Another reason why manufacturers sell to Costco, and why manufacturers should sell to Costco, is the low level of competition within a warehouse. When you go to a typical retail store, there may be 10’s or 100’s of other products just like yours. For example, customers at a typical grocery or retail store have an overwhelming number of toothpaste and toothbrush brands to choose from. However, in Costco warehouses, they limit their product brands to a small handful, typically one or two, giving your product a much higher chance of being purchased by the members. It is not hard to see why many manufacturers find that being one of few product brands in the top U.S. wholesale chain is a premium place to be.
Reason 3: Why manufacturers sell to Costco
Another reason why manufacturers sell to Costco is because of Costco’s ordering structure. In the United States there are hundreds of Costco warehouses, each of which requires at least one pallet of product and plenty of back stock – whether it is held in the warehouse or the depot centers. Given this structure, Costco often orders products based on truck load quantities. The high quantity of product orders is extremely attractive to manufacturers because it obviously yields high dollar amounts per purchase order.
Reason 1: Why manufacturers sell to Costco
A second reason why manufacturers strive to get into the Costco warehouses is the fact that it is a membership based retail avenue with high loyalty and a high-end demographic. Costco’s retention is around 86-87% from year-to-year, which means that Costco shoppers see enough of a value to keep them coming back year after year. Even through economic downturns and membership price increases, Costco members continue to renew their memberships. There is certainly a value to having your products displayed to a segment of loyal Costco members, with higher annual incomes than the average shopper.
Reason 2: Why manufacturers sell to Costco
A second reason why manufacturers strive to get into the Costco warehouses is the fact that it is a membership based retail avenue with high loyalty and a high-end demographic. Costco’s retention is around 86-87% from year-to-year, which means that Costco shoppers see enough of a value to keep them coming back year after year. Even through economic downturns and membership price increases, Costco members continue to renew their memberships. There is certainly a value to having your products displayed to a segment of loyal Costco members, with higher annual incomes than the average shopper.
May Blogs – Costco Wholesale
May blogs will be dedicated to talking about Costco Wholesale, its growth, and 4 of the top reasons why manufacturers would want to sell to Costco:
5/15/2012 – Warehouses opening soon
5/17/2012 – Reason 1: Why manufacturers sell to Costco
5/22/2012 – Reason 2: Why manufacturers sell to Costco
5/24/2012 – Reason 3: Why manufacturers sell to Costco
5/29/2012 – Reason 4: Why manufacturers sell to Costco
5/31/2012 – Reason 5: Why manufacturers sell to Costco
Stay tuned!
Costco Membership: Rates and Retention
To date,member renewal rates remain high as a result of constant value perception and product innovation. Because Costco is a low-margin business, they reward their members for being loyal and are successful by increasing the frequency and average purchase of club members. According to Trefis research done in 2015, membership renewal rates are on the rise and customers are visiting Costco more frequently. Costco’s ability to retain their members is unlike anything that has been seen before.
If you think your product would sell at Costco, pair up with one of our representative to develop your strategy today! Call us at 949-600-7688 or email [email protected].
Why is VendorCo selective of their clientele?
Costco holds member satisfaction to an extremely high standard, which is reflected in Costco’s high member retention rate and consistently high sales volume. Costco has the highest membership rates in comparison to other wholesale clubs, even though the membership fees are typically the most costly. This is because members are willing to pay more to receive Costco’s fantastic product quality and great prices.
Buyers are careful to provide only the BEST products at the lowest prices available. Certain criteria must be met before Costco buyers will even consider placing a product on their sales floor or through Costco.com. This criteria is tough to meet, but Costco will not compromise quality or warranties for their members.
So why is VendorCo so selective of our clientele? Because we WANT you to succeed with Costco! We will be honest and direct with you if we do not believe that you are ready, and offer our consulting services until you are. If you do not meet Costco’s criteria, we would not want to waste your time, Costco’s time, or your resources shooting for a goal that is not within reach just yet.
As with most retail buyers, you truly have one shot to make an impression. Keeping in mind that Costco is the third largest retailer in the United States, you should not introduce your company too early in your growth stages and risk damaging your reputation with the buyers. First establish yourself, be sure your company can handle shipping truckload quantities, and be sure you are willing to provide Costco members with the required discounts, allowances and value.
Not sure if you’re ready for Costco? Need some expert advice? Through VendorCo’s consulting services, a seasoned representative will answer your questions and point you in the right retail direction. As an added value, receive a FREE copy of the must read booklet “15 Elements of Successful Product Placement” with every initial purchase.
Click HERE for more information, or email [email protected] to get started
The History of Costco
The first Price Club warehouse opened in 1976 in an airplane hangar on Moreno Boulevard in San Diego, California for business shoppers only. The unbeatable prices and bulk packaging appealed to business consumers everywhere, and it’s no surprise that over the next ten years it would bring in 3.2 million members, 22 warehouses, and become Forbes Magazine’s “Best Managed Company”.
Founded by James (Jim) Sinegal and Jeffrey Brotman, the first Costco Warehouse opened in September 1983 in Seattle, Washington – the current home of Costco’s corporate offices. By the end of Costco’s second year in business it would open 9 additional locations in 5 states, as well as the first expansion into Canada. Later, Costco would become the first company to grow $3 billion before its sixth year.
In 1993, Costco’s 10th anniversary and Price Club’s 17th year in business, both companies merge to create PriceCostco. With locations in the United States, Canada, and Mexico, 1993 proves to be a monumental year with the first international expansion to the United Kington in West Thurrock, Essex, England. The international expansion would continue to Korea (1994), Taiwan (1997), Japan (1999), Puerto Rico (2001), Australia (2008), as well as expansions online through Costco.com and Canada’s equivalent, Costco.ca.
PriceCostco officially changes its name in 1997 to what we know now as Costco Companies, Inc.
Today, Costco is the leading warehouses/Big Box retailer by sales volume, exceeding Wal-Mart’s Sam’s Club and BJ’s Wholesale. Founder Jeffrey Brotman continues to sit as the chairman of Costco’s Board of Directors, and Founder Jim Sinegal is Costco’s CEO (soon to be replaced by current COO Craig Jelinek). Costco continues to prove their “consumer first” business model through the creation of new and unique business concepts, included Costco Pharmacy (1986), Produce and Bakery (1987), Optical Labs (1987), 1-Hour Photo (1989), Hearing Aid Centers (1994), Costco Gas Stations (1995), Costco’s Business Centers (1996), Costco Travel (2000), Costco Home (2003), and Car Washes (2006).
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