The goal of this memo is to evaluate Costco’s overall performance in comparison to Sam’s Club and BJ’s.
Costco Wholesale Corporation is a wholesale club that will require customers to get annual memberships in order to purchase 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 survive in the competitive wholesale industry. Additionally, it adopted a method which was different when compared with its major competitor, Sam’s Club This enabled costco corporate to get the biggest wholesale club in the business in 2001.
I. Costco’s Performance in Relation 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 discovered that Costco’s total revenue were increasing at 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 started to grow in a declining rate.
Costco has a higher membership fee and much more and also this enabled Costco’s total revenue to become more than BJ’s. This membership fee is essential since it is the key cause of the company’s bottom line since sales excluding membership fees barely covers operating expenses. Costco also offers more warehouses and a lot higher sales per store. Costco has warehouses in many international locations while BJ’s have only warehouses in the US. However, Costco includes a lower operating and gross margin which implies that BJ’s has more effective operations and better product prices than Costco. Costco’s inventory turnover ratio is outstanding since it is much larger than BJ’s. This clearly shows that Costco comes with an excellent operating efficiency.
II. Costco’s Performance with regards to Sam’s Club
Sam’s Club, on the other hand, has more members and warehouses in comparison with costco making 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 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 concentrating 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 was created to provide it with higher total revenues and to create value to its customers. Their core strength can be separated into two:
• Targeting a wealthier group of small businesses proprietors and middle-class shoppers which differs from Sam’s Club.
• Refusing to mark up products more than 14 percent on the distributor’s price
Costco’s technique is really efficient in providing it with a competitive edge over its competitors BJ’s and Sam’s Club. This is definitely a long-term value enhancing strategy because costco easter hours is always to create value for their customers. They vpaisq definitely obtain many loyal and satisfied customers who do not mind paying a greater membership fee to sign up with Costco. Costco is also a very ethical company since they are not implementing a technique which serves to lower their costs and cheat customers with their cash in an indirect way.