Background Information About Costco Wholesale Corporation
Costco was the world’s second-largest retailer, Costco was the largest retailer of option in the world with organic food, rotisserie chicken, premium beef, and wine. Costco has the core competencies that give it a competitive advantage over its competition. Costco has defined its business model of services and quality goods at a very low-cost supplier. Costco management has designed, developed and implemented various strategies focused on this framework, enabling Costco to have a very large rate of growth in market share, sales, balances, etc. The main competitive advantages of Costco are economies of scale, reduced reliance on profit from goods sales and more concentrate on profits from membership fees and ancillary department sales and services.
Costco’s s marketing strategies are providing high-quality products at the lowest price and charge all customers’ a membership fee. The marketing mix (4Ps) of Costco successfully supports the company’s efforts to maintain one of the global retail market’s top positions. (see Appendix for full trans)
Unique Value – Membership
Costco’s membership fee is very profitable. Costco operates a chain of membership-only warehouse clubs. Customers must join the membership before to shop in Costco. Customers need to show the membership card when they enter and purchase in Costco. Costco keeps costs to a minimum and sells high-quality products at the lowest price to attract customers to join the membership. Receive annual fees every year to make a profit.
Recommendation of Marketing Plan
Considering the product’s environmental sensitivity, the level of product saturation in the new potential market and other possible contextual factors. Hong Kong is a new potential market for Costco.
In segmentation, geographic segmentation and behavioral segmentation will be considered. First, for the geographic segmentation, high-purchasing power residential areas, commercial areas, and some prosperous areas such as Central and Causeway Bay. These are the areas where Costco can be set up. Second, for the behavioral segmentation, Costco should intend to focus on consumers who like to buy foreign imported goods.
For targeting, upper-middle-income consumer groups are the target customer of Costco. The issuance of membership cards as a market segment is divided into business members and gold star members. Business member is for the company management or director of Nonprofit Organization. Gold star member is for adult consumers.
About the positioning, Costco imports large quantities of products to introduce unique products at the lowest price. Also, in order to attract the general consumer market, Costco should sell retail goods, provide small package items, offer retail goods for consumers to choose. However, based on cost considerations, the price is slightly higher than bulk packaging sales.
Costco imports goods directly. They are the importers, it eliminates the price difference between suppliers and importers, so the products are selling at a low price. In the crowded market, Costco has differentiated itself by offering bulk products at discounted prices. There are many kinds of products imported from abroad, offering more options to customers. Costco selling their own production, it reduces the purchasing cost. Also, Costco provides products tasting to attract consumers to buy.
Due to the membership system, member need to pay the membership fee to shop, and member needs to pay an annual fee to renew the membership, Costco will be lost non-member customers. Costco packs products into bulk packages in order to save costs, but the packaging is too large, it is not suitable for a small family. Although customers have the option to buy most goods at Costco, the choice is rather limited compared to other retailers. The total number of products circulating is 4000. When you hear that Walmart holds over 50,000 items, it sounds impressive.
By eCommerce, Costco is creating a stronger presence. And with all that Costco has to offer, building a strong community of online shoppers will be easier for it. It also makes it possible for Costco to sell more items without placing them in physical stores. Costco can also do something to stand out by offering its own production. Also, most people admire imported goods, their acceptance of Western culture has also increased sharply. It is a good chance to set up Costco in Hong Kong.
The competition is rising. Costco is used to compete with the big guys like Walmart, but the market share of Costco is still limited. Now it places pressure on Costco with these same guys focusing on eCommerce. Although the price of the Costco products is very low, if Costco wants to enter the market in Hong Kong, they have to compete with local supermarkets and department stores.
The inherent risk of international retail expansion is that retailers cannot adapt to different social and cultural environments. If retailers are unable to adapt to the needs of new consumers, they may lose sales and customer retention. So, Costco should adopt Global localization when they enter into Hong Kong market. Hong Kong people not used to buy bulk package products, they can shop in the supermarket and department store anytime, they do not need to buy food for a week at a time. Also, Costco could provide some products with Hong Kong culture only sell in Hong Kong to attract customers to consume in Costco.