Costco Wholesale: Business Strategy, SWOT, and Recommendations Report

This report examines Costco Wholesale's business strategies in the competitive retail market. It analyzes their product selection, pricing, and treasure hunt merchandising strategies. The report highlights Costco's competitive advantages, including low prices and customer service, while also conducting a SWOT analysis to identify strengths, weaknesses, opportunities, and threats. The study explores Costco's growth strategy and operations in 2019, emphasizing the importance of customer loyalty. Recommendations include expanding internet retailing, multi-channel business strategies, and global expansion. The report provides a comprehensive overview of Costco's strategic approach and its implications for future success in the retail industry.

Running head: COSTCO WHOLESALE
Costco Wholesale
Name of the Student
Name of the University
Author Note

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The business in the modern generation is getting significantly competitive with each
and every passing day and almost all the organizations, present in the market, are in need to
form effective strategy so that they can get some breathing space in the tough market
competition. Costco wholesale being a renowned name in the retail industry is also subjected
to the intense competition of global market and that made them reform some of their
strategies. The paper discuses one such case and evaluates the impact of the strategies along
with their implementation. Apart from this, the paper also conducts a SWOT analysis in
context of the strategy.
Strategies:
Product Selection:
Costco Wholesale was one of the few organizations with a large product chain
starting from fresh meats, seafood, vegetables, fruits, paper products, coffee, to dairy
products like cheeses. The list also includes DVD, light bulb, cookware electric toothbrushes,
vitamins, ceiling fans, toys, games and many more products. The strategy introduced by
Sinegal was to deliberately block the wide range of choices for a single product. The
organization introduced a single product to represent a single product category. Sinegal’s
explanation in the implementation was that the organization was ready to lose one or two
customers out of 10 owing to the topic of restriction in the selection of the products. The
organization is okay with this intelligent loss of sales but they do not want to make their
business difficult with the increment in the variety of the product category.
Pricing:
The organization was significantly focused in delivering quality at a significantly low
price as they correctly assessed the act that customers come to their shop not because of the

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good environment rather they want the organization to think of the customers. The
organization reformed their pricing strategy in such a manner that their strategy had strong
emphasis on the ultra-low pricing and low markup on brand name merchandise even at 14%
compared to 20-50% of others (Barnes, 2013). The vision Jim Sinegal was clear and that was
to reduce the competition of the market by reducing the price of the products. Sinegal wanted
to make sure that the competitors of Costco get pissed off and consider others to be their
competitors rather competing against Costco.
Treasure Hunt Merchandising:
The organization was significantly concerned in creating the demand among the
customers where the plan was to offer such deals which will guarantee more amount of
investment from the part of the customers than they would have. This helps the organization
to generate amount of revenue. The organization was instrumental in mixing the featured and
treasure-hunt items which forced the customers to visit Costco more than the number of the
previous visits for the usual stock up trips (Courtemanche & Carden, 2014).
Low Cost Emphasis:
Jim Sinegal was significantly concentrated on decreasing the cost of the products by
reducing all sorts of operating cost related to the products like the costs associated with the
wholesalers and retailers including salespeople, fancy buildings, delivery and billings. The
strategy for the location of the warehouses was to consider the high traffic routes which will
be easily accessible by both small businesses and the residents with above average incomes.

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Growth Strategy:
The growth strategy for the concerned organization was pretty clear for the
organization with an estimation of 5% or more increment in sales annually in order to open
additional warehouses both domestically and internationally.
Competitive Advantages:
 Costco was having the competitive edge over the other organizations due to the
mentioned points:
 Costco’s prices were the lowest in the industry.
 The organization had a significantly good customer service which includes higher pay
rates, health based benefits and financial benefits.
 The organization was satisfying the customer needs in an incredible manner and the
effective social networking strategy was significant in providing the competitive
advantage to the mentioned organization.
Reduction of the external Threats:
The organization will be able to reduce the threats of the external competitors with the
lowest pricing of the materials, increment in the social media presence, customer care service,
comparatively improved store quality, delivery method and the wide range of facilities in the
membership plans.
SWOT strategy:
Strengths:
 The mixing and changing of the featured and treasure hunt items along with the
addition of the gasoline and other services encourages the customers to buy more.
 Higher market coverage for the concerned organization over the competitors.

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 The organization followed a model which ensured low operating cost
 Well perceived private label brand.
Weakness:
 The organization has significant dependence on the North American markets
 The new strategy of limiting the products choices is also a point of concern.
Opportunities:
 The increased level of market expansion will certainly provide the company with
access to large customer base.
 The organization had the opportunity to increase its reach by the concept of
multichannel retailing.
Threats:
 The organization was subjected to face fierce rivalry from the other dominant forces
of the retail industry and with the increased variety in their product chain of other
retailers, the organization had experienced the threat to lose the customers.
 The class proportion decrement in US proposes significant concern to the concept of
catering the middle-high income.
 The low customer loyalty is also a major threat to the organization.
Operation in 2019 and Brand Loyalty:
The organization must increase the number of products in a particular product
category in 2019. Obviously it must not hamper the organization’s operation and
arrangements but the organization must focus on providing some options to the customers.
This will eventually increase their sale and will also be instrumental in associating the
customers with the organization. It will definitely help the organization to increase the

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customer loyalty and in the competitive market that will be significant for the survival and
growth of the organization.
Recommendations:
Under the current situation, the first recommendation for the concerned organization
is to focus more on the internet retailing and strategies for multi-channel business. The
formation of the new retailing channels and stronger presence on internet will allow the
organization to reach larger customer base. The next recommendation will be the global
expansion into untapped markets which will help the organization to reduce dependency on
the North American market.

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References:
Barnes, J. M. (2013). Case Study Report: Architecture Evolution at Costco. Tech. Rep.
Courtemanche, C., & Carden, A. (2014). Competing with Costco and Sam's Club: Warehouse
club entry and grocery prices. Southern Economic Journal, 80(3), 565-585.