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Costco Wholesale Corporation
Type Public (NASDAQCOST)
Founded 1983
Founder(s) James D. Sinegal
Jeffrey H. Brotman
Headquarters Issaquah, Washington, U.S.
Number of locations 563 (2009)
Key people James Sinegal, Founder & CEO
Jeffrey Brotman, Founder & Chairman
W. Craig Jelinek, President/COO
Richard Galanti, EVP & CFO
Dick DiCerchio, Sr. EVP & COO
Paul Moulton, EVP
Joseph Portera, EVP
Douglas Schutt, EVP
Thomas Walker, EVP
Dennis Zook, EVP
Industry Retailing (Warehouse club)
Products Merchandise
Private label brands - Kirkland Signature
Revenue US$71.422 billion (2009)
Operating income US$1.777 billion (2009)
Net income US$1.086 billion (2009)
Employees 147,000 (2009)

Costco Wholesale Corporation (NASDAQCOST), simply known as Costco, is the largest membership warehouse club chain in the United States. As of July 2009 it is the third largest retailer in the United States and the ninth largest in the world.[1][2] As of October 2007, Costco is the largest retailer of fine wine in the world.[3]



Costco is headquartered in Issaquah, Washington, United States[4] and was founded in Kirkland, Washington[citation needed] with its first warehouse in nearby Seattle.[5] Costco has locations in the United States, Canada, Australia, Mexico, Taiwan, South Korea, Japan, and the United Kingdom.[6]


The Costco in Moncton, New Brunswick was branded as a Price Club upon its completion in 1995. Two years later it was re-branded as Costco Wholesale due to the merger between Price Club and Costco
The first Costco logo used until the early 1990s

Founded by James (Jim) Sinegal and Jeffrey Brotman, Costco opened its first warehouse in Seattle, Washington, on September 15, 1983.[7] Sinegal had started in wholesale distribution by working for Sol Price at both FedMart and Price Club. Brotman, an attorney from an old Seattle retailing family, had also been involved in retail distribution from an early age. Sol Price died on December 14, 2009 at 93.[8]

In 1993, Costco merged with Price Club (called Club Price in the Canadian province of Quebec). Costco’s business model and size were similar to those of Price Club, which was founded by Sol and Robert Price in 1976 in San Diego, California.[5] Thus, the combined company, PriceCostco, was effectively double the size of each of its parents. Just after the merger, PriceCostco had 206 locations generating $16 billion in annual sales.[9] PriceCostco was initially led by executives from both companies, but then Sol and his son Robert Price founded Price Enterprises and left in December 1994.[5]

Prior to the 1993 Price merger, Walmart founder Sam Walton wanted to merge Sam's Club with Price Club.[10]

The first Price Club location was opened in 1976 in an old airplane hangar,[5][9] previously owned by Howard Hughes, and is still in operation today (Warehouse #401 located in San Diego).

In 1997, the company changed its name to Costco Wholesale.[5][9]

Costco today

Costco in California. Notice the electric car charging stations.
Entrance of a typical Costco warehouse club.

In the United States, the main competitors operating membership warehouses are Sam's Club and BJ's Wholesale Club.[11] Although Sam's Club has more warehouses[12] than Costco, Costco has higher total sales volume.[13] Costco employs about 142,000 full- and part-time employees,[6] including seasonal workers. As of September 2009 Costco had 55 million members.[14] For fiscal year 2009, which ended on August 31, 2009, the company's sales totaled $71.42 billion,[6] $1.28 billion of the revenue was net profit.[15] Costco is #24 on the Fortune 500.[15] The ACSI (The American Customer Satisfaction Index) named Costco number one in the specialty retail store industry with a score of 83 in Q4 2008.[16]

In the United States, Costco is closed on the following holidays (most other major retailers stay open on all of these dates except Thanksgiving and Christmas):

Costco became the first company ever to grow from zero to $3 billion in sales in less than six years.[9]

Other wholesale formats

  • Costco Business Center

There are a growing handful of Costco Business Centers, all of which offer delivery via a private fleet of trucks. Some locations have a warehouse selling floor open to Costco members who wish to shop in person, while others are strictly delivery only. A new Business Center, converted from an existing Costco location, opened in Las Vegas, Nevada in early 2009. Two additional locations opened in the Los Angeles area in 2009; located in Hawthorne and Commerce.[17]

  • Costco Home (defunct)

The first Costco Home warehouse debuted in 2002 in Kirkland, Washington. The warehouse's concept was to combine the value, setting and members-only elements of Costco's warehouse clubs with the product array one would find at an upscale home store, such as Fortunoff or Crate & Barrel. The Costco Home warehouses sold furniture, housewares, kitchen products and accessories from higher-end brands such as Lexington, Ralph Lauren and Waterford[18] in a warehouse-club setting. Costco claimed that, similar to its main warehouses, it accepted lower margins in return for greater volume and overhead.

