The business model of using a membership to allow customers to avail significant discounts has helped Costco to maintain a loyal client base. The retailer is famous for offering unparalleled discounts and promotes a “treasure hunt” shopping environment. This strategy involves offering large discounts on certain items which will be available for a short period of time, and as such increases turnover by volume. Expansion by Costco to foreign countries is giving a boost to their sales and allowing them to benefit from economies of scale and better inventory management. Aggressive expansion plans to increase the number of warehouses to 1,000 in the next ten to twelve years (Audited Financial Statement 2011, 4) will help the company to improve upon its market share.
Despite the large discounts, Costco is known to offer a catalogue that offers a limited range of products, mainly high end, high value products and certain private labels. Unavailability of certain items might force customers to abandon Costco as a preferred retailer.
Costco's business model has the potential to be successful in foreign countries, and the company should further expand its warehouses in foreign countries to tap potential markets. Also the company should look towards increasing its product catalogue and further enhance its online shopping experience to increase turnover and customer satisfaction and retention. ...Show more