The goal of this memo is to assess Costco’s performance in comparison to Sam’s Club and BJ’s. Costco Wholesale Corporation is a wholesale club that needs customers to buy annual memberships to be able to shop at their stores. Costco’s main competitors were Sam’s Club and BJ’s Wholesale. Costco purchased Price Club in 1993 which enabled it to live in the competitive wholesale industry. Additionally, it adopted a technique that was different when compared with its major competitor, Sam’s Club This enabled Costco to be the largest wholesale club in the market 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 realized 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 begun to grow at a declining rate.
Costco includes a higher membership fee and much more and this enabled costco opening times to get more than BJ’s. This membership fee is very important as it is the main contributor to the company’s bottom line 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 numerous international locations while BJ’s just have warehouses in america. 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 bigger than BJ’s. This clearly implies that Costco posseses an excellent operating efficiency.
Costco’s Performance in Relation to Sam’s Club – Sam’s Club, on the contrary, has more members and warehouses as compared to 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 a lot more internationally dispersed compared to 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 strategy of concentrating on decreasing the unit price of goods and buying few Stock Keeping Units (SKUs) looking at 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 may be divided into two:
• Targeting a wealthier selection of small businesses and middle class shoppers which differs from Sam’s Club.
• Refusing to mark up products greater than 14 percent over the distributor’s price
Costco’s strategy is really efficient in providing it having a competitive advantage over its competitors BJ’s and Sam’s Club. This is definitely a long term value enhancing strategy because Costco’s primary aim is to ctqosf value for their customers. They are going to definitely obtain many loyal and satisfied customers who do not mind paying an increased membership fee to sign up for Costco. Costco is yet another very ethical company as they are not implementing a technique which serves to lower their costs and cheat customers of the funds in an indirect way.
I have been a member of Costco for 2 yrs with a business professional membership. I prefer Costco for many of my business purchases and so i switched to simply using Costco as opposed to having both memberships. Bjs and Costco carry the majority of the same things. Costco features 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 service. BJs has the main benefit of accepting MFR coupons and accepts all major bank cards! Costco only accepts checks and American Express inside their warehouses (they are doing accept all major charge cards online though) BJs lines appear to move quickly, and their aisles, at least at the ones I have been to, are better organized.