Factors or attributes that permit business organizations to deliver products and services in a more competent manner than the market competitor, are known as “Competitive advantages”. These traits give businesses an edge over a competitor to charge high prices and capture more customers from the target market. Costco is an American MNC that works on a business model of membership warehouse chain internationally. Costco is known for its substantially low prices and quality branded products as compared to other whole sellers. Costcos grabs the target market by pitching unique competitive advantages to their customers like private label or branded products, membership model, and competitive prices.
Costco is an international warehouse chain that works with a vision to create the finest place for competent purchasing and functioning practices for members. Costco offers incomparable savings with good quality for their loyal customers. Costco’s competitive advantages are derived from its business model that delivers and maintain brand name merchandise at low prices reasonably. With this vision and marketing strategy Costco aspires to target the market to purchase in bulk so individuals with families and small to medium size businesses are the possible shoppers for Costco. Costco tries to place maximum resources and marketing efforts on bulk buyers while executing marketing strategies.
Costcos competitive advantages
Costco has worldwide existence with 800 plus stores and 500 plus are in the United States only. Costco also has made its presence in China, Canada, Japan, the United Kingdom, Korea, Australia, Spain, Taiwan, Mexico, France, and Iceland. There are three main divisions of Costco’s business operations namely US operations, Canadian operations, and other international operations. Costco implements direct sourcing and inventory management practices to facilitate loyal customers through memberships.
To generate more sales and to gain higher margins than the competitors, businesses try to be more competitive through their effective business development strategies, such attributes and factors are commonly known as competitive advantages. Businesses make efforts to build their competitive edge in the market to strengthen brand loyalty and expand their target market. There are a lot of aspects that a business can enjoy as a competitive advantage like new technology, skilled labor, availability of natural recourses, geographical location, enriching information, low production cost, cheap raw material, etc. Organizations design or develop business strategies as a long-term plan to get a competitive position in the market.
Costco deals in brand name products at lower prices comparatively that appeal to clients to purchase in bulk which in turn boosts sales and customer retention rate equally. Bulk buying and customer loyalty also ensure economic sustainability for businesses. A comparatively large variety of product categories is available at Costco for customers under one roof. Costco product categories include groceries, home textiles, electronics, jewelry, hardware stationery, furniture, office supplies, and much more.
- Membership model ensures consistency
Costco’s membership model is one of the most prominent elements and its business ability to increase profitability consistently. The recurring purchasing with membership programs gives investors the privilege of sales predictability and cash flow consistency. Because of its subscription-based model and membership policy, Costco does not have to invest a lot of money in the name of marketing campaigns.
- Sell in bulk at low prices
Costco is famous for offering bulk products at unbeatable prices to its customers. The higher the buying power of the customers the greater the pricing leverage for Costco, equally it enables Costco to sell products at lesser prices than other retailers.
- Efficient supply chain management
Costco has become enabled to run lean and efficient supply chain processes because it excludes all unnecessary touches and handoffs. Costco’s supply chain structure is a good example for any other retailer in supply chain principles’ implementation and execution. Costco is consistent with lean thinking, efficient transportation, waste elimination, and inventory handling. Due to this efficiency, it enjoys agility and cost efficiency at the same time.
Costco has designed its business strategy based on its business model and target market i.e., membership warehouse stores chain and middle to upper-class educated individuals who are brand and quality conscious and enthusiastic to purchase in bulk. Based on these two pillars, Costcos has developed competitive advantages like a warehouse membership model, selling in bulk quantities, comparatively low prices, and an efficient supply chain management system. Costco procure products directly from manufacturers in bulk to give their customer the lowest possible prices.
Frequently asked questions (FAQs)
- What is Costco?
Costco is an American multinational company (MNC) that deals with membership chains for retail stores or warehouses. Costco was initially established in 1983 in Seattle, Washington, U.S.
- What are the features of Costco’s products?
There are two main features of Costco products i.e., Low prices and brands name products.
- What are Costco’s competitive advantages?
Membership model, sell in bulk, competitive prices, and efficient supply chain.