Over time, the concept was adjusted to include home electronics, some major appliances, office furniture, and a large selection of outdoor furniture and window treatments.

On April 2, 2009, the company announced that it would be abandoning its Costco Home concept, closing the two existing stores in Kirkland, Washington and Tempe, Arizona on July 3, 2009, and abandoning plans for a third store on the West Coast.[19] The company cited cutbacks in consumer spending on home products and its interest in focusing on its core business as the main reasons.

  • Costco Fresh (defunct)

Plans for Costco Fresh, a gourmet supermarket, were abandoned in 2004.[citation needed]

Sales model

Typical Costco warehouse interior

Costco focuses on selling products at low prices, often at very high volume.[citation needed] These goods are usually bulk-packaged and marketed primarily to large families and businesses. Furthermore, Costco does not carry multiple brands or varieties where the item is essentially the same except when it has a house brand to sell, typically under the Kirkland Signature label. This results in a high volume of sales from a single vendor, allowing further reductions in price, and reducing marketing costs. If Costco management feels the wholesale price of a product is too high, they will refuse to stock the product. For example, on November 16, 2009, Costco announced that it will stop selling Coca-Cola products due to the soft drink maker refusing to lower its wholesale prices.[20] Costco resumed selling Coca-Cola products on December 14, 2009.[21][22] Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must bring their own bags or use the merchandise shipping boxes from the company's outside vendors. Such boxes are often found in large, metal box bins (of which most of the time are colored red, however some warehouses may have different colors). The boxes are placed there by employees after they are empty.

As of November 2009 membership fees at Costco are $50 per year for a Gold Star (individual) or Business membership, which can be upgraded to Executive membership for an additional $50 per year.[23] Along with the additional benefits the executive membership offers (e.g. car purchasing savings, home loans, car insurance, check printing services) Executive members also receive an annual "2% Rewards Check" of up to $500.00 from Costco on all purchases made, excluding select items such as gasoline, alcohol, and tobacco.[24]

In the UK, membership is £20.00 for Trade membership (plus VAT) which includes a card for a spouse. People who work for the National Health Service or any other government employee are entitled to an individual membership, which costs £25.[citation needed]

In Australia, membership is AUD $55.00 a year for a business membership, or AUD $60.00 a year for a Gold Star membership.[25]

Costco is only open to members and their guests, except for purchases of liquor and gasoline in some U.S. states due to state laws; and prescription drugs due to federal law.[citation needed] Memberships must be purchased in advance for one year (as of May 5, 2007).[6] Purchases made at Costco's website do not require a membership; however, a 5% surcharge is added to purchases made by non-members. Purchases made with Costco Cash Cards also do not require a membership, and there is no surcharge. Canadian and United States Costco locations only accept American Express, PIN-based debit cards (Interac in Canada), cash, and checks. Guests of members are not allowed to write checks. American Express is the only accepted credit card (in the United States and Canada) because they charge Costco very low interchange fees (a percentage of revenue from total sales made); as Costco's margins are low in comparison to other retailers[citation needed], they cannot accept the fee without raising prices.[citation needed] Costco accepts Flexible Spending Account (FSA) debit cards for qualifying purchases at the pharmacy and optical departments in the US. accepts the American Express, Visa, MasterCard, and Discover cards.[26]

In the UK credit cards are not accepted, and customers must pay by cash, checks, or debit card.[27]

Lighting costs are reduced on sunny days, as most Costco locations have several skylights. During the day, electronic light meters measure how much light is coming in the skylights and turn off an appropriate percentage of the interior lights. During a typical sunny day, it is very common for the center section of the warehouse to have no interior lights powered on.[28]

Most products are delivered to the warehouse on shipping pallets and these pallets are used to display products for sale on the warehouse floor. This contrasts with retail stores that break down pallets and stock individual products on shelves. Costco limits its price mark up on items to 15%.[29]

