The Key Trend in Retailer Industry
Costco Wholesale Corporation (CWC) is the “nation’s largest wholesale club operator” (Hoover’s, Inc., 2016, para. 1), and its sphere of activities can be termed as “retail” (Forbes, 2016). In the area, one of the key trends that all the modern retailers have to correspond to is the adoption of contemporary technologies in the sphere of customer service, in particular, the e-commerce.
Fortune (2016) terms CWC a “laggard” in this respect (para. 1). Value Line analyst Dalavagas (2015) puts it differently: he suggests that CWC is oriented towards baby boomers who are less interested in technology, which may be considered a kind of inertia for an old and reputable retailer. In any case, the lack of response to the e-commerce development is an issue that turns into an external threat as the competitors of the company employ it (Fortune, 2016).
Even though in 2014, the National Retail Federation (2014) ranked CWC number three, CWC is not a monopolist. Hoovers, Inc. (2016) suggests that CWC’s primary competitor is the Wal-Mart’s Sam’s Club, and the competition between the two is tight. For the time being, CWC is outperforming Sam’s (Fortune, 2016), but Sam’s is looking for opportunities to change the situation.
For example, the recent CWC credit card swap (which involved breaking the partnership with American Express and choosing Visa instead) led to many customers being unable to use their card and having to change it. Wal-Mart responded by offering to accept Costco membership cards at Sam’s (Farber, 2016). The competition between the two clubs is tough, and this threat is being intensified by the issues that CWC has with e-commerce.
However, it should be pointed out that e-commerce remains an opportunity as well. This age is the age of technology; the Millennials comprise a large part of the current market’s consumers, and they are very technology-savvy (Loeb, 2016); the following generations are even more dependent on it. Generations X and Y regard e-commerce as a definite advantage of a retailer (Dalavagas, 2015). Apart from that, technology is an opportunity in itself; it is being developed for the sake of the improvement of the quality, speed, convenience of the service. In other words, while the current CWC behavior turns the trend of e-commerce into a threat, it can be viewed as an opportunity if CWC ceases “lagging” behind.
Internal Strengths and Weaknesses
CWC strengths include its size, age, and experience. CWC was founded in 1993 to pioneer the concept of a membership warehouse, and in 2014, it had 671 warehouses, the majority of which was located in the US; also, it was represented in Canada, Mexico, UK, Japan, Korea, Taiwan, Australia, and Spain (Costco Wholesale Corporation [CWC], 2015, p. 2).
CWC is a pioneer in the market and a well-known brand that guarantees a certain level of quality. Another significant strength is the company’s ability to lower the prices, which makes it more competitive (CWC, 2015), and the store placement: it can be stated that CWC retail locations exist in affluent areas (Fortune, 2016).
It may also be suggested that the reputation of CWC corresponds to its size and experience. Fortune (2016) features CWC in three of its lists, including the World’s Most Admired Companies (CWC is ranked number twelve). Also, Fortune (2016) termed CWC’s Kirkland store brand a “cash cow that is only growing in popularity” (para. 1). However, CWC’s reputation depends on those of its suppliers and can be endangered by them.
An example of such a situation is the Listeria outbreak caused by CRF Frozen Foods in CWC (Addady, 2016). This possibility of being compromised can be considered CWC’s internal weakness. Apart from that, for the time being, CWC remains a primarily American retailer with about 70% of its locations remaining in the US (CWC, 2015). However, this weakness is likely to be eliminated in the future: CWC has the intent and the resources for international expansion, which is why the issue can be turned into an opportunity.
References
Addady, M. (2016, June 27). This Frozen Food Company Can’t Figure Out What Caused a Massive Listeria Outbreak. Fortune.
Costco Wholesale Corporation. (2015). Annual Report 2014.
Dalavagas, I. (2015). SWOT Analysis: Costco Wholesale Corporation.
Farber, M. (2016, June 28). Sam’s Club Takes Advantage of Costco’s Disastrous Credit Card Swap. Fortune.
Fortune. (2016). Costco.
Hoovers, Inc. (2016). Costco: Competition.
Loeb, W. (2016, January 4). Why Retailers Must Restructure In 2016. Forbes.
National Retail Federation. (2014). Top 100 Retailers Chart 2014.