Jan 09, 2024 09:45:00

How did Costco achieve its position as one of the top retailers?

Costco, which has been in business for 40 years, is the third largest retailer in the world after Walmart and Amazon, and is three times the size of Aeon, Japan's largest retailer. Regarding Costco, researcher Brian Lehrer, who has been a Costco member for a long time, gives his opinion on how to sell all products at low prices while satisfying employees and customers.

Costco Capitalism - Bryan Lehrer

https://www.bryanlehrer.com/entries/costco/

According to Lehrer, Costco maximizes value for consumers by selling products at competitive prices while ensuring that employees are treated well.

Costco is unique in that it has a membership system. Membership strengthens the sense of belonging to Costco and brings a sense of specialness, and members tend to shop to recoup their annual membership fees.

On the other hand, while a typical supermarket has around 30,000

SKUs of products in its stores, Costco is able to keep the number of SKUs down to around 4,000 because it sells a single type of product in large quantities. In addition, by adopting a system in which products are sold on pallets in our warehouse stores, we are able to reduce maintenance costs and operate with fewer employees compared to the store area. .

According to data as of 2019, Walmart's sales per employee were $235,450 (approximately 33,900,000 yen), while Costco's sales per employee were $744,893 (approximately 107,300,000 yen), double that. that's all. Lehrer points out that this allows them to increase wages for individual employees, increasing retention rates, improving customer happiness, and increasing sales, a cycle that increases.

In addition, its rival Amazon has achieved low prices by starting its business with a low-cost structure. The driving force for growth is to increase transaction volume by improving customer experience, and create an unstoppable cycle in which more sellers enter the activated market, enriching the product lineup, increasing customer satisfaction, and further increasing transaction volume. This is called the 'Amazon flywheel effect.'

What is the 'Amazon flywheel effect' that is the driving force behind Amazon's growth? -GIGAZINE

by Vestman

Lehrer describes Costco's growth as a similar mechanism, but more sophisticated and simple, with each highly transparent cost-cutting measure acting as a 'pulley' that is passed on to customers. doing.