Food service

A food concession stand at the Costco warehouse in Overland Park, Kansas

Most Costco locations have a food court that offers a quarter-pound 100% beef hot dog and 20 oz drink (with free refill) for $1.50, the same price since 1985, In Australia the hot dog is made of pork and is sold at A$2.49 with large soda[30] In the UK, the hot dog is also made from beef and you also get a drink (with refil) for £1.50. Costco sold more than 82 million quarter-pound hot dogs in its food courts in 2008.[30] Pizza is also available in most locations as cheese, pepperoni, veggie, or combo, and can be ordered to go at many locations. Frozen yogurt is also served in chocolate, vanilla, or swirled together. Also offered are very berry smoothies, mocha latte freezes, chicken bake sandwiches, turkey wraps, twisted churros, and chicken caesar salad. French fries are also offered in some locations. Due to slow sales, the pretzel was replaced by the churro.[31] The nutrition data for the Costco Food Court items is posted online.[32]

Costco Cash Cards

Costco Cash Cards can be purchased in the warehouse and members can load them with money to make non-cash purchases at all Costco warehouses in the United States and Australia. Because Costco gas stations take only Costco Cash, debit cards, and American Express, people who can only pay for gas by check or cash must purchase a Costco Cash Card inside the building before filling up. A Costco Membership is not required to purchase an in-store item with a Costco Cash Card. A non-member may not purchase or re-load a Costco Cash Card, however, they may spend more than the total value of their cash card provided they do not write a check for the remaining balance.

Return policy in the USA and Australia

Costco memberships can be refunded in full at any time before they expire. Costco guarantees almost all of their products with a full refund within a reasonable amount of time. Exceptions include televisions, projectors, computers, cameras, camcorders, digital audio players, and cellular phones; these may be returned within 90 days of purchase for any reason for a refund. After 90 days those returns must be done through the manufacturer according to the terms of the warranty. Costco has negotiated with manufacturers to extend the manufacturers warranty to two years for new TVs and computers. Costco also offers a free "concierge" service to members that purchase electronics, to help answer questions regarding setup and use and avoid potential returns due to not understanding how to use the products.


The domain attracted at least 58 million visitors in 2008 according to a survey.[33] Costco has three e-commerce websites including for the US market, for Canada and for the United Kingdom.

Food stamps in the USA

Until 2009, Costco did not accept food stamps. A March 14, 2009, article in the Pittsburgh Post-Gazette quoted Jim Sinegal, co-founder and president of the company, as saying, "Generally we don't have customers who use food stamps."[34]

In response to the poor economy, as well as competitor BJ's Wholesale Club's decision in April to accept electronic food-stamp benefits chainwide,[35] Costco announced in May 2009 that it will accept food stamps on a trial basis in two New York City stores starting in June 2009 and depending on its success, might expand it to all New York City stores.[36] The company subsequently announced plans to expand the program beyond New York City, targeting first the "hard-hit areas like Michigan and the central valley of California", expanding to "half its roughly 410 U.S. stores by Thanksgiving", and then going nationwide.[37]


Over the years, Costco has gradually expanded its range of products and services. Initially it preferred to sell only boxed products that could be dispensed by simply tearing the shrinkwrap off a pallet. It now sells many other products that are more difficult to handle, such as fresh produce, meat, dairy, seafood, fresh baked goods, flowers, clothing, books, computer software, vacuums, Home appliances, home electronics, solar panels, jewelry, tires, art, fine wine, hot tubs, furniture and caskets. Many warehouses have tire garages, pharmacies, hearing aid centers, optometrists, photo processors, and gas stations. Optometrists working at Costco locations will see patients without Costco memberships.

Costco Optical ranks as the fourth-largest optical company in the US.[38] A membership is required to fill a prescription at the optical department.

Some locations have liquor stores, often kept separate from the main warehouse in order to comply with liquor license restrictions. In some states (such as Texas), the liquor store must be owned and operated by a separate company with separate employees.[39] In 2006, Costco won a court decision against the state of Washington allowing it to purchase wine directly from the producer, bypassing the state retail monopoly.[citation needed]. In Australia, Costco has to comply with regulations set by each state they choose trade in; their first store in the state of Victoria benefits from some of the most liberal alcohol licensing laws in the country, with retailers permitted to sell alcohol on shelves within the store, in a manner similar to most European countries, yet they have chosen to have a separate checkout within the liquor section.[citation needed]

