Costco utilizes the same distribution strategy internationally as they do in the U.S. The company makes an effort to obtain products locally by developing relationships with local suppliers in order to reduce supply chain costs (Soni, 2016). This tactic also helps Costco provide products that are partial to the local customer base. Products are sold at Costco warehouses, demonstrating a direct involvement in distribution. Globally, the company utilizes a distribution strategy in which the supply chain is kept as short as possible in an effort to reduce costs and keep prices down. Much of Costco’s success can be credited to their supply chain efficiency. The company’s supply chain is a source of competitive advantage as it plays a
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Even as the company expands internationally, they strive to emphasize a low cost leadership strategy. By use of a membership-only warehouse business model, Costco is able to stay true to their pricing strategy.
Yearly membership dues along with the warehouse design of the store help keep prices down. The company generates most of its profit from membership fees, which permit members access to discounted products and services (Nassauer and Armental, 2015). Costco saves both time and money by selling products straight from the pallets they were shipped on. The shopping facility and the warehouse are one in the same. These factors allow Costco to sell products with average markup of about 10 percent, globally. Compare this to the average markup of 20 to 30 percent in supermarkets (Edleson, …show more content…
The variety of items found at Costco is minimal compared to other retailers. The average supermarket carries 50,000 different items and the typical Wal-Mart carries 100,000. Costco, however, usually carries only 4,000 different items (Logan and Beyman, 2012). Costco is able to drive sales volume by keeping the number of brands they sell to a minimum. This tactic eliminates the need for consumers to choose, which can cause shoppers to abandon a purchase due to confusion. Another way Costco generates high-volume sales is by only offering products to be sold in bulk. The more Costco sells, the more prices can be
Even as the company expands internationally, they strive to emphasize a low cost leadership strategy. By use of a membership-only warehouse business model, Costco is able to stay true to their pricing strategy.
Yearly membership dues along with the warehouse design of the store help keep prices down. The company generates most of its profit from membership fees, which permit members access to discounted products and services (Nassauer and Armental, 2015). Costco saves both time and money by selling products straight from the pallets they were shipped on. The shopping facility and the warehouse are one in the same. These factors allow Costco to sell products with average markup of about 10 percent, globally. Compare this to the average markup of 20 to 30 percent in supermarkets (Edleson, …show more content…
The variety of items found at Costco is minimal compared to other retailers. The average supermarket carries 50,000 different items and the typical Wal-Mart carries 100,000. Costco, however, usually carries only 4,000 different items (Logan and Beyman, 2012). Costco is able to drive sales volume by keeping the number of brands they sell to a minimum. This tactic eliminates the need for consumers to choose, which can cause shoppers to abandon a purchase due to confusion. Another way Costco generates high-volume sales is by only offering products to be sold in bulk. The more Costco sells, the more prices can be