Inside Costco Warehouses: Item Numbers

When shopping at Costco, you will notice a code that is listed above the item name. Item numbers can be up to 7 digits in length. This code, or item number, identifies the specific item, size, color, etc. and is used by the warehouse, buying staff, vendor, and the member to identify the item and for categorization purposes. Early in Costco’s history when the warehouse had not yet merged with Price Club, it offered a different style of numbering system. You would hear employees unloading a cart and yelling out the digits to the cashier, who would key in the item number into the system.

Today, Costco’s system has evolved with technology, but some of these original items numbers are still visible when you buy milk, some tobacco items, and eggs. Costco uses item numbers as a tracking number associated with UPC codes. It is the UPC codes that have sped up the Costco process.

Costco categorizes their products differently than other retail stores, it is important to learn how Costco uses item numbers and other techniques to identify their products. If you are interested in partnering with a manufacturer representative, and starting out your Costco program precisely, then contact VendorCo today at sales@vendorco.com.

Inside Costco Warehouses

Costco is the world’s largest membership warehouse chain, with over 72 million members. Costco may have competition, but their warehouses are unique in multiple ways.  For example, Costco takes pride in their “Treasure Hunt” strategy to keep members engaged.  This means that products offered at Costco continuously change to keep the shopping experience new and exciting.

Other successful business strategies include samples station, as no other retailer has been able to engage consumers quite the way that Costco does with these samples. Additionally, massive depots that distribute goods to the chain’s warehouses across the United States has been monumental to Costco’s success. This month, we will delve inside Costco Warehouse for a look into the unique aspects of their sales floor strategies.

In the coming weeks, we will cover the following topics:

  • Inside Costco Warehouses: Item Numbers
  • Inside Costco Warehouses: Costco Signs
  • Inside Costco’s Corporate Office: Issaquah
  • Inside Costco Warehouses: Paper or Plastic?
  • Inside Costco Warehouses: The Treasure Hunt
  • Inside Costco Warehouses: Reading Price Codes
  • Inside Costco Warehouses: More Information

If you are interested in bringing your product into the world’s largest member warehouse, contact info@vendorco.com. Our staff has 25 years worth of Costco experience and an in-depth knowledge of their culture.

More Information

Although getting your products through the early stages of program development is a step in the right direction, establishing a price is perhaps one of the more pertinent steps that a vendor will set out to accomplish. Establishing a price is paramount with what visions you have set out with your company and with Costco. This will take careful consideration of key costs and hidden costs that are most often times more difficult for the seller to anticipate.

It is important that you understand how Costco functions and operates when you negotiate pricing with the warehouse company. Costco’s pricing structure varies greatly from other retailers that you may be accustomed to. Partnering with a manufacturer representative could be the key difference piece to creating a Costco appropriate sell price. To learn more about pricing your product, get help from a representative at VendorCo to help get you situated. Contact us at: help@vendorco.com.

Costco Discounts & Markdowns

The price of your product can fluctuate as your program evolves with Costco depending on some key factors. It is not uncommon for Costco to envisage a request to take markdowns on your product. Costco has an unparalleled reputation of generating high warehouse turnover. On average, a warehouse will have inventory turned over 14 times a year. Costco may ask for a discount for a promotional push, or in order to achieve higher volume sales and quicker turnover. Factoring in this foreseeable cost will help you build a safety net when these markdown requests eventually come.

To help ensure that you will be successful in this venture, contact sales@vendorco.com for more details about how our services will best serve you.

Costco Allowances

Costco Allowances are an agreed upon percentage held from payment to settle any freight, demo, spoils, advertising, or other fees that may occur throughout the duration of a program. Allowances ensure that the vendor will not be burdened with an overbearing debit, thus protecting the vendor in the end. Allowance arrangements vary per item, department and Costco avenue and include considerations for shipping terms, payment terms, duration of the program, guarantee vs. full sale, geographical scope, etc. Some allowances pull from the full PO amount, while others (such as New Warehouse Allowances) only apply to the applicable units.

Many allowances are optional, but some may be required. With the flow of Costco’s buying process, if an allowance is required it may not be announced until after you have submitted pricing. It can be difficult to anticipate which allowances will be asked for. You clearly do not want to underestimate allowances, but you also do not want to build too much in that you overprice your item.

It is vital that allowance costs be factored appropriately into the price of your potential product. To successfully plan your price point and consider all possible allowances, partner with VendorCo – experts in Costco sales. Contact help@vendorco.com for more details about how our services best serve you.

