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Complete SWOT Analysis of Costco | IIDE

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The company Costco was the fifth-largest retailer in the world as of 2020. Costco is an American multinational company that operates a series of member-only retail stores. Costco is one of the largest world retailers of organic foods,  prime beef, wine, and rotisserie chicken, etc. Its service is available in the United States, United Kingdom, Canada, Australia, Japan, Mexico, Taiwan, Spain, China, South Korea, France, and Iceland. To understand the company’s business pattern and to recommend a solution, we need to compute the SWOT analysis of Costco.

The SWOT analysis of Costco will help to have an insight into the past strategies of the company and to plan the future strategy. It examines the internal as well as external factors that are relevant to the business. 

Costco’s SWOT analysis addresses the most significant issues that a company should take into account while forming the futuristic strategy formulation that will contribute to Costco’s good position in the global retail market.

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About CostcoCostco Logo | SWOT Analysis of Costco | IIDE

Costco is the world’s leading retailer and wholesale company. Costco provides membership options to customers and introduces the best deals to customers for different brands. Costco Wholesale Corporation was founded by James Sinegal & Jeffrey H. Brotman, in 1983. Currently, the company is improving its tactics to increase financial growth. The total revenue of Costco is $138,434 million. The main focus of the company is to sell the items at a low price, in bulk quantity, and to provide the customer with the best services. 

Costco’s timeline is as follows:

  • 1983 – Establishment of 1st Costco retail house
  • 1993 – Merging of Costco and Price Club 
  • 1997 – Changed the name to Costco Wholesale Corporation
  • 2014 – Becomes the 3rd largest retailer in the US
  • 2016 – 29 more new locations were opened
  • 2019 – First outlet in China
  • 2020 – Increased members up to 105.5 million 

 

Competitors of Costco

Costco Warehouse | SWOT Analysis of Costco | IIDE

The competitors in the market help you keep going and innovating with your strategies to improve the revenue. These competitors sometimes become challenging and understanding the tactics of competitors also helps in the formation of a defeatless plan.

 

1. Walmart Inc.

One of the main competitors of Costco is Walmart. It holds a really good position in the global market. Walmart offers a variety of essential items including bakery items, food, grocery, meat etc. It provides private labelled as well as brand labelled goods. Walmart provides various services like financial services, money orders, prepaid cards, check cashing and payment of bills. Walmart has more net revenue than Costo even though Costo provides high-quality products.

 

2. Amazon

Founded in 1994, Amazon has become the most widespread e-commerce business and online service. It offers 146 private labelled brands and 60 exclusive brands to its customers. It continues to reach and expand worldwide through a remarkable online marketing strategy.

 

3. The Kroger Company

Established in 1883 in Ohio, The Kroger Company is one of the biggest retailers in the world. They have supermarkets in 35 states of the US. In 2018, it collaborated with Drone Express to implement the technological way of delivering grocery items to consumers with the help of drones and look forward to expanding this method in future.

 

4. Target

Target was founded in 1902, another competitor of Costco. It has more than 1000 operational stores in the US and has more than 36000 employees across the US. Even though Target and Costo share similar services, Target’s initiatives prove to be more impactful and effective. The future gross margin of Target is approximately 29 per cent while Costco’s gross margin is 13 per cent only.

 

5. Sam’s Club

Sam’s Club is owned by Walmart and provides a wide range of products that are similar to the products of Costco. The company’s digital sales are quite strong and focus on Electronic, Appliances and Home improvement equipment. It also sells bulk groceries online and has a good market in e-commerce. 

 

6. Walgreens Boot Alliance

WBA was founded in 1901, primarily focused on drug store services in the US and Europe. Every year it covers more than 25000 centres of distribution to provide its services to pharmacies, Healthcare centres, Doctors etc. It highly depends on the medical services, which is an advantage for Costco. In 2020, its sales dropped by 28% leading to the loss of $1.71 billion.

