Another good quality - they close early on Sundays and are always closed on holidays. If your product is good, you don't have to work 24/7 and beg the customers to come. Happy employees in a good thing.

Wrong - per the 10k - Gross margin was $6.64 billion in fiscal 2007 or 10.52% of net sales, compared to $6.22 billion or 10.55% of net sales in fiscal 2006. Costco has to cover all of their expenses with that 10.52% (like rent, insurance, payroll, etc.)

Most recent 10K
http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=5493240-1010-334824&type=sect&dcn=0001193125-07-225805


Macy's Gross Margin: Cost of sales was $15,677 million or 59.6% of net sales for 2007, compared to $16,019 million or 59.4% of net sales for 2006, a decrease of $342 million. (for the non finance people - that's a gross margin of 40.4%)

http://yahoo.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=5838927-1140-431572&type=sect&TabIndex=2&companyid=10592&ppu=%2 52fdefault.aspx%253fcik%253d794367

That definately does not prove that Costco is for the rich! Go shop there, look at the customer - some are rich, many are not. Besides, what's wrong with being rich?

Obviously, I'm a fan!

Awright, fellas. I just BBQ-ed and handily devoured the most amazing 24-ounce Costco Sirloin (rare @5 min. per side), with no rub or sauce or crap like that. Just some salt and garlic powder. Umm...umm...

I'm too full for dessert, which is supposed to be 72 virgins. :D

Costco sells them in bulk, too? Gotta start going on the weekends when they demo all the products.

The remaining $0.3 billion are from hotdogs :)

They do make a modest gross margin on their goods; but it gets eaten up by operating the warehouses, paying decent wages and benefits etc. No doubt, to stay afloat, they do have to run lean and mean, buy low and sell a tad bit higher.

But membership fees is where the cream is, COGS on that is pratically zero. I pay them $50 a year to buy stuff at cost, works for me for the last 10+ years.


added: A little trivia. Costco is headquartered in Issaquah WA, it is a suburb of Seattle. Kirkland is another Suburb of Seattle that Costco used to be HQ'ed at, thus the house brand.

Kirkland rocks (the products - don't know anything about the town).

I lived in Kirkland as a kid, for a while. Nice place.

I don't think I've seen a single person in the Costco here who could even be remotely described as "rich". What I do see are many white, black and hispanic familes buying in bulk (usually with lots of kids in tow). The cars out front are beat up Toyotas and old minivans. On a number of occassions I've seen the Amish in ours- buying in bulk and dressed traditionally.

I don't know if there are statistics on the average wealth of a Costco buyer but I guarantee it ain't rich.

BTW ours is pretty empty on weekdays too. On the weekends it's a madhouse.

If you want to see where the rich shop for groceries go to Whole Foods.

Maybe you mean who outwardly appears rich. Looks can be deceiving, so one never knows for sure. It is entirely possible they attract wealthy people who do not like to look wealthy. I know a few of those. They all go to COSTCO.

I audited Costco early in my career. I'm talking mid 80's when they had 12 warehouses. We took them public. I've been a loyal customer ever since.

• Yes, they charge to be a member but their margins are the thinnest across the board that they can maintain and sustain the business.
• They are non union but maintain a union like pay structure and have great employee benefits. They promote from within and treat their employees well. Look at the name badges some time. Note how many people have been there for years. Cashiers with 8-10 years of service. I know people from their accounting dept. who've been there since the early 80's.
• Their executive team is largely the same as it was 20 years ago. Top notch people who don't gouge their shareholders with multi million dollar pay packages. Yes, they are rich, rich from over 20 years of doing things the right way and long term stock appreciation.
• They sell quality stuff. Yes, a lot of it you don't need but you don't have to buy it.
• Most of their business is actually wholesale, over 60% to small business owners buying restaurant supplies, etc.

Their business model is somewhat recession proof and that has been part of their plan since day one. When people are hurting financially, they'll look to save money and go to Costco. When things are going well, they want the $500 Dyson and expensive BBQ, also going to Costco.

And the CEO refuses to accept more than 10x (IIRC) the lowest paid employee... That alone gives me a warm fuzzy feeling.

And Sam Walton used to drive around visiting his WalMart stores in his old trusty red/white Ford pickup, and walk through the stores unannounced in his coveralls. I have an uncle who used to work security for them who said he saw him a couple of times.