Costco Retainer Fees

One of the main concerns vendors have when starting business with Costco is related to the release of payment. Like any contract, when you partner with Costco you will negotiate payment terms; however, your terms will not necessarily guarantee the release of full payment. Consideration for end of program costs must be taken into account, and Costco will either require or provide the option of holding a retainer for some of these funds.

With Costco’s “Treasure Hunt” atmosphere, items are constantly moving in and out, and exit strategies must be planned appropriately. There are costs to consider with the end of a program, including potential markdowns, discounts, or other adjustments, shipping of returned product on a guaranteed sale, and of course, returns that may continue to come through after the product has been moved off the sales floor. A retainer provides the option for Costco to hold some of the Purchase Order funds to account for these costs. Although it may not seem ideal, retainers benefit and provide assurance to both the vendor and Costco. The vendor would otherwise be required to send a check each and every time the balance falls below zero – that would mean sending a check for each and every return, which could be an accounting and labor nightmare.

A knowledgeable manufacturer representative like VendorCo can help you plan your exit strategies appropriately, including an appropriate and reasonable plan for end of program costs. To set a strong foundation on your product’s prices, contact help@vendorco.com for more details about how our services will best serve you.

Costco EDI Fees

If you are interested in becoming a vendor at Costco, it is required that you use an Electronic Data Interchange (EDI) system prior to the start of sales. EDI systems are popular amongst retailers, and it is how Costco organizes and disseminates information concerning their complex logistical and ordering procedures. EDI systems allow two parties to electronically exchange documents without the use of email, fax or mail. For Costco’s purposes, these documents may include purchase orders, invoices, shipping notices, bill of ladings, and more.

This communication service can be pricey, and must be compliant with Costco’s requirements. Costco utilizes two EDI service companies for in-store or online ordering. If you are already set-up with EDI for other retailers, do not assume that you are prepared for Costco. There may be costs associated with set up, regardless of your current capabilities.

If you are interested in partnering with a manufacturer representative, and starting out your Costco program right, then contact VendorCo today at sales@vendorco.com. We will ensure you are fully informed of the EDI requirements, pricing, and procedures to get the most out of your program.

Costco Return Fees

This may be disheartening or concerning to some vendors; however, most Costco returns can be re-sold and occur within the first couple of weeks. Additionally, Costco maintains a delicate balance between satisfying the member with their return policy, while preventing vendors from being burdened with returns. One of the ways Costco helps to prevent massive returns is by only purchasing high quality items that will ensure satisfaction amongst members. If your product is high quality and lives up to its promise, then Costco’s return policy should not be a detrimental concern.

To help ensure that you will be successful in your Costco venture, contact sales@vendorco.com for more details about how our services will best serve you.

Costco Advertising fees

Have you ever noticed that Costco commercials, print Ad’s, and other forms of media advertising are virtually non-existent? This is because Costco chooses to market products only to their members, versus the consumer population as a whole (with the exception of some popular social media sites). Because of this, advertising opportunities within Costco are minimal.

Advertising channels varies depending on where the product is selling within Costco. If a particular product is selling in-store, certain advertising opportunities on Costco.com may not be available, and vice versa. In-store advertising programs at Costco may be different than what you are accustomed to at other retailers. With the exception of roadshow items, Costco does not incorporate flashy materials in the display of their products. Vendors are generally limited to their product packaging, pallet skirts, and occasionally a display unit. However, there are some paid in-store advertising options including coupons, Connection Ads, end caps, front of store placement, and cages.

With limited opportunities available, there is a high demand amongst vendors to obtain one of the coveted spots available. If you are interested in creating a program with advertising, consider partnering with a manufacturer representative like VendorCo. Our team can offer more information and services on in-store advertising options; call us at (866)365-2925.

Costco Miscellaneous Program Costs

This month we will be delving into the various costs, allowances, and discounts to consider before starting a program with Costco. Calculating your price is paramount to the success or fail of your product. A price that is too low may undercut your margin and result in a loss, while a price that is too high may be entirely overlooked by the buyers.

Before quoting to Costco, consider these costs that can pop-up in most programs:

  • Costco Advertising Fees
  • Costco Return Fees
  • Costco EDI Fees
  • Costco Retainer Fees
  • Costco Allowances
  • Costco Discounts / Markdowns
  • Building in these miscellaneous fees will allow you to obtain a practical margin and be successful long-term.

It is critical to secure a well-rounded cost structure before a program starts with Costco. To help ensure that you will be successful in this venture, contact sales@vendorco.com for more details about how our services will best serve you.