Costco

Costco's history began with Sol Price and his son, Robert, opening the first Price Club warehouse on July 12, 1976, on Morena Boulevard in San Diego, California, thus giving birth to a new concept: a retail warehouse club. The Price family placed Price Club Warehouse #1 inside a series of old airplane hangars[9][10] previously owned by Howard Hughes; that warehouse, now known as Costco Warehouse #401, is still in operation today.[12]

Costco opened its first warehouse in 1983 in Seattle on September 15,[9] by James (Jim) Sinegal and Jeffrey H. Brotman.[13] Sinegal had started in wholesale distribution by working for Sol Price at FedMart; Brotman, an attorney from an old Seattle retailing family, had also been involved in retail distribution from an early age. He began his retail involvement as a grocery bagger.[14] A second store opened in Portland in October, and a third in Spokane in December 1983.[6]

In 1993, Costco and Price Club agreed to merge operations themselves after Price declined an offer from Sam Walton and Walmart to merge Price Club with their warehouse store chain, Sam's Club.[15] Costco's business model and size were similar to those of Price Club, which made the merger more natural for both companies.[10] The combined company took the name PriceCostco, and memberships became universal, meaning that a Price Club member could use their membership to shop at Costco and vice versa. PriceCostco boasted 206 locations generating $16 billion in annual sales.[9] PriceCostco was initially led by executives from both companies, but in 1994, the Price brothers left the company to form Price Enterprises,[10][16] a warehouse club chain in Central America and the Caribbean unrelated to the current Costco.[17]

In 1997, Costco changed its name to Costco Wholesale Corporation, and all remaining Price Club locations were rebranded as Costco.[9][10]

Map of Costco warehouses in the US (August 2010).

As of October 2019, Costco has 785 warehouses worldwide[1] as shown below:[18]

• 546 in the United States[1]
• 100 in 9 Canadian provinces[19]
• 39 in Mexico[20][1]
• 29 in the United Kingdom[1]
• 26 in Japan[20][1]
• 16 in South Korea[20][1]
• 14 in Taiwan[20][1]
• 11 in Australia[20][1]
• 2 in Spain[20][1]
• 1 in Iceland[20][1]
• 1 in France[20][1]
• 1 in Shanghai, China[21]

On April 26, 2012, CNBC premiered its documentary, The Costco Craze: Inside the Warehouse Giant.[22]

In 2014, Costco was the third largest retailer in the United States.[23] That year Costco announced plans to open an online store in China using Alibaba Group.[24]

In the United States, Costco's main competitors operating membership warehouses are Sam's Club and BJ's Wholesale Club.[25] Costco employs 254,000 full and part-time employees worldwide.[1] In 2016, Costco had 86.7 million members.[26] In 2017, Costco had 90.3 million members.[18][26] In 2018, Costco had 94.3 million members.[26] In 2019, Costco had 98.5 million members.[1]

Costco was the first company to grow from zero to $3 billion in sales in under six years.[9] For the fiscal year ending on August 31, 2012, the company's sales totaled $97.062 billion, with $1.709 billion net profit.[27] As of 2019, Costco is ranked #14 on the Fortune 500 rankings of the largest United States corporations by total revenue.[5] The ACSI (The American Customer Satisfaction Index) named Costco number one in the specialty retail store industry with a score of 84 in 2014.[28]

From December 2013, Costco's board of directors was chaired by co-founder Jeffrey H. Brotman and included James Sinegal, co-founder and director, and two officers of the company: president/CEO W. Craig Jelinek and CFO Richard A. Galanti. On August 1, 2017, Jeffrey Brotman died.[29] As of August 2017, James Sinegal and W. Craig Jelinek remain on the board. Jim Sinegal stepped down in 2018.[26]

Kirkland Signature logo

Kirkland Signature branded bottled water, pictured in 2005

"Kirkland Signature" is Costco's private label. It is sold by Costco at their website and warehouses, and is trademarked by the company. Costco introduced Kirkland Signature as its private label in 1992, deriving the name from the location of Costco's then corporate headquarters, Kirkland, Washington (their HQ later moved, roughly 12 miles (19 km), to Issaquah, Washington).[51] It accounts for almost a third of all Costco sales and is growing faster than Costco sales.[52] Kirkland branded bottled water is produced by private label bottler Niagara Bottling.[53]

