Download - CostcoFinal
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Identified Opportunities
in 2017Sarah Hamilton, Natalie Bryniczka, Marco Yaquinto,
Samantha Downs, Jordyn Morales
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AGENDAAbout Costco• Company History• Mission & Values• Business ModelCompetitive Landscape
Identified Opportunities for Costco • Member Demographics• Opportunity GapsStrategies & Solutions
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AboutCostco
What you need to know…
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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
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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
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Costco’s Mission & Values
Highest quality
products and
services
Lowest possible prices
Excellent customer service
Strict code of ethics
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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
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Costco’s Competitive Landscape
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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+
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Identified Opportunities
for Costco
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Costco Member Demographics
$75,000, $100,000+ Household of 3-5
50 Years
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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
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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.”
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Costco’s Business Model: Goals
+5%+30%
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StrategiesAnd
Solutions
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Strategies and Solutions1. Membership Options
2. Additional Offerings
3. Maximize PL Profits
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Strategy and Solution #1: Costco Membership Options
$110
$55
$55 STUDENT MEMBER
$35
STUDENT MEMBER
$30
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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
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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
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STUDENT MEMBER
Strategy and Solution #1: Student Membership
NEW members only
4 Year Maximum Span
Must have university email
Ages 18-26
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$55
$55
$110
$60
$115
$60 + $406.5 Million Dollars
2015
+$5
+$5
+$5
Strategy and Solution #1: Costco Membership Options
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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
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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
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Strategy and Solution #2:Costco Car Care - Wash
ServiceCostco currently
offers…
400
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Strategy and Solution #2:Costco Car Care - Wash
Service100 COST
$20,100,000
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Strategy and Solution #2:Costco Car Care - Wash
ServicePRICE Basic: $3.50Super: $6.50Full Service: $14
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Strategy and Solution #2:Costco Car Care - Wash
ServiceBreak Even Per Location:-27,625 washes/year-77 washes per day
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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
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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
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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
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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
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Strategies and Solutions1. Drive Store Traffic
2. Build Shopper Basket
3. Optimize PL Profits
STUDENT MEMBER TRIAL MEMBER
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THANK YOU!*All data sourced from Mintel