Costco Wholesale

(NASDAQ: COST · $959.44 ▲ 1.3%) Costco Wholesale is a multibillion-dollar global retailer that runs membership warehouse clubs in 14 countries. In the warehouse club model, shoppers pay a membership fee to buy goods in bulk at low margins, and the fee income helps keep shelf prices down. Costco describes its operating philosophy as keeping costs down and passing the savings on to members, and it credits its large membership base, buying power and focus on efficiency for its prices on brand-name merchandise. Its warehouses carry about 4,000 stock keeping units, compared with the 30,000 found at most supermarkets, and also offer specialty departments and member services. A limited assortment lets a retailer concentrate its purchasing on fewer products and buy each in larger volumes, a common way for warehouse clubs to compete on price.

The business traces its roots to Price Club, which opened its first location in 1976 in a converted airplane hangar in San Diego and at first served only small businesses. Price Club later opened membership to selected non-business customers to increase its buying power, and the first Costco warehouse opened in Seattle in 1983. When the two companies merged in 1993, the combined business, PriceCostco, had 206 locations, and it went back to the Costco name in 1997. The company has since expanded internationally and operates hundreds of locations worldwide.

Costco says it focuses on quality and business ethics and describes a workplace where employees are expected to be service-oriented and committed to a common goal. It cites promoting from within, fair wages and benefits as part of what it calls an employee-focused approach. For a high-volume, low-margin retailer, investing in staff retention can help hold down hiring and training costs, which links workforce policy to the cost discipline that underpins low prices.