The idea for the private label was to provide the appearance of brand name quality products at discounted prices.[54] To counteract the consumer confidence problem common in store-name branding, Kirkland Signature occasionally employs co-branding. According to Costco, while consumers may be wary of same-store branding, they are less likely to be wary of brands that they are familiar with and trust.[55]

Costco offers a free "concierge" service to members who purchase electronics, to help answer questions regarding setup and use and avoid potential returns due to not understanding how to use the products.[59]

Costco acts as an investment broker and travel agent. Costco has an agreement with Ameriprise for auto and home insurance. In 2004, Costco offered an original artwork by artist Pablo Picasso on their online store; more recently a highly regarded 1982 Mouton Rothschild wine was offered as well as other rare wines in rotation.

Costco Photo Center is a multi-functional photography printing lab offering services at the warehouses as well as through their web site, costcophotocenter.com. The website provides free unlimited digital file storage with a current membership. Previous to May or June 2010, Costco had an agreement with Mypublisher.com for custom book and calendar publishing. Now, they print the photobooks and calendars themselves.

As of September 2015, Costco was the second largest auto seller in the US, just behind AutoNation.[60] Costco regularly teams up with various automobile manufacturers to offer special deals to customers, e.g., Polaris (a leading seller of powersport vehicles) in 4Q2015[60] and General Motors from October 2015 through January 2016.[61] Addicted to Costco lists the following as some benefits of the Costco Auto Program:[61]

• A low, prearranged price for Costco members
• All available national manufacturer incentives
• More than 3,000 dealerships nationwide, with specially trained employees to assist Costco members

On March 9, 2005, NOVA Information Systems (NOVA) partnered with Costco to market and support payment processing services to Costco Canada's Business Executive Members.[62]

Costco Optical ranks as the fifth-largest optical company in the US, as of 2015.[63] Optometrists working at Costco locations will see patients without Costco memberships,[64] although a membership is required to fill a prescription at the optical department.[65]

Costco Travel is a wholly owned subsidiary of Costco Wholesale and offers leisure travel to Costco members of the United States and Canada.[66] The program was established in 2000 as a service to Costco members. Costco Travel's offices are located in Issaquah, Washington, adjacent to Costco's corporate headquarters. Costco Travel employs over 700 travel professionals, all of them Costco employees.

The program offers vacation packages to the Caribbean, Europe, Florida, Hawaii, Las Vegas, Mexico, and the South Pacific. Other products include car rentals, cruises, guided vacations, and theme park packages. Select products feature additional benefits for Costco Executive Members.

The program is marketed directly to Costco members through various Costco avenues, including the Travel Guide to Savings (found in all U.S. Costco warehouses) and in the Travel section of Costco.com.

Food concession stand at the Costco warehouse in Overland Park, Kansas

Most (if not all) Costco locations have a food court.[67] They can be indoors or outdoors,[68] but the menu is essentially the same: hot dog with drink (one of the food court's most popular items), pizza, frozen yogurt, various drinks, baked items, and sandwiches.[69] Sometimes, items are added to the menu seasonally. Costco offers a quarter-pound 100% beef hot dog and 20 US fluid ounces (590 ml) drink (with refills) for US$1.50, the same price since 1985.[70][71][72] In Australia, the hot dog is made of pork and is sold with a large soda for AUD$1.99. In Canada, the price for a hot dog and soda with refills is C$1.50.[73] In Mexico, the hot dog is made of 100% beef and includes a drink (with refills) for MXN$35. In the UK, the hot dog is also made from beef and customers also get a drink (with refills) for £1.50. Costco sold more than 137 million quarter-pound (113 g) hot dogs in its food courts in 2017.[72]

In Taiwan and Japan, the hot dog is made of pork as well.[74]

Cheese, pepperoni, veggie, or combo pizza is also available in most locations, and can usually be ordered to go, making Costco arguably the 14th largest pizza chain in the U.S. in 2010.[75] Frozen yogurt is also served in chocolate, vanilla, or swirl. Costco also offers fruit smoothies, latte freeze (without chocolate), mocha freeze (with chocolate), beef bake,[76] chicken bake, turkey provolone sandwiches, twisted churros, chicken Caesar salads, beef brisket sandwiches, organic beef-based cheeseburgers, beef chili with beans, and in some locations, gelato. Various locations also began offering acai bowls in 2018. French fries are also offered in some locations. Some of the food court items are only available in certain countries. For example, the bulgogi bake is only available in Taiwan, Korea, and Japan; poutine is only available in Canada; and plokkari only in Iceland. There are, however, temporary menu items available exclusively in several countries, like the pizza al pastor in Mexico.[77][78][79][80] The nutrition data for the Costco Food Court items is posted online.

