costcofinal

Identified Opportunities

in 2017Sarah Hamilton, Natalie Bryniczka, Marco Yaquinto,

Samantha Downs, Jordyn Morales

AGENDAAbout Costco• Company History• Mission & Values• Business ModelCompetitive Landscape

Identified Opportunities for Costco • Member Demographics• Opportunity GapsStrategies & Solutions

AboutCostco

What you need to know…

You Might Not Know This…Costco

became the first ever U.S. company to

reach $1 Billion in sales in less than 6

years 14th Largest Pizza Chain in the U.S.100 mil+

The price has remained the same since 1985

Costco Wholesale Company History: Important Timeline of

Events

1983

The first Costco

store opens in

Seattle, WA.

1985

Costco becomes a public company

2014165 of Costco’s warehouses

exceeds revenues of $200 Million

Annually

2016Ranked 2nd

largest

retailer in

the world

1993Costco Merges

with Price Club

Costco’s Mission & Values

Highest quality

products and

services

Lowest possible prices

Excellent customer service

Strict code of ethics

Costco’s Mission & Values

5

1. Obey the law

2. Take care of our members

3. Take care of our employees

4. Respect our suppliers

5. Reward our shareholders

Costco’s Competitive Landscape

Costco’s Competitive Landscape

Costco Sams0

100200300400500600700800900

1000

338 353

675 663666559

662

46

813

451

977

415

Warehouse Club Shoppers by Household Income

<$25K $25K-49.9K $50K-74.9K$75K-99.9K $100-149.9K $150K+

Identified Opportunities

for Costco

Costco Member Demographics

$75,000, $100,000+ Household of 3-5

50 Years

Costco’s Business Model

Highly profitable with rapid

turnover low cost items

Membership fees make up a large

majority of overall profit Low

operating costs

“Treasure hunt” experience

Costco’s Business Model“To entice shoppers to spend more than they might by offering irresistible deals on big ticket items or name-brand specials, and further, to keep the mix of featured and treasure-hunt items constantly changing so that bargain hunting shoppers would go to Costco more frequently than for the periodic “stock up” trip.”

Costco’s Business Model: Goals

+5%+30%

StrategiesAnd

Solutions

Strategies and Solutions1. Membership Options

2. Additional Offerings

3. Maximize PL Profits

Strategy and Solution #1: Costco Membership Options

$110

$55

$55 STUDENT MEMBER

$35

STUDENT MEMBER

$30

STUDENT MEMBER

Strategy and Solution #1: Why does Costco Want

Students?

Male, 18-34 Male, 35-54 Male, 55+0

5

10

15

20

2524

1719

12

63

Female, 18-34 Female, 35-54 Female, 55+0

5

10

15

20

25

25

21

1618

12 13

I use/ shop with a household membership and I am not the primary member

I shop with a friend/ family member not in my household and use their membership

Why do students want Costco?

STUDENT MEMBER

Strategy and Solution #1: Costco Membership

Options

Limited Kitchen Space

RSO’s / Greek Life

Alcohol Selection

Parent Convenience

STUDENT MEMBER

Strategy and Solution #1: Student Membership

NEW members only

4 Year Maximum Span

Must have university email

Ages 18-26

$55

$55

$110

$60

$115

$60 + $406.5 Million Dollars

2015

+$5

+$5

+$5

Strategy and Solution #1: Costco Membership Options

Strategy and Solution #1: Costco Membership Pricing81,300,000 91% 73,938,300 73,938,300 $5 $369,961,500

$227,970,000

$141,721,500

9% Member Loss

Strategy and Solution #1: Membership Renewal

Renewal Rate projection for 2017

92%RENEWAL RATE OF U.S. MEMBERS. SOURCE: COSTCO FINANCIAL FILINGS

2010 2011 2012 2013 2014 2015 2016 201786.0%

87.0%

88.0%

89.0%

90.0%

91.0%

92.0%

93.0%

Costco Membership Renewal Rate

**NOTE: OUR TRIAL MEMBERSHIPS WOULD NOT BE INCLUDED IN CALCULATING MEMBER RENEWAL RATE

Strategy and Solution #2:Costco Car Care - Wash

ServiceCostco currently

offers…

400

Strategy and Solution #2:Costco Car Care - Wash

Service100 COST

$20,100,000

Strategy and Solution #2:Costco Car Care - Wash

ServicePRICE Basic: $3.50Super: $6.50Full Service: $14

Strategy and Solution #2:Costco Car Care - Wash

ServiceBreak Even Per Location:-27,625 washes/year-77 washes per day

Strategy and Solution #2:Costco Car Care - Wash

ServiceBreak Even Per Location:-27,625 washes/year-77 washes per day-19.5% of gas customers

400Per day

Strategy and Solution #3:Maximize Kirkland Signature

ProfitsWorlds largest seller of fine wines

Maximize floor space increase - displays of wine and build vertical displays

2016: Kirkland 20% of sales

Strategy and Solution #3:Maximize Kirkland Signature

Profits

Samples have boosted sales by as much as 2,000%

43% millennials like to sample items before

purchasing

Strategy and Solution:Maximize Kirkland Signature

Profits

81% more likely to buy a product

after they get a free sample

62% said actual product sample is the most effective

way for a brand to get them to try a product

Strategies and Solutions1. Drive Store Traffic

2. Build Shopper Basket

3. Optimize PL Profits

STUDENT MEMBER TRIAL MEMBER

THANK YOU!*All data sourced from Mintel