I buy big ticket stuff at Costco, but it ends up being only a few times a year. I bought a Plasma TV, Sony handycam, and computer equipment. Otherwise, it was pretty much underwear, steak, and books. I'd say on a typical Costco trip I might spend less than $100.

I spend on average $150 on a trip to Target because that is where I do my real shopping for toilet paper, bathroom supplies, household stuff.

Groceries probably the same amount every week and a half or so, to two weeks.

Macy's and Gottschalks are an entirely different thing.
I shudder, literally, to think about how much I have spent at either store. It's not unusual to get the woman in yer life a nice purse. A large D&B is about $450, same for Coach. A suit for yourself? $1K. A cheap visit to the Chanel counter would be $250. I bought 3 coats there last year for the little lady. You simply do not do that kind of shopping at Costco, Sams Club, Target, or Walmart.

I don't do that kind of shopping at any store.

Is $50,000 a year "rich?"

Glad to settle that argument.

Costco Does Organic Homework
The chain’s managers are learning all they can about organic food

Vicky Uhland

Items that might be found in a Costco Wholesale Corp. merchandising manager’s office:



Regional sales spreadsheets
Distribution data
Family photo
Nutrient breakdowns for organic blueberries
Scientific study on the lifespan of DDT in soil.

Club stores are one of the fastest-growing channels for natural and organic foods, and Costco executives are making sure they don’t miss out on the phenomenon. “We’re getting more customer demand for products that would be perceived to be free of those bad things that are put in from an industrial standpoint, so we’re trying to become students of organics, looking at what are the quality attributes of an organic product,” says Jeff Lyons, Costco vice president of fresh foods and corporate foods.

Club stores, with their giant cans of spaghetti sauce and bags of chips big enough to satiate a football fan for the entire preseason, aren’t an obvious option for discerning organics shoppers. But according to The Hartman Group’s Organic Food & Beverage Trends 2004 report, 13 percent of consumers shopped for organic items in club stores in 2003, up from 4 percent in 2000. And a recent ACNielsen survey found that 35 percent of “heavy shoppers” at club stores report that they are affluent, and another 37 percent say they’re “living comfortably.”

“The average income for a Costco member is about $50,000 a year, and 90 percent own their own home,” says Jon Hauptman, vice president of Barrington, Ill.-based Willard Bishop Consulting. “The club demographic is very favorable to natural and organic products because of that higher-than-average income.”

But naturals and organics shoppers have more in common than their bulging wallets. Lyons believes they want to be reassured they’re getting food that truly is good for them and the environment. That’s why he and Costco regional food department managers are studying up on organics. “We don’t want it to be just a marketing ploy that we carry organics. We have a very astute membership, and they read package [labels]. What if we’re not delivering what people expect from organics?”

In some cases, the fact that a product carries the U.S. Department of Agriculture organic seal isn’t enough, Lyons says. “I don’t care that they may have the stamp—I want to know what the processes are that validate their claims.” He’s asked growers how long their land has been fallow and if they’ve ever farmed with chemicals, because he’s read studies that DDT and Alar can remain in the soil for 10 years.

On the other hand, he notes, “Sometimes pesticides are better than the residue of an insect or a bird on a plant. The key is that we want a good, clean washing process. We want the product as food-safe as possible.”

Issaquah, Wash.-based Costco doesn’t have a list of uniform standards or questions for organic growers and suppliers. “I could see us doing that in the future, but now we need more education,” Lyons says.

Club stores’ liberal sampling policy also can help acquaint customers with unfamiliar natural or organic brands.

Costco caters to the organic consumer’s goal of buying fresh, local products by purchasing 60 percent of its deli food regionally, Lyons says. Also, “We buy as close to the resource as possible to keep transportation costs down.” But club stores’ need for large amounts of stock can play havoc with that plan. “The problem is replenishment. We can run out of an item if it’s popular. As organic companies get bigger and bigger, there will be more stock.”

For fresh foods that are carried nationally, such as salad greens or baby spinach, Costco contracts directly with organic growers. “We give them a list of our needs and they plant to our specifications,” Lyons says.

That strategy can help cut down on the cost of organic items. Despite Costco shoppers’ affluence, a $2 or more markup on an organic food versus conventional might be too much, Lyons says. “Fifty cents more is a more fair value for our consumer.”

