Reflection Essay on Costco

Over the years retail has been developed currently into a new
dimension, the fact that the new era of super markets has seen a
very big impact in the lives of the average consumer. Costco is one
such company, which has been able to bring about such in the lives
of the average consumer.
Rather than being called a retailer, due to the sheer magnitude of
the operations Costco has been called a wholesale club where every
person has to become a member to purchase items from their
outlets. The magnitude of operations of Costco has been able
achieve has been primarily by maintaining very low margins and
churning out as much inventory turnover as possible. This shows
that Costco as a company has been able to make significant
contribution to the cost efficiency and distributional efficiencies.
To bring able differentiation in pricing in comparison with its
competitors Costco has resorted to ordering many items in bulk
packaging. This reduces cost of items compared to other retailers
(like Wal-Mart, BJs, SAMs Club, etc) and there giving items a more
attractive price point (example selling a box of 30 bars of KITKAT
Chunky for $20 averaging $1.5/bar, rather than selling individually
for $1.8) this helps to bring about more and more cost efficiency in a
product. At the same time selling fewer SKUs of products has also
been a very instrumental move on the part of Costco compared to
its consumers, which helps bring about cost efficiency for producers
and there by a lower cost for Costco.
The above two strategies to bring about efficiency help put Costco
in a commanding brand position, and thereby helps a company like
it to extend its product lines. This thereby helps us to understand
the qualitative aspects behind Costcos growth.
Analysis the Costcos quantitative growth we have in the study a
small snapshot about the companys financials. Which has seen
tremendous growth from 1997 to 2001. Where the company
experienced huge growth in sales and subsequent increasing value
of assets in the balance sheet. A good determinant of the
representation of the increase in sales with respect to increase in
assets is the asset turnover ratio or Sales/Total Assets has not seen
significant improvement over this period of time( mainly because of
the technology bubble which had burst in early 2000 and didnt not
give any impetus for the subsequent years) . On the quantitative
analysis of the company other ratios like current ratio , leverage
ratio and equity ratio show a good picture of how Costcos has been
able to maintain efficiency even while it has been growing.