At Costco, consumer preferences echo throughout the store
Costco Wholesale Corporation, the retail giant known for its bulk items and iconic rotisserie chickens, continues to dominate the US market. The company reported significant growth in 2019, with net sales for September increasing 5.6% year over year to $14.41 billion.
Despite the success, Costco isn't resting on its laurels. The company's membership base grew to 94.3 million at the end of fiscal 2018, even during economic downturns like The Great Recession. This growth is particularly impressive when compared to competitors like Macy's, which has shrunk its footprint to 867 stores.
The Kirkland Signature brand, Costco's private label, accounted for 27.5% of the company's sales in 2018, well above the industry average of 17%. In 2018, Kirkland brought in $39 billion in sales, more than the annual sales of Macy's, J.C. Penney, Kohl's, and Nordstrom combined.
Costco's rotisserie chickens, priced at a consistent $4.99, are a popular draw for customers. Despite competitors raising their prices, Costco has chosen to maintain the price, using the chickens as a loss leader to drive traffic to the store.
The success of Kirkland isn't due to sacrificing quality, according to Tim Campbell, principal analyst at Kantar Consulting. Instead, consumers are willing to pay more for the private label because they like the brand just as much, if not more, than the name brand.
Costco has also taken steps to ensure the quality of its poultry supply chain. In 2019, the company announced plans to build a chicken-processing plant in Freemont, Nebraska, to have total control over its supply.
In terms of competition, Walmart, Costco's parent company, is the largest company in the world on a revenue measure. However, Costco continues to outperform Sam's Club and BJ's Wholesale. For instance, Sam's Club's net sales increased 1.8% to $15 billion for the three months ended in July, while BJ's Wholesale posted net sales of $12.7 billion for the entire fiscal year 2018.
Despite the challenges posed by the bird flu outbreak in 2019, which led to a $30 million to $40 million profit hit due to rising chicken prices, Costco has managed to maintain its steady growth. The company isn't facing massive store closures and has opened new warehouses at a steady pace.
In conclusion, Costco continues to dominate within its category and makes a strong case for itself as being one of the top retailers in the United States. The company's commitment to quality, competitive pricing, and innovative strategies have helped it maintain its position in the highly competitive retail market.
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