SPECIAL SECTION: KIRKLAND SIGNATURE
The idea for Costco came in the early 1980s, after Seattleite Jeff Brotman, whose family had deep roots in the retail business in that area, was urged by his father to check out the bustling Price Club warehouses in California. The younger Brotman immediately flew down to California and quickly realised he agreed with his father: There was nothing similar in America’ s Pacific Northwest.
Looking for somebody to help start and run the new business, Brotman asked around among his contacts and was told there was really only one guy for the job, a man who had worked with Price Club and understood this new warehouse model: Jim Sinegal.
The pair reached an agreement, scraped together $ 7.5 million from investors to back the start-up and in 1983 nervously opened the first Costco, in an industrial area in south Seattle. According to a popular story among company longtimers, the warehouse’ s first employees were told to park their cars in the customer lot to make the place look busy.
But the business survived, grew to 10 warehouses within a couple of years and, in an ambitious and complex move, merged with its competitor, Price Club, in 1993, creating a company with almost 200 warehouses and 43,000 employees. Along the way, it helped drive revolutions in the way products are manufactured, distributed, marketed and sold.
According to Costco’ s 2023 annual report, its revenue was US $ 237.7 billion. It operates more than 870 warehouses globally – including 600 in the US – with 316,000 total employees and 129 million members worldwide, making it the thirdlargest retailer in the world( based on global sales).
Going international
In planning Costco’ s international expansion, some were worried that the concept of paying for a membership to buy items in bulk might get lost in translation. Tubs of peanut butter, a lifetime supply of toilet paper and the means to transport and store such items are typically American, after all. But the truth is, whether you live in Seoul, Sydney or Seattle, the value proposition is the same: A Costco membership is worth the savings on everyday necessities and wow items. Plus, the Food Court’ s hot dog and soda combo translates to“ a steal”( yep, it’ s a buck-fifty around the world) no matter which language you speak.
This shared philosophy is what has led to Costco’ s well-known strategies: focusing on a narrow selection of products in a wide range of categories; proceeding with steady, but cautious, growth; and never selling seconds or inferior goods.
Pierre Riel, executive vice president of Costco’ s international division, oversees the company’ s efforts to launch its operations in new countries. He shares that the company’ s philosophy toward expansion is more than just a business plan.
Expanding warehouse operations began in Canada in 1985, with the first Australian warehouse opening in Melbourne’ s Docklands in 2009. Today, you can also find Costco in mainland China, France, Iceland, Japan, New Zealand, South Korea, Spain, Sweden, Taiwan and the United Kingdom.
Growth mindset
Even though it’ s been 40 years since the first Costco warehouse opened, Craig Jelinek, Costco’ s CEO, says,“ We still view ourselves as a growth company. We see exciting opportunities, both in existing markets and potential new markets, where our model would be successful.”
As for what’ s inside the warehouses, each country features items specific to that part of the world – mostly foods that cater to local taste preferences. The remaining goods comprise many of the same nonfood items you’ d see in a US warehouse. And, the company’ s Kirkland Signature items are universally revered for their quality and value.
In addition to warehouses, Costco also has international ecommerce sites in many countries through which it does business.
Jelinek says that no matter where Costco puts down roots, it’ s important to maintain a consistent company culture to ensure that all employees worldwide are invested in its business goals and outcomes. He says that constantly reiterating Costco’ s history, values, ethics and merchandising strategies is crucial
36 | MAR / APR 2024 COSTCO CONNECTION