Costco wholesale is one of the global leaders in the retail industry after Wal-Mart. Established in 1983, it has almost 785 stores over 12 countries worldwide. With 493 warehouses, this company claims one of the biggest distribution channels. It uses the strategy of providing good at a low price like Wal-Mart. Though Wal-Mart is still in a top position in this business, Costco Wholesale is giving it a fierce competition. Costco Whole doesn’t do a lot of promotional stuff like other companies, but its growth rate is awe-inspiring. What marketing strategies does this company use to let it become one of the retailer giants?
4Ps or Marketing Mix of Costco Wholesale
Product Strategy of CostCo Wholesale
A business enters into a market with its products that are valued in the market. And marketing ensures that the products can have an excellent reach to the target market.
Costco Wholesale uses the membership strategy on its business strategy. The member of the Costco Wholesale club has access to get various products at a low price. Although this company doesn’t have a lot of variety like Wal-Mart or Target, it’s still giving them a fierce competition through its massive warehouse chain. It offers a narrower range of product lines with a broad category. This company now has almost 330 items on its private level, responsible for nearly 15% of its total revenue. The major product categories of this business are food, furniture, electronics, music, hardware, jewelry, apparel, health, medicine, wine, etc. It also provides service of real estate agents, home and auto insurance, life insurance, travel agent, mortgage services, etc. They have extended their product services online as well. They also bring seasonal products to their customers, which brings additional hype to them. Costco also sells premium quality products and services under its private brand named Kirkland Signature brand, which has some superior quality product lines and categories.
Price Strategy of CostCo Wholesale
A business must decide its price based on the cost and market value. The pricing strategy defines how efficient the company is and why people should negotiate with the offered rate.
Although this brand is focused on giving valuable experience to the customer and has employed a massive workforce for that, Costco Wholesale offers its products and services at a relatively low price. This brand provides frequent discounts and coupons to its customers. But still, this company is growing to a greater extent with a higher level of profit margin. The secret behind this success is the largest warehouse channel this company has. Also, it always buys products in a large amount and can store them for a long time. This strategy has helped this business keep the operating cost low and offer customers a low price. Costco also uses penetration pricing, which is its primary pricing strategy, which has brought this massive success. It has made people buy relatively less known products at a discounted price. As a result, when people get the same satisfaction form those less popular products at a lower price, they tend to buy the cheap one more, and automatically the sale increases.
Place or Distribution Strategy of CostCo Wholesale
Placement and distribution of a business are very important as it makes the physical visibility among the people. This strategy makes the target people know that a business is available with its products at the nearest possible place.
Costco Wholesale has a strong global presence with its massive number of stores and warehouses situated worldwide. It may appear that this company still lacks stores compared to other rivals such as Wal-Mart or Target. But this company beliefs that their low price and services are enough to make people giving frequent visits to their store. And this belief is not wrong at all. In the case of placement and distribution, Costco Wholesale doesn’t provide much of a focus on competing with others. It has developed its strategies and doing well by itself. The large storing capacity of this business has a 12 times inventory turning each year. It indicates that this business sells its products quicker than the time of paying bills to the suppliers comes. And it has given this company to builds a good relationship with the suppliers and maintain the highest availability of products on each store. Also, now the online service of Costco has added another stair of success on its placement strategy.
Promotion Strategy of CostCo Wholesale
Promotion makes a business known to its customers. It works as an information strategy for a company.
Costco Wholesale has always adapted strategies that are not similar to other companies. And when it comes to promotional strategy, this business is still walking on the opposite road. While other companies are making a considerable investment in promotional activities, Costco Wholesale doesn’t pay much attention here. This business has established itself in a way that the outlets are enough to be the center of attention among the customers. We’ve already said that this company uses the strategy of membership, which means the customers are part of Costco Club. And Costco always gets in touch with them through direct emails regarding eye-catching offers and discounts that are hard to miss. As a result, this business always makes itself the talk of the town without any fancy advertisement, and the renewal rate of membership is more than 90%! And Costco saves almost 75% cost from not doing any traditional marketing and enjoying the higher profit margin.
Recommendation for CostCo
Costco Wholesale may not have the hype or crazes like Wal-Mart and Target, but this company is really getting tough on those rivals in the market. It is now a pace of almost reaching those big brands and hopefully overcoming their profit and sales margin. Although this company is still doing well without involving in any extensive marketing campaigns. But it should step into this platform for a sustainable existence. Because now it’s the era of advertising, and people don’t really trust a business without a robust public appearance. And if Costco wants to extend its target market globally, it needs to change its promotion strategy.
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References
- https://www.fool.com/investing/general/2015/07/30/the-costco-effect-5-ways-it-stands-out-from-the-co.aspx
- https://www.businessinsider.com/costcos-simple-strategy-2014-9
- https://marketrealist.com/2019/12/analyzing-costcos-inventory-supply-chain-management-strategies/
- https://finance.yahoo.com/news/costco-wholesale-standout-saturated-retail-190957105.html
- https://www.barrons.com/articles/vaccines-could-start-rolling-out-this-fall-were-not-ready-for-how-complicated-it-will-be-51592490366
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