When it comes to marketing and displaying those organic and natural foods, Costco doesn’t do anything differently than it does for conventional foods, Lyons says. “It’s not a process of advocacy for us, of ‘Oh, look at us, we have organics.’” But Hauptman of Willard Bishop notes that the club shopping experience already has aspects favorable to organic products marketing.

“Club buyers are predisposed to trying new products because they’re used to being exposed to products they might not have seen before. Club stores are a place to go and treasure hunt—you’re not sure what you see will be there the next time. Many purchases are made on impulse.”

Club stores’ liberal sampling policy also can help acquaint customers with unfamiliar natural or organic brands, Hauptman says.

But if that small, unfamiliar brand isn’t sampled, organics buyers might never see it in the vast number of rows and shelves that make up a club store. Products need strong, visual packaging that can attract buyers from a distance, Hauptman says. He calls it the “5 by 5 rule”—an item should convey its value in 5 seconds from at least 5 feet away.

Organic and natural products also need to be delivered on pallets or, in the case of produce, in 3-pound bags, to reduce the need for hand stocking and thus save labor costs, Hauptman says.

There's nothing wrong with the millionair next door lifestyle...Maybe people who shop at Costco are rich but maybe they are rich because they shop at Costco.

I also shop at Whole Foods - usually for dinner on the way home from work and it is definately pricy - sometimes I wish it wasn't a couple of blocks from home. Last night I saw a small tub of organic, natural butter for $14 and I thought (you've got to be kidding). I buy my butter at Costco.

Costco is not fro everyone but if it closed, myself and a whole lot of other people would be seriously depressed.

Tidybuoy I compeletly agree- I was just trying to dispel the ridiculous notion that Costco is for the "rich".

I agree. Costco seems to attract different types of shoppers. Those with large families, those with businesses, and those who can afford to buy in bulk. I've seen Escalades parked beside Golfs and pickup trucks and minivans.

What I wonder is if the vast demographic/economic appeal of Costco was something planned into the business model from day one, or just luck of being who Costco is.

+1000000000000000 I can't imagine how my wife would chew my ass if I bought her a $500 purse. Yeah, I'm a lucky guy........

I can't fathom the idea of paying for the privilege of spending money in someone's "club".

It's similar to these stupid "club cards" that a lot of the big chain supermarkets do now (Albertson's Ralphs, etc). I don't shop there and I certainly don't use those cards. Either give me the good price or don't. Don't think you're going to entice me to participate in some stupid glorified phishing scam by giving you my personal information to sell to a bunch of direct marketers in exchange for $2.00 off a box of rubbers. I'll go to Trader Joe's or somewhere else to get my groceries and whatever else for just as good a price (or better, in some cases) without the attitude, B.S. and attitude.

Costco is kinda' like glorified Wal-Mart, IMHO. Bleh. Even if they dropped the membership fee thing and card thing I probably wouldn't go there but maybe once every year or two.

I don't see a lot of "poor" people at Costco either though. Costco caters to all demographics, but the really lower income folks tend not to want to pay the membership fee, and they buy in smaller quantities at a time, even if it costs more per unit.

Go to a "Walmarts" and stand in line there, then go to a Costco. All I'm sayin is that it's is a slightly higher demographic at Costco. Maybe not across the board, but in general, yes. Costco is not exclusive to rich. But rich people hate to get ripped off even more than poor people. I can't remember the last time I actually shopped at Whole Foods. I might have bought a sandwich or something, but I do not like to buy crab at $7/pound ever. Probably the only thing Whole Foods has that would interest me is their produce, and that is only in the summer when you can get local stone fruit, tomatoes, and greens at the Farmer's Market for less. I think Whole Foods caters to the really upper or upper middle class exclusively. Unless maybe you're a first generation immigrant, are accustomed to paying a large part of your income toward food, and it is the Holiday season and family is coming over.

Ok so you are a lucky guy, wife says do not buy me a purse. You score there because she doesn't want a purse, but she wants something though, all women do, and that money is going to go to some splurge item. And how much money have you spent on your own toys? How much have you spent at Pelican? On car lease payments? Travel? We shop at bargain retail places so we have more to spend to luxury stuff. The more you spend on everyday stuff, the less you have to spend on luxury stuff, that was my point.