation’s efforts lay emphasis on removing the supplies from their Kirkland Signature brand of goods considered troublesome for deforestation, like just using palm oil, pulp, wood and paper items sensibly sourced (Bravi 2021). Moreover, Costco mentions that it is operating to reinforce sustainability within societies, including merchandising and operating in a manner that is better for the earth. It constitutes to have all-inclusive sustainability and education proposal that comprises a 10-point action plan engrossed in decreasing inequalities, undertaking climate action, upholding clean water and safeguarding life both below water and on land.
Business ethics and social responsibility are becoming progressively significant for all customers and employees. Corporations that implement social errands and ethics fetch various benefits like additional benefits over competing firms and raised customer bases (Carroll 2021).
The competition in the corporate world is getting stiff day by day and it can be quite challenging for the corporation to set itself separately in the eyes of consumers, However, firms that take social accountability seriously can win customers as well as form a stage to market and earn attention of their audience. In simple words, social accountability can aid people in seeing the corporation as a optimistic force in society. Also, CSR is significant when it arrives to branding. To build a fruitful brand and retain consumers, firms should produce trust with the target viewers and having an effective CSR approach can aid in building a good status and in turn, earn loyalty and trust among customers (Zhang et al. 2020).
Being socially answerable and following fundamental business morals have the below-listed benefits –
Businesses that are highly socially accountable may also appear highly striking to investors. Investors intend to have one common goal in business which is to have higher and higher returns on the funds invested by them.
In the case of Costco, there are various crucial factors that drive their victory. In order to flourish Costco owes their achievement to staying as a money-making business while performing the right set of things. To actualize this, Costco undertakes various guiding values like commitment towards doing its portion to assist the world strive, dedicating attention towards generating global impact and pursuing constant learning to assist in improving the world (Bravi et al. 2022). Furthermore, Costco committed to four sustainable tasks –
Costco intends to lay emphasis on various elements according to its sustainability report like carbon change statement, progress and site design, packaging designs, energy administration, recycling and waste stream supervision and carbon emissions footprint. With respect to climate change, Costco confesses that environmental revolutions influence its business model (Shewmake et al. 2020). In addition, climate change may affect the capability to procure required commodities at costs and in volumes. Extreme weather anomalies such as thunderstorms, ice or snow storms, intense hurricanes, rising sea levels and tornadoes. All these contribute to the challenges for Costco. To decrease its impacts, Costco guaranteed to continue the carbon-efficient practices that direct to it allegedly being the industry front-runner. It has also been reported by Costco that for both indirect and direct releases, its objectives align with the industry benchmarks (Montgomery and Van Clieaf 2023). Also, the company’s construction progress and site design agendas offer the following environmentally conscious and sustainable practices –
The citizenship of the company is regarded as the responsibility of company towards the society. The objective is to generate higher standards of living and superior quality of life for the communities that surround them while still upkeep profitability for the stakeholders (Edmans 2021). For instance, the companies might improve society and strengthen their brands via corporate social responsibility initiatives, community service and charitable donations. The website of Costco indicates that it necessitates suppliers to mark a code of conduct form that restricts them from processing, selling and making goods that use unlawful forms of labour. This code bans the practice of forced labour, child labour and promotes safe and healthy working settings.
Philanthropic responsibility denotes Costco's aim to lead the world into a better place to live. Other than meeting the ethical and legal expectations of society, Costco also meets its philanthropic responsibility by getting proactively involved in volunteer work. The corporation devotes a particular portion of earnings to charity (Stanwick and Stanwick 2020). It offers voluntary aid to public and private education institutes to instruct society and make education reasonable for all. Also, it raises capital for education plans and supports well-being initiatives for the upliftment of society. The fulfilment of philanthropic responsibility allows Costco to meet the expectations of the general public and society. It strengthens the brand image of the company and effective communication of the charitable work raises the trust of stakeholders in the operations of the business (Uysal and Aksak 2022). It realizes its responsibility towards the environment and beyond duly conforming with the fundamental ecological laws, a company is proactively undertaking actions to decrease the carbon footmark and make heavy investments in the environment-conscious business.
Numerous retailers are acquiring an omnichannel emphasis that offers the choice to purchase products online and in outlets. Nowadays, customers use distinct linked devices to buy online, compare prices and research products (Marmol and Fernandez-Alarcon 2019). While the emphasis of Costco is on the storeroom enabling the wholesale discount retailers to upkeep prices at lower margins, it does not render to the form of omnichannel experience that many clients expect. Customers assume a unified omnichannel experience that enables them to buy instantly anytime and anywhere. In order to ensure that, Costco has to renovate IT systems for a smooth experience for customers on any touch point or device. Consumers access facilities, make buying and interrelate with corporations via several channels and thereby accepting an omnichannel approach will assist Costco to offer a cohesive customer practice that will be steady, smooth and competent for the consumers (Herhausen et al. 2019).
