Seattle Observer

The moment we set foot on US ground, we were instantly issued a membership card for COSTCO, one of the mega-super-discount everyday-low-price warehouse stores. The Costso is the best place to shop for people who buy in bulk. For people who want everything in one go, there’s Walmart.

Costco operates, what is called, ‘membership warehouses’ based on the concept:

offering members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories .. producing high sales volumes and rapid inventory turnover

The rapid inventory turnover, when combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, enables Costco to operate profitably at significantly lower gross margins than traditional wholesalers, discount retailers and supermarkets. Costco buys the majority of its merchandise directly from manufacturers for shipment either directly to Costco’s selling warehouses or to a consolidation point (“depot”) where various shipments are combined so as to minimize freight and handling costs. As a result, Costco eliminates many of the costs associated with multiple step distribution channels, which include purchasing from distributors as opposed to manufacturers, use of central receiving, storing and distributing warehouses, and storage of merchandise in locations off the sales floor. Costco’s merchandise selection is designed to appeal to both the business and consumer requirements of its members by offering a wide range of nationally branded and selected private label products, often in case, carton or multiple-pack quantities, at attractively low prices. More controversial Many trace discount retailing’s birth to 1962, the first year of operation for Kmart, Target and Wal-Mart. But by that time, Sam Walton’s tiny chain of variety stores in Arkansas and Kansas was already facing competition from regional discount chains. Sam traveled the country to study this radical, new retailing concept and was convinced it was the wave of the future. He and his wife, Helen, put up 95 percent of the money for the first Wal-Mart store in Rogers, Arkansas, borrowing heavily on Sam’s vision that the American consumer was shifting to a different type of general store. Today, Sam’s gamble is a global company with more than 1.3 million associates worldwide and nearly 5,000 stores and wholesale clubs across 15 countries. The “most admired retailer” according to FORTUNE magazine has just completed one of the best years in its history: Wal-Mart generated more than $256 billion in global revenue, establishing a new record and adding more than $26 billion in sales. The company earned almost $9.1 billion in net income and grew earnings per share by more than 15 percent. But it all started with an understanding of what consumers want from a retailer.

“The secret of successful retailing is to give your customers what they want,” Sam wrote in his autobiography. “And really, if you think about it from the point of view of the customer, you want everything: a wide assortment of good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy; friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience. And this is what Walmart delivers .. but. Around every new installment of Walmart, local retailers go out of business and the smaller shopping malls loose tenants which leaves vacant spaces .. this downward spiral has ignited protest and resistance towards Walmart which have been under attack ever since. One way of dealing with some of the dynamics is this website Walmart Facts.

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