Costco Wholesale Corporation is an American operator of warehouse clubs (hypermarkets), renowned for its membership-based business model: only Costco members can purchase items from the retailer's assortment of approximately <4,000 SKUs.
Founded in 1983 by Jim Sinegal and Jeffrey Brotman, Costco has grown over 40 years to nearly 900 locations worldwide across 14 countries. This expansion has propelled it to become the 20th largest publicly traded company globally by market capitalization ($475 billion as of February 17, 2025). Costco has positioned itself as the largest and most successful warehouse club in the world.
With its bulk sales, competitive pricing, and carefully curated selection of consumer products—ranging from everyday groceries and necessities to luxury items—Costco has attracted millions of members worldwide, reaching 76.2 million by the end of FY2024.
Costco distinguishes itself by passing a significant portion of its economies of scale back to its members through consistently low product prices, maintaining a markup of no more than 14% (15% for Costco's private label Kirkland Signature), with a target of 11% on Costco’s total cost of goods sold.
Maintaining these razor-thin margins is made possible by a combination of Costco’s strong customer loyalty and trust, operational efficiency, and its commitment to quality. Over the past 12 years, the company has increased its revenue from $99 billion to $254 billion, its membership base from 36.9 million to 76.2 million, and its number of warehouses from 622 to 897 (2012 and 2024, respectively).
This Deep Dive analysis will explore the key drivers behind Costco’s success—offering insights for quality-focused investors in their pursuit of the top <0.1% companies worldwide.
This Deep Dive begins at the beginning: Costco's origins and the entrepreneurial lessons from the key players who contributed to it. It continues with Costco's strategy and business model, competitive landscape, a breakdown of the company's finances, Costco's culture and management, as well as the risks, a moat analysis, and an attempt at valuation. It concludes with a final assessment.
Content:
- Author: Eelze Pieters
- Language: English
- Format: PDF
- Number of Pages: 60 (A4)
- Publication Date: February 18, 2025
- With Illustrations
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