People on the front lines are a point of emphasis for Costco because a good customer experience results in repetitive customer revenues. In comparison, Costco’s CEO earned $650,000. In 2012, Walmart’s CEO earned $18.1 million. This leaves stores like Walmart and Target out in the uncomfortable middle where they’re the second choice of the consumer every single time. The mom and pop corner stores provide more convenience for consumers. Costco outperforms Walmart and Target because their business model provides a better per-product discounting model. Consumers are focused on combining value and convenience so that the best products at the best prices can be obtained. Instead of cutting salaries and hours to save money, Costco wants to drive sales by paying their people more.įor the American consumer especially, salaries have been stagnant for a number of years. Costco pays more than most discount retailers do because they want good people on the sales floor that will make it so customers want to come back into the store. They also limit the number of actual items that are being sold as well.īecause driving sales is at the core of the Costco business model, this company is also focused on the customer experience. This actually helps Costco because it allows them to drive down pricing because they are increasing their overall sales volume. If one compares virtually any product that is sold at Costco and at Walmart or Target, Costco is going to be selling fewer brands. Why is this business model working, even under the pressure of other large discount retailers? Costco Focuses on Supply and ScarcityĬostco is known to sell very few brands of supplies in their store. What’s even more remarkable about this fact is that as Walmart and Target are dumping huge sums of cash into marketing, Costco does not advertise at all. Since then, Costco has nearly doubled up on the competition. In 2008, revenues for Costco, Target, and Walmart were essentially the same. It’s a rather unorthodox strategy for this membership club business for sure, but it is one that is definitely working. At the core of the Costco business model is one simple strategy: drive better sales.Ĭostco believes that if sales are good within the store, then everything else will basically just take care of itself. Quarter after quarter, Costco sees growth while other giant retailers are trying to discover why their sales rates have grown stale. They are consistently being outperformed by this warehousing discounting company.
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