Costco

Costco is a globally renowned membership-based warehouse supermarket founded in 1976 and headquartered in Seattle, Washington, USA. Its business model is centered on low-priced, high-quality goods and excellent membership services, and profits are achieved through the membership system. Costco’s membership system requires consumers to pay an annual fee to enter the store. This model not only attracts a large number of loyal members, but also brings a stable revenue stream to the company.

Costco’s success is inseparable from its unique business model and operating strategy. First, Costco adopts a low-price strategy to reduce the cost of goods through large-scale procurement and centralized distribution, so as to provide below-market price goods to members. Second, Costco implements a strict SKU (inventory unit) strategy, and each item usually only provides 1-3 options to maintain high inventory turnover and reduce inventory loss
In addition, Costco has further reduced costs by optimizing supply chain management and partnering with suppliers
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Costco’s membership system is the key to its profitability. Membership fees account for a large part of the company’s total revenue. For example, in 2017, Costco’s net profit was $2.68 billion, most of which came from membership fees. The membership system not only helps Costco lock in a large number of loyal customers, but also encourages members to engage in more spending behavior, which increases sales and profits.

Costco has an extensive network of stores around the world, with more than 800 stores worldwide by the end of 2023, and operations in multiple countries and regions
This global presence allows Costco to attract consumers from different countries and meet their needs through a diverse range of products and services
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Costco has achieved significant success in the global retail market through its low-price strategy, efficient supply chain management, rigorous SKU strategy, and successful membership system. Its business model has not only brought considerable profits to the company, but also provided important lessons for other retail enterprises.