Opportunity
Increasing Online Sales
Expending Store Locations Threat
High Level of Competition
Foreign Exchange Rate Fluctuations
Increasing Labor and Healthcare Costs
Strength
Permanently Capped Low Margin Prices
Costco’s business philosophy is to maintain lower prices, as well as offer the consumers high quality products. Costco’s prices are very competitive, maintaining a maximum markup price of 16% for branded and private label products, while average markup price for the industry is more than 26% (MarketLine). The company makes most of its profit from selling their Kirkland Signature branded products, more so than selling from national branded products. Costco also charges an annual membership fee from its 86 million members, which helps make up for low margins. Due to limited shelf space, and few SKU’s (stock keeping units), suppliers participate in competitive bidding for shelf space through price reduction, thus giving Costco the opportunity to offer lower prices compared to other retailers who carry the same products. The benefit that suppliers get in return by having their product on the shelf at Costco is that no competition will arise from other competing brands, since their product will …show more content…
Hassle free return policies, additional extended warranty, and free of charge technical support are few of the many services that Costco offers to members. Costco offers its consumers high credibility products based on quality, features, and pricing to sustain customer loyalty. Other than credible and high quality products, Costco also offers competitive pricing on auto insurance, travel deals, prescription medications, and optometry services more making Costco a “one-stop shop.” Another indication of strong customer loyalty is the 90% member renewal rate and growing number of new members
Increasing Online Sales
Expending Store Locations Threat
High Level of Competition
Foreign Exchange Rate Fluctuations
Increasing Labor and Healthcare Costs
Strength
Permanently Capped Low Margin Prices
Costco’s business philosophy is to maintain lower prices, as well as offer the consumers high quality products. Costco’s prices are very competitive, maintaining a maximum markup price of 16% for branded and private label products, while average markup price for the industry is more than 26% (MarketLine). The company makes most of its profit from selling their Kirkland Signature branded products, more so than selling from national branded products. Costco also charges an annual membership fee from its 86 million members, which helps make up for low margins. Due to limited shelf space, and few SKU’s (stock keeping units), suppliers participate in competitive bidding for shelf space through price reduction, thus giving Costco the opportunity to offer lower prices compared to other retailers who carry the same products. The benefit that suppliers get in return by having their product on the shelf at Costco is that no competition will arise from other competing brands, since their product will …show more content…
Hassle free return policies, additional extended warranty, and free of charge technical support are few of the many services that Costco offers to members. Costco offers its consumers high credibility products based on quality, features, and pricing to sustain customer loyalty. Other than credible and high quality products, Costco also offers competitive pricing on auto insurance, travel deals, prescription medications, and optometry services more making Costco a “one-stop shop.” Another indication of strong customer loyalty is the 90% member renewal rate and growing number of new members