Kirkland Signature

Kirkland Signature logo
Kirkland Signature branded bottled water

Kirkland Signature is Costco's store brand, otherwise known in the retail industry as an "own-brand," "house brand" or "private label." It is found exclusively at the Costco website and Costco warehouses and is trademarked by the company. The name derives from the fact that Costco's corporate headquarters was located in the city of Kirkland, Washington between 1987 and 1996.[40]

Costco introduced Kirkland Signature as its house brand in 1995. The idea was to identify categories in which a private label product could provide brand name quality at discounted prices.[41]

To counteract the consumer confidence problem common in store branding, Kirkland Signature sometimes relies on co-branding. According to Costco, while consumers may be wary of same-store-branding, they are less likely to be wary of brands that they are familiar with and trust.[42]

Kirkland Signature products are generally rated highly. Consumer Reports magazine has given high ratings for several products including batteries and laundry detergent. A number one rating was given to Kirkland Signature anodized cookware which sells for significantly less than some comparable products.


Costco acts as an investment broker and travel agent. They have introduced an automobile purchasing program where members can purchase new cars at specially arranged prices. However, it has been disputed[citation needed] whether buyers using this auto-buying program actually save any money or time in comparison with other auto buying methods. Costco has an agreement with Ameriprise for auto and home insurance. In 2004 Costco offered an original artwork by artist Pablo Picasso on their online store; more recently a highly-regarded 1982 Mouton Rothschild wine was offered as well as other rare wines in rotation.[citation needed]

Costco Photo Center is a multi-functional photography printing lab offering services at the warehouses as well as through their web site, Unlimited use and digital file storage with a current membership. They also use some of the latest high-end digital mini labs and offer print calibration "profiles" via Costco has an agreement with for custom book and calendar publishing.

Working at Costco

While some former Price Club locations in California and the northeastern United States are staffed by Teamsters,[citation needed] the majority of Costco locations are not unionized. The non-union locations have revisions to their Costco Employee Agreement every three years concurrent with union contract ratifications in locations with collective bargaining agreements. Similar to a union contract, the Employee Agreement sets forth such things as benefits, compensations, wages, disciplinary procedures, paid holidays, bonuses, and seniority. As of March 2008, non-supervisory hourly wages ranged from $11.00 to $20.50 in the United States, $11.00 to $22.15 in Canada and £6.28 to £10.00 in the United Kingdom. In the US, eighty-five percent of Costco's workers have health insurance, compared with less than fifty percent at Walmart and Target.[43]

Product-demonstration (e.g., food samples) employees work for an outside company. In the western USA, the company is called Warehouse Demo Services, Kirkland, Washington.[44] Costco also uses Club Demonstration Services, based in San Diego, California.[45] In Canada, demonstrations are done exclusively by Professional Warehouse Demonstrations.[46]


Warehouses outside the US are similar to those in the US. Layout, signage, and even parking lot markings are generally identical to warehouses in the US.[citation needed] Food court menus are tailored to international tastes, with poutine on offer in Canada, seafood-topped pizza available in Asian and Mexican locations, clam chowder in Japan & South Korea, jacket potatoes in the UK and meat pies in Australia.[47] The merchandise mix available in warehouses is also tailored to local tastes, with a mix of both American and local products available.


The Costco outlet at Docklands, Victoria. This is Australia's first Costco outlet.

As of December 18, 2009 (2009 -12-18), Costco has 566 locations.

As of November 2005 the world's largest Costco is located in Hillsboro, Oregon, USA.[48][49]