Due to slow sales, in 2009, the pretzel was replaced by the churro.[81] In April 2013, Pepsi replaced all Coca-Cola fountain drinks at U.S. locations because Coke had raised its prices; this helped keep the hot dog combo with soda at its original US$1.50 price.[82]

In select Costco food courts, Costco is selling cheeseburgers for a limited time to experiment sales. It will possibly be a new menu item if it has a success.[83]

In December 2005, Costco signed an agreement with PhotoChannel Networks Inc., whereby Costco could deploy the PNI Digital Media Platform to offer online photo printing for Costco members through the website.[84]

On July 17, 2015, Costco disabled their online photo site.[85] In common with other retailers,[86] there is currently no confirmation about whether hackers had stolen Costco customers' photographs or data. As of August 1, 2015, Costco was estimating the website might return in mid-August, after a four-week outage.[87]

On April 17, 2001, Costco Wholesale opened a B2B (Business to Business) online shopping site at Costco.com for faster and easier business shopping.[88]

The domain Costco.com attracted at least 58 million visitors in 2008, according to a Compete.com survey.[89] Costco.com is for United States members; costco.ca is for Canadian members, and other countries, such as Mexico, South Korea, Taiwan and the UK, each has its own online Costco shopping website.

Instacart offers Costco delivery in a select number of states including Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Missouri, North Carolina, New Jersey, New York, Oregon, Tennessee, Texas, Virginia, Washington, and the District of Columbia.[90] No membership is needed to order from Costco on Instacart, but Instacart charges delivery fees and the prices may not necessarily be the same as in a Costco warehouse. Similarly, in March 2017, Costco initiated a partnership with Shipt, an online grocery delivery service. Unlike Instacart, Shipt charges its own membership fee, $99 a year or $14 a month, in exchange for free delivery on orders over $35. As of November 2018, Shipt offers Costco delivery in select Florida markets.[91]

In October 2017, Costco launched same-day and two-day grocery delivery options for members.[92]Costco Business Centers provide a variety of different goods for clients that differ greatly from their traditional in-store wares. More than 70% of the items that can be acquired from a Costco Business Center cannot be found in a typical Costco store. They are primarily utilized by smaller businesses who seek to make purchases in bulk. There is a delivery charge of $25 for orders that are below $250.[93]

On April 1, 2016, Citigroup became the exclusive issuer of Costco's branded credit cards.[94][95][96]

While some former Price Club locations in California and the northeastern United States are staffed by Teamsters,[97] the majority of Costco locations are not unionized although there seemed to be a move in 2012 to unionize some locations in Canada.[98] The non-union locations have revisions to their Costco Employee Agreement every three years concurrent with union contract ratifications in locations with collective bargaining agreements. The Employee Agreement sets forth such things as benefits, compensations, wages, disciplinary procedures, paid holidays, bonuses, and seniority. The Employee Agreement is subject to change by Costco at any time and offers no absolute protection to the workers. As of March 2011, non-supervisory hourly wages ranged from $11.00 to $21.00 in the U.S., $11.00 to $22.15 in Canada, and £8.50 to £11.50 in the United Kingdom. In the U.S. as of 2005, eighty-five percent of Costco's workers had health insurance, compared with less than fifty percent at Walmart and Target.[99] Health benefits include coverage through Aetna, remote primary care through Teladoc, second opinions and clinical navigation by Grand Rounds, and wellness coaching by Omada.

