Costco Wholesale

The company's first location, opened in 1976 under the Price Club name, was in a converted airplane hangar on Morena Boulevard in San Diego.

Originally serving only small businesses, the company found it could achieve far greater buying clout by also serving a selected audience of non-business members. With that change, the growth of the warehouse club industry was off and running. In 1983, the first Costco warehouse location was opened in Seattle. Costco became the first company ever to grow from zero to $3 billion in sales in less than six years. When Costco and Price Club merged in 1993, the combined company, operating under the name PriceCostco, had 206 locations generating $16 billion in annual sales, and now has 432 locations

Jim Sinegal founded Costco Wholesale Club in 1983 and has been Costco's president and chief executive since 1993.

Costco began its online presence in 1995 with an informational Web site and in November 1998 began conducting e-commerce at costco.com. The Web site offers a wide selection of name-brand merchandise and services. Some of the product categories include computers, electronics, floral delivery, jewelry, books, CDs, DVDs, travel and pharmacy.

Despite a troubled economy, Costco net income rose 15%, Sales in stores open at least a year grew 6%. Costco Captured 50% share of the $70 billion U.S. wholesale club market, boosted sales so that warehouses generate an average $101 million annual volume, nearly double that of its nearest rival.

How does Costco grow so well yet keep their prices so low?

• Cutting costs


The Issaquah (Wash.)-based chain eliminates many of the costly overhead expenses faced by traditional retailers and wholesalers, like fancy display cases, salespeople, advertising and billing. That allows costco to impose a strict 15% markup limit on all items and offer bargains like a Compaq personal digital assistant for $319.19, vs. $449.99 at Circuit City Stores Inc.

"We have one mission," Costco President and CEO Jim Sinegal said, "to sell top-quality merchandise to our members at the best possible prices."

• Sells private label and branded merchandise


Costco sells private label and branded merchandise(Kirkland Signature) to businesses and individual shoppers. Kirkland Signature products is designed to be of equal or better quality than national brands, including diapers, photographic film, frozen foods, coffee, batteries, luggage, tires, clothing, detergent, health and beauty aids, housewares and more.

• Sell very large volumes of merchandise and achieving high inventory turnover


Costco has had to enlarge their shopping cart four times! Costco sells very large volumes of merchandise and achieving high inventory turnover In addition to providing a wide range of products and services for personal use, Costco's warehouses also help small-to-medium-size businesses reduce costs on purchasing for resale. Since Costco has such high sales volume and rapid inventory turnover it is able to receive cash from the sale of a large portion of its inventory before it has to pay back its suppliers. The use of float is a major advantage in its own right.

• Costco is open to Costco members only.


Costco has extremely loyal members; they have renewed their membership at an 86% renewal rate. When a member begins shopping at Costco they are amazed at the prices and how fast certain bargain priced merchandise sells. The member then feels compelled to take their time when shopping so they can cover the entire store, thus no bargain will be missed. From this stage the member starts going more and more often, after all why shop other places when the prices are so good at Costco. Members seem to develop an addiction to shopping at Costco.