Costco Wholesale Corporation SWOT and PESTLE Analysis

Strength

1. First mover advantage: Costco is the world’s first membership warehouse club. In 1983, the first Costco warehouse location was opened in Seattle (U.S.) and gradually Costco become the first company ever to grow from zero to $3 billion in sales in less than six years. In 2021 Costco featured as the sixth most valuable retail brand in the world, with a brand value of over 37.5 billion U.S. dollars. Costco was able to establish a dominant market with its first mover advantage, deduced primarily from economies of scale and given the colossal capital investment required for this kind of business, the threat of new entrants stands low. In the US, the major competitors operating membership warehouses are Sam's Club and BJ's Wholesale Club, but BJ’s has a relatively lower spread in terms of locations with many of its store food courts being replaced by Dunkin' Donuts kiosks or shops. 2. Operational and supply chain efficiency: Costco’s secret sauce lies in keeping operational expenses very tight. This is primarily achieved by trimming down on overhead costs by virtually cutting down on all the frills and costs associated with conventional sellers including sales team, expensive locations, delivery, billing, lighting and accounts receivable. Lighting costs are minimized on sunny days, as most Costco warehouses operate with skylights. Costco also saves by not stocking extra bags or packing materials and customers are required to carry their own bags or use a shopping cart or empty merchandise shipping boxes. In this way they are able to pass on dramatic savings to their members. The goods are usually bulk-packaged and marketed primarily to large families and businesses. A conventional Costco warehouse carries on average 4,000 distinct products, while a comparable Walmart Retail outlet stocks approximately 140,000 products. If the wholesale price of a product is too high, Costco will refrain from stocking it. Costco’s supply chain is the concept of eliminating fingerprints on the product as they employ the cross-dock distribution (depot) facility. Costco procures the lion’s share of its merchandise directly from the manufacturers and channelizes it through a network of cross-docking facilities which act as vendor consolidation points to transport products in packaged containers to the receiving kiosks. This process brings in freight volume and handling efficiencies, decimating redundant costs associated with conventional multiple-step distribution channels. The remaining section under "Strength" is available only in the 'Complete Report' on purchase.

Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

1. Omni channel opportunities: As per a report by BI Intelligence, Omni channel shoppers spend an average 4% more every time they are in a brick-and-mortar store, and spend 10% more when shopping online. Customers who engage with retailers on multiple channels visited a brick-and-mortar store 23% more often over six months. By 2025, the digital grocery market in the United States will be worth $243 billion. Keeping this scenario in mind, Costco need to adapt to the changing scenario and invest in its Ecommerce. In 2021, e-commerce net sales accounted for only 7% of total net sales of Costco. Costco began testing a system which allows customers to pick up high-value items such as jewelry and laptops, in its warehouses order online. Unlike competitors Walmart and Home Depot, Costco has no “Shop Your Store” options, so shoppers can’t see whether items that show up online are available for purchase in nearby physical locations. In the environment where several superstores are lagging behind due to the convenience of online shopping, Costco is no more a laggard and has started investing in Omni channel. When using an omnichannel strategy, physical stores are becoming critical touchpoints for converting customers. In the post-pandemic world, therefore, omnichannel will be the dominant strategy for brands. The remaining section under "Technological" is available only in the 'Complete Report' on purchase.

Legal

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Environmental

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