The goal of this memo is to assess Costco’s performance in comparison to Sam’s Club and BJ’s. Costco Wholesale Corporation is actually a wholesale club that requires customers to get 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 survive within the competitive wholesale industry. It also adopted a strategy that 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 – After 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 excluding year 2000 to 2001. BJ’s on the contrary, had growing revenues until 1999 when their revenues then started to grow with a declining rate.
Costco includes a higher membership fee and much more and also this enabled costco opening times to become greater than BJ’s. This membership fee is essential because it is the primary contributor to the company’s main point here since sales excluding membership fees barely covers operating expenses. Costco also offers more warehouses and far higher sales per store. Costco has warehouses in lots of international locations while BJ’s only have warehouses in america. However, Costco features 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 because it is much bigger than BJ’s. This clearly shows that Costco has an excellent operating efficiency.
Costco’s Performance in Relation to Sam’s Club – Sam’s Club, on the other hand, has more members and warehouses as compared to Costco which makes it Costco’s largest competitor. However, Costco had larger total revenues, sales per store and operating income due to its strategy. This is also because Costco is much more internationally dispersed compared to Sam’s Club as it has more warehouses in international locations. I am just struggling 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 focusing on lowering the unit value of goods and purchasing few Stock Keeping Units (SKUs) looking at the vendors which enable production savings. Costco’s core strength is made to provide it with higher total revenues and also to create value to its customers. Their core strength could be separated into two:
• Targeting a wealthier number of small businesses proprietors and middle-class shoppers which is different from Sam’s Club.
• Refusing to mark up products more than 14 percent over the distributor’s price
Costco’s strategy is really efficient in providing it having a competitive edge 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 with their customers. They will definitely obtain many loyal and satisfied customers who do not mind paying an increased membership fee to join Costco. Costco is yet another very ethical company because they are not implementing a method which serves to reduce their costs and cheat customers with their cash in an indirect way.
We have been a member of Costco for two yrs using a business professional membership. I prefer Costco for a lot of of my company purchases therefore i switched to simply using Costco instead of having both memberships. Bjs and Costco carry the majority of the same things. Costco includes 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 benefit of accepting MFR coupons and accepts all major charge cards! Costco only accepts checks and American Express inside their warehouses (they are doing accept all major credit cards online though) BJs lines manage to move rapidly, as well as their aisles, at the very least at the ones We have been to, are better organized.