Costco Wholesale – Buying, Merchandising & Operating
Selling Costco is challenging. The company only stocks 3,620 SKUs.
Costco buyers want to meet with suppliers who understand its business.
Therefore, to sell merchandise to Costco, you need to understand its strategy.
Costco ended 2021 with 828 locations. An average item had sales of $1,099 per week per club.
Costco opened its first location in Seattle, Washington in 1993. Since then, Costco’s strategy focused on product quality and low prices.
Product Quality – Costco believes it is wrong to offer low prices on low quality products.
As a result, Costco stocks high quality products. Those items have the lowest prices. This creates value and convinces members to pay to shop.
Jim Sinegal, Costco’s founder and former president and chief executive officer, said, “I don’t think there is any secret about the fact that people shop with us because of our value. And I stress the word value as opposed to price. We are attractively priced on quality merchandise. That is our reason for being.”
Low Prices – Suppliers respond to our annual industry survey. The survey includes questions about club margins.
Costco’s merchandise gross margins are the lowest at between 13% and 14%. It’s obviously one of Costco’s competitive advantages.
However, the merchandise gross margins at BJ’s and Sam’s Club have increased.
Sam’s merchandise gross margins increased from 16% in 2012 to 19% in 2021. BJ’s merchandise gross margins increased from 18% in 2012 to 22% in 2021.