Costco uses a lower-cost strategy. The manner in which Costco cut down costs in its value chain makes an addition to the uniqueness of the store amidst a sea of retail competitors. However, its differentiated model is not the strategy of the company. This approach demands the maintenance of the lowest feasible process for the members by maintaining the costs as low as possible. To attract more number of customers, Costco can ensure that user edge and user experience are maximized for all plans and user-friendly to make sure that its consumers can simply find and purchase items they are observing to purchase (Fang et al. 2022).
Costco duly understands that effective implementation of the CSR initiatives needs the company to manage close relationships with all chief stakeholders, including employees, customers, general society and supply chain partners. In order to accomplish that, the company must tailor its relationship and communication management strategies to the importance, relevance and impact of every stakeholder group. It must also ensure that all CSR initiatives are communicated effectively to pertinent stakeholders via adequate channels.
Advertising can assist Costco to assist targeted ads to their viewers that has previously visited or undertaken measure on their website. It must convert abandon carts on Costco.com by marketing to consumers that did not finish the purchase. In addition to that, Costco must also offer coupons to customers as right now, it does not provide any exclusive coupons to consumers shopping online. Coupons will aid Costco in promoting its products and increase sales. Providing discounts to fascinate consumers will also raise the perceptibility of goods presented by Costco.
Technology drives a competitive edge in the retail sector. Retail brands accomplish efficiency and speed by making investments in cloud technologies and digitalization. Costco is required to improve the extent of customer convenience and consumer satisfaction by making large investments in technology. The brand is assumed to do a lot more to make its e-commerce abilities sturdier by making investments in digitalization (King 2022). Amazon Prime provides various benefits to its members including the same-day delivery of products for Prime members who qualify for free same-day delivery. Costco can also acquire similar strategies by making higher investments in technology. There is a huge change in consumer behaviour due to the COVID-19 outbreak. It has raised the reliance of people on technology to meet their requirements like entertainment and shopping. Retail companies like Costco require to focus on technology to enhance customer convenience and attract customers.
It can be concluded that Costco trades only the best quality products. It is one of the greatest sellers of good wines across the globe. Moreover, the growing extent of its great worth, unique Kirkland Signature private label products, enhances to its stronger brand and worth and provides the consumers with a compelling reason to return. Also, Costco is dedicated to having the lowermost process on all its goods and services on a consistent basis. It sells packaged goods in bulk, thus the cost per unit is lower than at any food retailer. Costco uses a low-cost approach that aims at penetrating pricing and a diverse buying approach that offers clients a treasure hunt buying experience. Costco uses the prime components of lower costs, lower prices, limited items and the treasure hunt environment. All this puts Costco above all its competitors. Costco has no substantial strategic problems at this point. The business model of the company is appealing in the way that the corporation has rapid inventory turnover, operating profit and efficiencies at a very lower gross margin. Such success has arrived in its path because of factors like internet sales, ongoing measures to cut prices, treasure hunt produce, only stock bargains, no-hassle return strategy and word-of-mouth marketing.
A few challenges are being faced by Costco. Things such as memberships, omnichannel experience, customer behaviour and wholesale buying are all probable to adversely impact the value cable of Costco. The business model of Costco is highly reliant on memberships. This approach functions well as long as its associates keep approaching back and continues purchasing items in bulk. However, customers could select to move their memberships to its competitor firms like Walmart, Kroger, Target, etc. Changing customer preferences may also affect the company's operations. The corporation makes use of a warehouse tactic. It purchases certain matters in bulk amounts and tries to get them sold as rapidly as possible, but this only function if it can upkeep those higher volumes. In case, there is a change in consumer preference, Costco could be left with huge quantities of unwanted and probably, fragile goods.
To resolve these problems, Costco is required to raise expenditure on everything from sampling to ensuring that its in-house eateries stay temptingly cheaper way to eat a snack or meal.
Costco can enhance its business growth and success by enhancing technology, online marketing and advertising, exclusive online shopping coupons and omnichannel e-commerce. Costco is required to have a strong marketing strategy to promote its goods to online shoppers. It can advertise on Google Shopping to advertise its goods online to non-members along with that, it must increase the targeted email marketing to frequent buyers.
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