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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Costco is ranked number fifteen in the Fortune 500 list and has been on the list for the past 24 years. Costco is an American wholesale company with a variety of merchandise they sell. However, the company operates as a membership-only warehouse club, like Sam's Club, with their retail outlets across the world. Costco Wholesale Corporation has more than 740 warehouse stores with memberships from clients. The company currently holds as the nation's largest wholesale club operator (A. Anderson, 2018).

Costco

Costco also has more than 90 million cardholders in the United States, Australia, Canada, Mexico, the United Kingdom, Japan, South Korea, Taiwan, and Spain. The store is meant for offering discounts to customers. The stores often offer discount prices of about 3,700 products which can be from car materials, food, appliances, apparel, gas, and even alcoholic beverages. Most of the products bought in the store are bought in bulk. Memberships to Costco can be vary among customers. Certain club memberships can have special services like insurance, real estate, travel packages, or mortgage (A. Anderson, 2018). There are numerous of products or services customers could possibly do with a Costco membership.

History

As most new companies do, Costco started by serving only small businesses at the company's first location. The first location opened in 1976 when the name was “Price Club.” It was located in an airplane hangar on Morena Boulevard in San Diego, California. After serving only small businesses, the company got non-business customers that served as a great audience for them. Soon after that change, the industry started booming. By 1983, Costco's first warehouse location opened in Seattle and the company became to go from zero to three billion dollars in sales in less than six years. In 1993, Price Club and Costco merged under the name PriceCostco. This name had 206 locations which brought in 16 million in annual sales. It was said that Costco may have transformed the retail world when entrepreneur Sol Price introduced the world's first membership warehouse club (Costco, 2018). This would let consumers buy and operate things more efficiently with unmatched savings.

When Price Club first was starting up, they were only selling to business members only, who needed the big range of supplies and items. The executive vice-president of merchandising, distribution and marking, was Jim Sinegal, and he was determined to make the merchandise and marketing strategies better for the company. A few years later, Mr. Sinegal co-founded Costco Wholesale with Jeff Brotman. Both of them opened the first warehouse in Seattle, Washington in 1983. The next decade was history. The Price Club and Costco Wholesale continued to be successful and grow until merging in 1993. This merge created Costco the world's most successful warehouse club (Costco, 2018).

Important Figures

The President and CEO of Costco Wholesale Corporation is W. Craig Jelinek. He has held with position since 2012. Before this title, he was President, COO, and Director from 2010 to 2012. His compensation in 2015 was $699,810.00 salary, $88,800.00 bonus, and the total compensation was $6,342,124.00. Prior to his presidency and being CEO of the company, Jelinek had senior management positions in Operations and Merchandising. Before even joining the Costco company, Jelinek used to have management positions with Fed-Mart and Gemco (A. Anderson, 2018).

Another important figure at the Costco Wholesale Corporation is Richard A. Galanti. Richard Galanti has been the director of this company since January 1995. His current position is the Executive Vice President and Chief Financial Officer of Costco Wholesale Corporation. His compensation for 2015 was $712,888.00 salary, $75,520.00 bonus and the total compensation was $3,351,899.00. Prior to working with the Costco company, Mr. Galanti was an Associate with Donaldson Lufkin and Jenrette Securities Corporation (A. Anderson, 2018).

Financial Information

The most up-to-date income statement given from the Costco Wholesale Corporation is from August 2017. From the statement on August 2017, the revenue was $129,025,000,000 and the cost of goods sold was $111,882,000,000. The company's gross profit was $17,143,000,000. The operating income was $4,111,000,000 with an operating margin of 3.19 percent. The income before taxes was $4,039,000,000, income tax was $1,325,000,000, and the net income after taxes was $2,714,000,000. Continuing operations stayed at $2,714,000,000. The total operations and net income was $2,679,000,000. The net profit margin was 2.08 percent. From August 2008 to August 2017, the net profit margin increased from 1.77 percent to 2.08 percent. (A. Anderson, 2018).

The revenues and profits have been rising for several years as would any store that's expanding at a high rate. The revenues in wholesales increased eight percent to the highest it has ever been, which was $129 billion during August 2017. This happened because of the newly opened warehouses and the increase in comparable sells. The membership fees did increase by eight percent as well. The net income from the company increased from 11 percent from $2.4 billion in 2016 to $2.7 billion in 2017. The cash flow from Costco's operations also doubled from $3.3 billion in 2016 to $6.7 billion in 2017 (A. Anderson, 2018). Overall, the financial situation in this company is doing very well.

Human Resources

With a big company, there are numerous amounts of people needed to be employed. Especially if this company is international. In 2011, Costco Wholesale Corporation had around 92 thousand full-time employees and 72 thousand part-time employees. In 2017, the company had 133 thousand full-time employees and 98 thousand part-time employees (Costco, 2018).

The employees at Costco are trained to be service-oriented people that are determined to have a common goal of excellence. The Costco business is centered around merchandising. For the most part, Costco employees begin in the warehouse environment. This allows them to be able to become professionals at merchandising and operations. This company loves to promote within. Most of the warehouse managers and Vice Presidents were once Costco's stockers or cashier assistants. There are many opportunities that Costco has to offer. There are fields in accounting, buying, marketing, journalism, information systems, human resources, etc (Costco, 2018).

Industry

Since the Costco company has a broad spectrum of operations, there are a few industries that the company has to work with. The main industry Costco is involved with is the retail sector. In this industry, companies sell a big variety of products to customers and businesses. This can be from cleaning supplies to clothes. In the retail sector industry, larger companies have to rely on larger selections and economical pricing to get their customers in the door. From the retail sector industry, Costco Wholesale Corporation falls at number three on the highest companies in this industry. Walmart Incorporation and Amazon.com Incorporation are the two companies ahead of Costco in the retail sector industry (A. Anderson, 2018)

Within the retail sector industry, the Costco Wholesale Corporation's primary industry in in warehouse clubs and superstores. This industry focuses on companies who operate by membership in retail stores that sell a variety of goods and services. This can be from personal health items, food, electronics, or items that can be bought in big quantities. Typical customers in this industry are women who live in large households with a salary of around $50 thousand. The typical customers are also small businesses that need to buy in bulk. Buying in bulk allows companies to receive a big number of discounts. However, since there are few products in each category, most companies in this industry put only top brand names on their shelves. This makes sure the items sell faster. Costco Wholesale Corporation falls at number two on the top companies in the warehouse clubs and superstores industry. Walmart Incorporation stays at number one in this industry (A. Anderson, 2018).

Conclusion

The Costco Wholesale Corporation is on the constant rise in today's industry. Even though people are complaining that the new wave is online shopping, Costco now has ways to sell and ship online at an efficient time and costly matter. From an airplane hangar in Seattle, Washington to now having several international warehouses, I would say Costco has been thriving ever since. This corporation shows the drive to make consumers feel comfortable in what they need to buy, especially in bulk.

There is not a Costco Wholesale Corporation anywhere in Corpus Christi, Texas at the moment, but I know it would make money here within the industry. Might start slowing at first, but once people hear it is like Walmart or Sam's Club then it will be the next movement in the warehouse clubs and superstores industry in South Texas.

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