Costco and Sam's Club Introduction There are so many stores where people can get their groceries and basic needs. Where do you get your groceries from? Out of all the stores Costco and Sam's Club are the mainstream ones with a variety of products. Costco and Sam's Club share many similarities and differences when it comes to their membership, environment/food court, and customer service/experience. Membership Costco and Sam's Club both offer memberships and to shop in the stores or online you must have a membership.
The warehouse companies, such as Costco and Sam’s Club, use the subscription business model. Customers, who want to buy at the store and get the best offers, discounts have to buy a membership with the commitment of lower prices for the initial cost (Page 2015 n.p.). The companies’ customers subscribe not for products, but rather for serves of low prices.
Walmart was founded in the summer of 1962 by Kingfisher, Oklahoma native Sam Walton. Although Walton’s original vision for the store was relatively modest, the half century since its founding has seen Walmart morph into one of the biggest companies in the world. Today headed by one Doug McMillon, Walmart boasts more than 5000 stores in the United States of America alone and employs more than 1.5 million people. Walmart is undoubtedly an American institution, yet each Walmart store feels like its own little country. Walmart seems to have its own laws and customs and the people who shop their on a regular basis appear almost primitive in their behavior as they go about raiding the store’s shelves and wrestling with fellow customers for discount flat screen televisions and bulk packages of two-ply toilet paper.
Will millennials kill big box and DIY stores like Sam’s Club and Costco? The answer to that question is up to these stores to change their target market. According to Forbes, their main target market are the parents of millennials. These parents are the “the suburban, car-loving, McMansion-owning” parents who make up 63% of these types of stores customer base.
Since the company was founded as a corner store, the company’s business plan has always emphasized on expect more, pay less brand promise that sets it apart from its chief rival, Walmart. Although, Walmart is known for its low prices and offers a large selection to its customers; it’s customer service is often found to be nonexistent. This
1. Differences in Costco’s business model compared with competitors such as Walmart, Sam’s Club, and other retailers are quite significant. Most revealing of all would be their treatment of their hardworking employees, setting an example for other retailers. According to the article, “The company pays its employees on average 40 percent higher than competitors and offers health care insurance to all employees who work more than 20 hours per week.” This results in a lower job turnover rate in the company.
The discount stores industry is highly competitive. Costco Wholesale Corporation directly competes with Wal-Mart stores and its subsidiary Sam’s Club, Target Stores, Kroger, BJ's Wholesale Club, and indirectly competes with e-commerce businesses such as Amazon.com etc. The key aspects of Costco's strategy have already been identified as ultra-low prices, limited product selection, treasure-hunt merchandising, to low-cost emphasized efficient productivity and its long-term growth strategy. Considering the data available (Exhibit 3) and from the chart below, over the past five years’ average revenue growth of Costco is higher than its competitors which is 8.31% where as Walmart landed with 3.54%, Kroger with 7.17% and Target with 2.13%. From the above chart, we can clearly observe that Costco’s sales are increasing linearly at a steady rate YOY.
Key Trends – Globalisation One of the main opportunities Costco has is more global expansion to specific targeted countries. Although operating in many countries, Costco is heavily dependent on the U.S. and Canadian markets. It still has the opportunity to expand into the Asian and Australian markets where it has a limited presence. Costco has the capability to operate about 100 stores in Taiwan, Korea and Japan combined and about 20 stores in Australia. It currently has 41 stores in Taiwan, Korea and Japan combined and 6 stores in Australia.
As can be seen in the 5 year stock chart below (Figure 5), Wal-Mart’s stock started off stronger than the Dow Jones if we compare it in 2012. Towards the rest of the year, one begins to see that percentage wise, Wal-Mart begins to flirt with the rest of the market as it enters a slight downward trend. In the beginning of 2013, the markets take off, bypassing Wal-Mart and never looking back. Comparing Wal-Mart to it’s competitors like Target and Costco in 2012, one may see that all three stocks were relatively competitive. Once they entered 2013, Costco begins to pull away from the rest of the companies because of great PR and strong numbers in inventory sales and membership registrations (The Montley Fool).
What are the two types of core competencies that drive a firm’s competitive advantage? Which firms demonstrate a clear competitive advantage because of (a) major value-creating skills/core capabilities and/or (b) superior assets or resources? Which firms have demonstrated sustainable sources of competitive advantage? The two core competencies that drive a firm’s competitive advantage are cost leadership and differentiation.
The article “Labouring the Walmart Way,” author Deenu Parmar talks about how Walmart is able to achieve selling goods at a lower price then any average superstore. The author goes on to explain that Walmart’s antiunion efforts, employee selection, low prices and high retention rate all contribute to their major success. Walmart’s stance on ant unionism allows them to keep wage cost down and keep all their profits up. Not allowing a union keeps Walmart with the power to keep low wages and force unpaid overtime.
Market Segmentation: To be of value market segments must be measurable, substantial, accessible, differentiable, and actionable (Kotler & Keller, 2012). Segmentation of demographics for Costco is vast as the current product offerings include all genders, ethnicities, incomes. age groups, and social classes. When considering demographics, it is important to consider the average or typical characteristics of the target market. As mentioned earlier the target market or focus for this company is supplying the small- to medium-sized business and targets the middle- to high-end consumer with its private label brand Kirkland Signature.
Walmart has succeeded in achieving the leading position in the retail industry. Walmart now stands as the biggest retailer in the world. However, the external factors constitute pressure on the company that must be address carefully. By analyzing the five forces of external factors we will define the nature and power of our rival power in the market. The five factors are competitors from rival, potential new entrants, substitute products, supplier bargaining power and customer bargaining power all of these competitive forces affecting Walmart position.
As customer service is essential to the success of any business, this had a significantly noticeable effect on Walmart 's bottom line. Walmart found that only 16 percent of stores were meeting the company’s customer service goals which lead to sales at stores falling for five straight quarters; the company revenue fell in 2015 for the first time in Walmart’s 45 year history as a publicly traded company. Determined to reduce this problem, the management staff at Walmart came up with an idea entirely out of the norm for a business staffed by a low-skilled workforce. The irony is this is a company famous for squeezing pennies so successfully that labor groups accuse it of depressing wages across the American economy. As an efficient,
I. Introduction Walmart Stores, Inc. - the American corporation which was established in 1962, is well-know for the globe’s largest multinational retailer (Walmart 2016). Walmart owns a chain of grocery stores, discount department stores and hypermarkets with about 11,500 retail stores over 28 countries. In 1998, Walmart entered Germany with the acquisition of Wertkauf and Interspar chain (Louisa 2006). Despite having the strongest economy in Europe and the third largest retail market in the world, Germany was not an ideal place for Walmart to achieve its ambition (Knorr and Andt 2003). After nearly a decade struggling to grow, Walmart decided to pull out of German market in 2006 with the loss of one billion dollars (Mark 2006).