Product-demonstration (e.g., food samples) employees work for an independent company. In the western U.S., the company is called Warehouse Demo Services, Kirkland, Washington.[100] Costco also uses Club Demonstration Services (CDS), based in San Diego, California.[101] Demonstration employees receive a pay and benefit package that is less than that of Costco employees. As of August 1, 2017, demonstrations/samples are provided by CDS in Canada.[102]

Following the COVID-19 outbreak, the first Costco store in Perth, Australia unexpectedly opened on March 19, 2020 without an opening ceremony and earlier than its planned time of 8:00AM due to high demand, especially for toilet paper products, to ease panic buying in mainstream supermarkets in Australia, although toliet paper was limited to only 1 per transaction. Carts and other objects were cleaned regularly to minimize the risk of contracting the virus.

As of March 6, 2020, Costco contractor CDS has temporarily stopped providing free food samples in several Costco stores globally amid public health concerns regarding COVID-19.[103]

Costco announced it opened 29 new locations in 2016, the most in one year since 2007.[105][106] Span Construction, led by King Husein, has been constructing almost all of Costco's buildings since 1989.[107]

In August 2019, Costco opened its first Chinese location in Shanghai. The popularity of the store's opening led to its opening day being cut short over safety concerns.[108]

In 2005, the world's largest Costco was located in Hillsboro, Oregon.[109] In 2015, Costco completed an expansion in Salt Lake City, making it the new largest Costco at 235,000 sq ft (21,800 m²).[110] In 2011, Costco's highest volume store was in Seoul, South Korea.[111] Taiwan's Taichung ranks at the very top in the number of members and is second in the world in sales volume (the exact figures are confidential), behind South Korea's Yangjae store in Seoul; moreover, 13 Costco operations in Taiwan, three – Taichung, Neihu, and Chungho – rank in the top 10 in the world in sales volume.[112]

Costco Business Centers are warehouses similar to regular Costco warehouses, and are open to all Costco members, regardless of membership type. Their merchandise, though, cater predominantly to enterprises, with a focus on small businesses. Business Centers do not carry most consumer items like clothing, jewelry, media, and tires, while carrying larger quantities and more options for the business products they do carry.[113] They do not offer most of the consumer-oriented services found at regular Costco warehouses, but some locations do have a food court or a gas station or both. Also unlike regular warehouses, most Costco Business Centers have a Print & Copy Center which provides printing professional services. They have large parking spaces for trucks and are capable of delivering goods to businesses in bulk quantities. Finally, opening hours are shorter than regular warehouses (usually opening at 7:00 am on Mondays to Saturdays and closed on Sundays), while discounts and coupons for Business Centers are issued separately from regular warehouses.

As of August 2017, there are 17 Costco Business Centers in the United States, located in Orlando, Florida; Phoenix, Arizona; California (Commerce, Hawthorne, Hayward, North Hollywood, San Diego, South San Francisco and Westminster); Denver, Colorado; Morrow, Georgia; Bedford Park, Illinois; Hackensack, New Jersey; Las Vegas, Nevada; and Washington (Lynnwood, and Fife).[114]

The first Costco Business Center outside the U.S. opened in Canada in Scarborough, Toronto in spring 2017.[115]

Like many other retailers vertically integrating their food supply chains, Costco has brought in-house poultry production for their rotisserie chickens, which are a major driver of customer traffic and sales.[116][117][118] This is to allow keeping their pricing intact while maintaining a consistent quality control of its chickens as a result of annual growth of per-capita chicken consumption in the United States.[119][118]

The first Costco Home warehouse opened in 1983, and was rebuilt / expanded in 2002, in Seattle.[120] The warehouse's concept was to combine the value, setting and members-only elements of Costco's warehouse clubs with the product array one would find at an upscale home store, such as Fortunoff or Crate & Barrel. The Costco Home warehouses sold furniture, housewares, kitchen products and accessories from higher-end brands such as Lexington, Ralph Lauren and Waterford[121] in a warehouse-club setting. Costco claimed that, similar to its main warehouses, it accepted lower margins in return for greater volume with minimal overhead.

Over time, the concept was adjusted to include home electronics, some major appliances, office furniture, and a large selection of outdoor furniture and window treatments. Costco also partners with Glentel subsidiary WIRELESS etc. to sell mobile phones and plans in Canada and Wireless Advocates in the US.

On April 2, 2009, the company announced that it would be abandoning its Costco Home concept, closing the two existing stores in Kirkland, Washington and Tempe, Arizona on July 3, 2009, and abandoning plans for a third store on the West Coast.[122] The company cited cutbacks in consumer spending on home products and its interest in focusing on its core business as the main reasons.