 

7. Home Depot

It is a leading provider of tools in Home construction. It was established in 1978. It offers every tool essential for home improvement. In 2020, the sales of Home Depot increased because of its integrated strategy. Home Depot gives customers what they need more easily and productively. It has more than 2300 stores located in the US, Canada and Mexico.

 

8. Tesco

Tesco is a British Supermarket organisation, which was founded in 1919. It is one of the most popular supermarket chains in Europe. It operates in a similar fashion as Costco but customers don’t need membership cards to buy goods at Tesco and this is the advantage of Tesco, being less restrictive towards customers.

 

SWOT Analysis of Costco

Costco Supermarket | SWOT Analysis of Costco | IIDE

The Swot analysis of Costo will help the company to resist the competition and make robust strategies that will lead to an increase in revenue. Costco’s competitive analysis will help you analyze the strong and weak points of Costco and how this analysis will help the company to grow exponentially in the future.

 

1. Strengths of Costco

Costco’s best practices in business define its strength. Only innovation can help the company to make progress. Based on the SWOT Analysis of Costco, the strengths can be listed below:

  • Costco sells its high-quality products at a low price, maintaining the low-price strategy.
  • Costco has created a good awareness among the people about their brand and expanded their business by establishing retail houses at various locations.
  • They have created a strong market presence and do not unnecessarily waste money on advertisements.
  • The financial growth of Costco increased extensively and focused on a measure like membership, that makes the consumer feel special.
  • The company follows a four-fold approach to maintain sustainability and to have an environmentally responsible business.
  • The optimization of processes to achieve minimum cost and maximum profit.
  • Incentives and impressive value proposition to the customers. 

 

2. Weaknesses of Costco

To have the perfect plan we need to know the strengths as well as weaknesses of the firm. Costco’s weaknesses can be calculated and used to develop effective strategies.

  • The consumer can only purchase the goods in bulk, individual choices are limited.
  • The availability of Costo warehouses is less as compared to different other retail shops.
  • Due to the low-price strategy, the profit margin is low.
  • The majority of warehouses are established in the USA and Canada, this makes the brand dependent on these two major sources of revenue.
  • The product choices are limited and lack diversity.
  • Product recall affects the reputation of the business.

 

3. Opportunities of Costco

The way the company assesses its performance, makes them avail the benefit of different opportunities. The company can decide to pair the opportunities with their strengths to ensure the hike in the profit.

  • The Costco Wholesale Corporation can increase its online presence as most people are dependent on E-commerce.
  • The company can invest in digital marketing for better reach and attract new consumers.
  • Since a huge number of people are inclined towards healthy eating, the company should focus on making healthy organic products.
  • Costco can expand its business by opening more warehouses.
  • Customer-focused services can be provided.
  • Acquiring lower chains to help the organization grow globally.

 

4. Threats of Costco

Threats of Cosco define the vulnerability of the company, which may harm its growth if ignored consistently.

  • Costco came into controversies when it labelled the Bible as a fictional book.
  • The membership fees are small but not everyone is willing to pay, thus reducing potential members.
  • The economical issue it faced was a lower sales problem.
  • Online marketing competition is increasing.
  • Government policies and tax procedures can have an impact on the margins.
  • Brand switching can be another threat.

 

Possible Solutions or Strategy

The result of this SWOT analysis can be taken as this company has the most loyal consumer group and it has the great potential to grow and increase in revenue, if

  1. Starting to invest in online marketing campaigns.
  2. Allows new members to easily join them by making them understand the various benefits of the membership.
  3. It can use the opportunity provided by E-commerce to reach more people with a diverse range of products.
  4. Costco can expand its sector by innovative new technologies that can help people and interest them.
  5. Increase the availability of its warehouses in different areas for different sets of the target audience

 

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Conclusion

 

SWOT analysis of Costco Wholesale Corporation shows that the company is doing well in the market and adopting changes for better results. The company can build an efficient plan for the future to take Costco to new heights and give tough competition to their competitors. 

Hope this SWOT analysis of Costco wholesale was informative for you. If you got any kind of suggestions, let us know in the comment section.

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Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs......[Read full bio]

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