The objective of this memo is to analyze Costco’s overall performance in comparison to Sam’s Club and BJ’s.
Costco Wholesale Corporation is actually a wholesale club that will require customers to purchase annual memberships in order to look 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 thrive inside the competitive wholesale industry. Additionally, it adopted a strategy which was different in comparison with its major competitor, Sam’s Club This enabled costco ceo email to be the biggest wholesale club in the industry in 2001.
I. 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 discovered that Costco’s total revenue were increasing with an increasing rate with the exception of year 2000 to 2001. BJ’s on the other hand, had growing revenues until 1999 when their revenues then began to grow in a declining rate.
Costco includes a higher membership fee and more and also this enabled Costco’s total revenue to get more than BJ’s. This membership fee is vital as it is the main cause of the company’s bottom line since sales excluding membership fees barely covers operating expenses. Costco even offers more warehouses and much higher sales per store. Costco has warehouses in numerous international locations while BJ’s have only warehouses in the US. However, Costco features a lower operating and gross margin which implies that BJ’s has better operations and better product prices than Costco. Costco’s inventory turnover ratio is outstanding because it is much larger than BJ’s. This clearly demonstrates that Costco comes with an excellent operating efficiency.
II. Costco’s Performance in terms of Sam’s Club
Sam’s Club, on the other hand, has more members and warehouses in comparison with call costco which makes it Costco’s largest competitor. However, Costco had larger total revenues, sales per store and operating income because of its strategy. This is because Costco is more internationally dispersed when compared with Sam’s Club since it has more warehouses in international locations. I am just not able to compare Costco’s financial statement performance with Sam’s Club because Sam’s Club details are joined with Walmart.
III. Costco’s core strength and strategy
Costco pursues the technique of focusing on lowering the system cost of goods and buying few Stock Keeping Units (SKUs) from its 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 can be divided into two:
• Targeting a wealthier selection of small business owners and middle-class shoppers which is different from Sam’s Club.
• Refusing to mark up products more than 14 percent on the distributor’s price
Costco’s method is really efficient in providing it with a competitive advantage over its competitors BJ’s and Sam’s Club. This is undoubtedly a long-term value enhancing strategy because costco store hours is to create value to their customers. They vpaisq definitely obtain many loyal and satisfied customers that do not mind paying a greater membership fee to sign up for Costco. Costco is another very ethical company as they are not implementing a strategy which serves to reduce their costs and cheat customers of the money in an indirect way.