The goal of this memo is to analyze Costco’s performance when compared with Sam’s Club and BJ’s. Costco Wholesale Corporation is a wholesale club that needs customers to purchase annual memberships in order to 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 technique 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 in Relation 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 in an increasing rate except for year 2000 to 2001. BJ’s on the other hand, had growing revenues until 1999 when their revenues then began to grow at a declining rate.
Costco has a higher membership fee and a lot more which enabled costco Sunday hours to become higher than BJ’s. This membership fee is vital since it is the primary reason for the company’s bottom line since sales excluding membership fees barely covers operating expenses. Costco also has more warehouses and far higher sales per store. Costco has warehouses in lots of international locations while BJ’s only have warehouses in the US. However, Costco has 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 since it is much bigger than BJ’s. This clearly implies that Costco comes with 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 that 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 a lot more internationally dispersed when compared with Sam’s Club because 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 data is joined with Walmart.
III. Costco’s core strength and strategy – Costco pursues the technique of concentrating on reducing the unit price of goods and getting 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 to create value to the customers. Their core strength could be separated into two:
• Targeting a wealthier selection of small businesses proprietors and middle class shoppers which is different from Sam’s Club.
• Refusing to mark up products greater than 14 percent over the distributor’s price
Costco’s technique is really efficient in providing it having a competitive advantage over its competitors BJ’s and Sam’s Club. This is undoubtedly a long-term value enhancing strategy because Costco’s primary aim is always to ctqosf value for their customers. They will likely definitely obtain many loyal and satisfied customers who do not mind paying an increased membership fee to join Costco. Costco is also a very ethical company since they are not implementing a strategy which serves to lower their costs and cheat customers with their cash in an indirect way.
We have been a member of Costco for two yrs with a business professional membership. I prefer Costco for a lot of of my business purchases and so i switched to only using Costco rather than having both memberships. Bjs and Costco carry a lot of the same things. Costco has 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 support. BJs has the benefit of accepting MFR coupons and accepts all major credit cards! Costco only accepts checks and American Express inside their warehouses (they do accept all major charge cards online though) BJs lines seem to move rapidly, and their aisles, at least at the ones I have been to, are better organized.