Industry, Marketplace & Competitive Situation

Industry, Marketplace, & Competitive Situation

The Industry

Warehouse Clubs and Super-centers

Definition of the Industry

“The industry is made up of large stores that primarily retail a general line of grocery products combined with merchandise items. Warehouse clubs offer customers a wide selection of goods (often in bulk) at discounted prices in exchange for a membership fee that is paid by each customer” (Everett, 2013).

Shape of the Industry

This industry has been one of the fastest growing among retail industries. The growth of the Warehouse Clubs and Super-centers industry has started to slow; however, it is still growing. Memberships of Warehouse clubs are divided into approximately 35% business customers and 65% personal shoppers (Everett, 2013).  

This industry is now approaching its maturity. “The availability of space for new locations has become limited, and the introduction of different product lines has been slow because clubs and super-centers already market a variety of goods. These two factors have created a saturated market, which has slightly slowed the industry’s expansion. Nonetheless, the industry continues to outperform the retail sector as a whole” (Everett, 2013).

Development of the Industry

Current Conditions of Marketplace

Costco's current marketplace conditions have not changed to much over the past couple of years, other than adding different services (Costco Services). Costco added their occidental, pharmacies, and hearing aid centers.  Costco still does not advertise (Costco Wholesale, 2014). By not advertising; Costco is able to save 2 percent of their budget, and invent more towards not only employees pay but even benefits(Costco Wholesale, 2014).

Changes in the Marketplace

Just like any business sometimes there are changes that need to be made. Costco has had to make several changes to their marketplace. One of the major changes that Costco had to make was a small mark-up on their prices. This markup was close to 15 percent on specific products (Lutz, A.). Another change that Costco made was creating internet sales. Costco now has an online store for the convenience of their customers. Another change that Costco has made was to when they increased the price of the membership card. The price of the card is to go up every five years to keep of with the inflation (Kim, S.).

The Marketplace

Costco has many different services that they not only market, market too. Costco is always welcoming new members into their market place. Within that marketplace currently they market to home, business, and life; therefor their target market is directed towards small business owners, large families, and people who look to buy in balk (Costco Wholesale, 2014).

Costco offers many different services within their market place. Those services are; the food court, photo center, optical center, pharmacies, hearing aid centers, auto centers and gas stations (Costco Services). Because Costco offers these different services, they offer a more competitive market place.

COSTCO Competitive Situation

“Wal-Mart isn't a behemoth in every business. Costco is the nation's largest wholesale club operator (ahead of Wal-Mart's SAM'S CLUB) (Hoover’s Inc., 2015). “It operates more than 660 membership warehouse stores. Primarily under the Costco Wholesale banner, it serves more than 71 million members in 40-plus US states, as well as in Australia, Canada, Japan, Mexico, Puerto Rico, South Korea, Taiwan, and the UK. Stores offer discount prices on an average of about 4,000 products (many in bulk packaging), ranging from alcoholic beverages and appliances to fresh food, pharmaceuticals, and tires. Certain club memberships also offer products and services, such as car and home insurance, mortgage and real estate services, and travel packages” (Hoover’s Inc., 2015).

Direct Competitors Include:

Target Corporation, Wal-Mart Stores, Inc., and BJ’s Wholesale Club, Inc.

Direct Competitor Comparison: Yahoo Finance

Indirect Competitors:

Costco indirect competitors include big box stores such as Trader Joe's, Whole Foods, and Amazon.

Whole foods and Trader Joe's attract the same type of customer as Costco, especially their grocery customer.  Trader Joe’s and Whole Foods cannot compete with the pricing that Costco is able to offer, but they are trying to package special items in bulk.

Whole Foods Business Summary (Yahoo Finance)

Whole Foods Market, Inc. operates as a retailer of natural and organic foods. The company’s stores offer produce and floral, grocery, meat, seafood, bakery, prepared foods and catering, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins, and body care products, as well as lifestyle products, including books, pet products, and household products. As of November 5, 2014, the company had 401 stores in the United States, Canada, and the United Kingdom. Whole Foods Market, Inc. was founded in 1978 and is headquartered in Austin, Texas.

Trader Joes is a privately held Company. Costco offers many of the same grocery items available in organic, in bulk at a reduced price.  Costco also competes indirectly with Home Depot, Lowe's, in the home improvement, grill, appliance, outdoor patio department. 

Industry References:

BJ’s. (2015). Company Background. BJ’s At A Glance. Retrieved from https://www.bjs.com/company-background.content.about_background.A.about

Costco. (2015). History. About Us. Retrieved from http://www.costco.com.au/About/History.shtml

Everett, N. (2013, June). In the club: Major players will diversify, but rising sentiment will keep revenue stable. IBISWorld Industry Report 45291 Warehouse Clubs & Supercenters in the US. Downloaded from https://www.academia.edu/7714555/IBISWorld_Industry_Report_45291_Warehouse_Clubs_and_Supercenters_in_the_US

Walmart. (2015). History Timeline. Our Story. Retrieved from http://corporate.walmart.com/our-story/history/history-timeline

Marketplace References:

Costco services. (n.d.). Flexible Spending Account. Retrieved April 22, 2015, from http://www.costco.com/services.html

Costco Wholesale. (2015, August 31). COST 10K 2014. Retrieved April 22, 2015, from http://www.sec.gov/Archives/edgar/data/909832/000090983214000021/cost10k2014.

htm#sA5709D9D8C998CE83EF486675C5F199C

Kim, S. (2011, October 12). Costco Increases Membership Fee; Wholesale Clubs Comparison. Retrieved April 22, 2015, from http://abcnews.go.com/blogs/business/2011/10/costco-increases-membership-fee-wholesale-clubs-comparison/

Lutz, A. (2013, March 7). Costco's Unorthodox Strategy To Survive The Big Box Apocalypse. Retrieved April 22, 2015, from http://www.businessinsider.com/costcos-unorthodox-business-strategy-2013-3#costco-doesnt-advertise-6

Competitive Situation References:

Commodity Systems, Inc. (2015, April 17). Costco Wholesale Corporation (COST). Retrieved from finance.yahoo.com: http://finance.yahoo.com/q/co?s=COST

Hoover’s Inc. (2015). COSTCO WHOLESALE CORPORATION Competition. Retrieved April 16, 2015, from www.hoovers.com: http://www.hoovers.com/company-information/cs/competition.COSTCO_WHOLESALE_CORPORATION.9acf2327527015f2.html