See also


  1. ^ [ Top 100 Retailers] STORES
  2. ^ [ World's largest retailers] STORES
  3. ^ [,_mass_market_retailer.html The high quality, mass market retailer] Wine Business International, October 2007
  4. ^ "Costco Wholesale shareholder info". Costco Wholesale. 
  5. ^ a b c d e [ "Costco Wholesale Historical Highlights"]. Costco Wholesale. February 12, 2009. Retrieved 2009-11-27. 
  6. ^ a b c d "Costco Wholesale company profile". Costco Wholesale. November 12, 2009. 
  7. ^ "Why Become A Costco Member?". Costco Wholesale. Retrieved 2009-11-27. 
  8. ^ MARGALIT FOX (December 16, 2009). [ "Sol Price, Who Founded Price Club, Is Dead at 93"]. The New York Times. Retrieved 2009-12-24. 
  9. ^ a b c d "Costco Wholesale membership". Costco Wholesale. 
  10. ^ Sol Price; John Helyar; Ann Harrington (November 24, 2003). "Sol Price On Off-Price". Fortune. 
  11. ^ "BJ's Smaller in Store Size but Mightier in SKU Count". Home Textiles Today (Reed Elsevier). July 20, 2009. Retrieved October 28, 2009. 
  12. ^ "About Sam's Club". Sam's Club. 2009-02-09. Retrieved 2009-11-27. 
  13. ^ "Sam's Club company profile". Hoover's. Retrieved 2009-11-27. 
  14. ^ [ Costco Today], Costco Wholesale, September 2009
  15. ^ a b [ "24. Costco Wholesale"]. Fortune 159 (9). May 4, 2009. 
  16. ^ "Scores By Company: Costco Wholesale Corporation". American Customer Satisfaction Index (ACSI). 
  17. ^ "Costco New Locations Coming Soon". Costco Wholesale. Retrieved 2009-11-27. 
  18. ^ Desjardins, Doug (January 6, 2003). "Costco Home poised to revolutionize high-end furniture". DSN Retailing Today. Retrieved 2009-11-27. 
  19. ^
  20. ^ Fredrix, Emily. "Costco nixes Coke products over pricing dispute". Yahoo! Finance. Associated Press. Retrieved 2009-11-27. 
  21. ^ Joe Guy Collier (December 10, 2009). [ "Coke returns to Costco next week"]. The Atlanta Journal-Constitution. Retrieved 2009-12-24. 
  22. ^ Melissa Allison (December 10, 2009). [ "Costco brings back Coke next week, reports 1 percent boost in first-quarter profit"]. The Seattle Times. Retrieved 2009-12-24. 
  23. ^ [ Join the Club], Costco Wholesale
  24. ^ [ "Member Benefits and Costco Services"]. Costco Wholesale. March 2009. 
  25. ^ "Costco Wholesale Australia Join the club". Costco Wholesale Australia. Retrieved 2009-07-09. 
  26. ^ [ "Shopping"]. Costco Wholesale. 
  27. ^ [ Costco UK FAQ]
  28. ^
  29. ^ Bary, Andrew (2009-03-23). "Kings of the Jungle". Barron's (Dow Jones & Company). Archived from the original on 2009-04-07. Retrieved 2009-04-07. 
  30. ^ a b [ Order in the court] Costco Connection. March 2009. Volume 24. Issue 3. pp. 21.
  31. ^ [ Food Court questions] Costco Connection. May 2009. pp. 59.
  32. ^ [ Costco Food Court Nutrition Data]
  33. ^ "Site Profile for (rank #136)". Compete. Retrieved 2009-11-27. 
  34. ^ Millman, China (March 14, 2009). "Needy shoppers prompt subsidy adjusting". Pittsburgh Post-Gazette. 
  35. ^ Duff, Mike (June 2, 2009). "Costco Food Stamp Compromise Follows BJ's Precedent". 
  36. ^ Lee, Jennifer (May 27, 2009). "Costco Will Accept Food Stamps at 2 Stores". The New York Times. 
  37. ^ Allison, Melissa (October 27, 2009). "Costco plans to accept food stamps nationally". The Seattle Times. Retrieved 2009-11-27. 
  38. ^ Costco Story, Costco Wholesale
  39. ^ Texas Alcoholic Beverage Code section 22.14
  40. ^ "Business Spotlight: Costco Wholesale". Retrieved 2006-10-26. 
  41. ^ "Costco buying power makes dent in private-label wine market". Retrieved 2007-03-30. 
  42. ^ Duff, Mike (December 19, 2005). "A private label success story". DSN Retailing Today. Retrieved 2009-11-27. 
  43. ^ Greenhouse, Steven (July 17, 2005). "How Costco Became the Anti-Wal-Mart". The New York Times. 
  44. ^ Warehouse Demo Services (WDS) - Costco Product Demonstrations from
  45. ^ Club Demonstration Services
  46. ^ Professional Warehouse Demonstrations
  47. ^ "COSTCO Melbourne Docklands Prices List - Comparison *Updated*". BuckScoop. Retrieved 2009-08-30. 
  48. ^ "Costco Cuts Recruitment Costs, Then Ribbon". Employment Department Success Stories. State of Oregon. 
  49. ^ Desjardins, Doug (December 19, 2005). [ "At 40% larger, new Costco prototype redefines big"]. DSN Retailing Today. Retrieved 2009-11-29. 
General references

External links

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