Rapaport Magazine
Big Box Chain Retailers


999 Lake Drive
Issaquah, Washington 98027
President and CEO: Craig Jelinek
Executive Vice President and Chief Financial Officer (CFO): Richard A. Galanti
Fiscal 2012 Sales: $97.10 billion
Fiscal 2012 profit: $1.71 billion
Advertising Spend
   While marketing and advertising expenses were included in the company’s $9.5 billion SG&A costs, Costco is known to have one of the smallest advertising budgets of all warehouse clubs in the U.S. Its marketing expenses are limited to warehouse opening announcements, occasional direct mail, member publications, such as The Costco Connection, coupon mailers and weekly emails.

   Costco Wholesale Corporation (Costco) is a membership-only warehouse retailer that advertises “one of the largest and most exclusive product category selections to be found under a single roof.” Merchandise categories for Costco include: groceries, candy, appliances, television and media, automotive supplies, tires, toys, hardware, sporting goods, jewelry, watches, cameras, books, housewares, apparel, health and beauty aids, tobacco, furniture, office supplies and office equipment.
   Costco also has a proprietary store brand called Kirkland Signatures and a manufacturing arm called Costco Wholesale Industries, which specializes in special food packaging, optical laboratories, meat processing and jewelry distribution.
   As of December 2012, Costco had 67 million members, including 6.4 million businesses; 622 warehouses, 448 of which are located in the U.S. and the others spread across Canada, Mexico, U.K., Taiwan, Korea, Japan and Australia.
   Costco has three membership options — Gold Star, Executive and Business. Depending on the membership chosen, one can not only purchase the warehouse’s merchandise, but also obtain loans; auto, home and health insurance policies; business services; travel packages and high-yield saving accounts, 401(k) plans and other financial accounts at discounted rates.
   Due to its membership fees, the quality of its goods and its limited brand diversity, Costco has been labeled the “Anti-Walmart.” Its shoppers are also fairly distinguishable from those at discount retailers due to their high average median income of $85,000.
   In his 2012 letter to share holders, Costco President and CEO Jelenik noted that increasing sales and the loyalty of Costco members are critical to the future successes of the company. He also lauded Costco’s performance in a tough market, stating “Despite an environment of ongoing economic challenges, and an ever-changing, but always fierce, competitive landscape, our company achieved record sales and earnings for the third consecutive year.”

   Costco sells a variety of diamond, gemstone, precious metal and pearl jewelry in most of its warehouses, including rings, earrings, watches, necklaces and bracelets, as well as bridal jewelry. While Costco does not release information on jewelry sales specifically, it did note that the jewelry category accounted for less than 10 percent of the company’s sales in fiscal 2012.
   Costco’s jewelry offerings cover a wide range of price points from $50 to almost $100,000. The warehouse club also offers a small “exclusive selection” of jewelry priced above $100,000 online, but these items cannot be purchased directly though the Costco website, only by contacting Costco representatives.
   All of Costco’s jewelry items containing a diamond 1 carat or larger come with an International Gemological Institute (IGI) appraisal, while jewelry items containing a diamond 1.25 carat or larger come with a Gemological Institute of America (GIA) diamond grading report, as well as an IGI appraisal. Unique and one-of-a-kind jewelry items come with both documents, regardless of their carat weight. The company says that all of the diamonds in its jewelry are from “closely monitored legal channels set forth by the Kimberley Process.” 

Article from the Rapaport Magazine - June 2013. To subscribe click here.

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