Costco finds a wi­lling and gro­wing mar­ket in Ca­na­da

Sa­me-sto­re Ca­na­dian sa­les are up 8 per cent - hig­her than in any ot­her country in which Costco ope­ra­tes. And the fu­tu­re looks even brigh­ter

La Jornada (Canada) - - ENGLISH SECTION -

Un­less you’re the­re on a Sa­tur­day, cons­tantly trying to avoid co­lli­sions with over­si­zed shop­ping carts, you pro­bably li­ke Costco, even though it will cost you mo­re to shop the­re as of Ju­ne.

The basic mem­bers­hip fee is going up by $5 to $60, whi­le pre­mium folks will ha­ve to pay $120, up from $110.

Pa­ying to spend is an in­cre­di­ble bu­si­ness mo­del. With mo­re than 10 mi­llion mem­bers in Ca­na­da and a re­ne­wal ra­te ex­cee­ding 90 per cent, Costco ma­kes mi­llions be­fo­re se­lling a sin­gle pro­duct.

And with high in­ven­tory tur­no­ver that allows it to pay for mer­chan­di­se af­ter it’s bought by cus­to­mers,, Costco looks a lot li­ke a bank. It’s all about cash flow.

Re­cent re­sults we­ren’t bad for Cost­cost tco world­wi­de, but

Ca­na­da has be­co­me a bea­con of fi­nann ncial suc­cess for this glo­bal pla­yer.

Sa­me-sto­re sa­les for Costco in

Ca­na­da we­re up eight per cent this year - hig­her than in any ot­her country in which the com­pany ope­ra­tes.

The­se are the kind of num­bers most re­tai­lers would die for and the fu­tu­re looks even brigh­ter.

The com­pany ope­ra­tes 94 sto­ress in Ca­na­da and will add se­ven mo­re byyy year’s end. This is the most sto­res Costt - co has ope­ned anyw­he­re in the last decc ca­de.

And Ca­na­da will re­main a growth wtth mar­ket for Costco for the next se­vev­ve­ral years, lar­gely be­cau­se it doesn’t snn’t ha­ve to com­pe­te with its U.S. ri­val, Wa­lWa­lWal-W mart-ow­ned Sam’s Club, which fai­led mis- ada a few years ago.

Costco is well-run. It sees it­self as a re­tai­ler, as well as a por­tal to a vast but of­ten obs­cu­re supply chain. The mem­bers­hip an­gle ma­kes cus­to­mers feel li­ke eli­te guests, as mem­bers get ac­cess to spe­cial dis­counts from ma­nu­fac­tu­rers.

Costco is al­so a lo­gis­ti­cal mas­ter­pie­ce. A ty­pi­cal Costco sto­re ca­rries about 5,500 mer­chan­di­se ca­te­go­ries, com­pa­red to around 150,000 in most ot­her sto­res of si­mi­lar si­ze. So pro­cu­re­ment is much less stress­ful and less costly. Mo­re choi­ce can lead to con­fu­sion for cus­to­mers and po­ten­tially fe­wer sa­les. Wi­de ais­les for easy mo­ve­ment of pa­llets allows Costco to turn over in­ven­tory mo­re ef­fi­ciently than any ot­her re­tai­ler, with much less la­bour. And the­re are no signs, no weekly pro­mo­tio­nal spe­cials and no de­co­ra­tions.

But it’s in se­lling food that Costco’s stra­tegy has wor­ked best in re­cent years. Not only has it in­crea­sed its food mar­ket sha­re to 10 per cent ver­sus Wal­mart’s se­ven per cent, it’s se­lling qua­lity pro­ducts - much to the dis­may of Lo­blaws, So­beys and Me­tro.

Li­ke ot­her food re­tai­lers, Costco par­tially pro­ces­ses many food erably in Can- pro­ducts in-hou­se and ma­kes this clear to cus­to­mers.

Costco al­so sets up a kind of trea­su­re hunt, en­ti­cing cus­to­mers to think about food at the just right ti­me, af­ter ha­ving go­ne th­rough pant racks and tool ais­les.

Des­pi­te the fact that its sto­res are giant and rat­her unins­pi­ring pla­ces, Costco wel­co­mes mem­bers by ser­ving food and lots of it. Any­body who co­mes hungry can walk out of the sto­re fee­ling full, es­pe­cially kids. The food-sam­pling-to-pur­cha­se con­ver­sion ra­te is ex­tre­mely high at Costco com­pa­red to tra­di­tio­nal food re­tai­lers. Whi­le tas­ting sta­tions at Costco ge­ne­ra­te food sa­les, ot­her re­tai­lers spend mi­llions to ma­ke their sto­res feel li­ke gla­mo­rous laby­rinths of fla­vours and scents.

All of this seems coun­te­ri­n­tui­ti­ve but it’s ac­tually wor­king for Costco, and in Ca­na­da es­pe­cially.

Bu But the pic­tu­re is not all rossy. rosy.

W Whi­le Costco has ma­de ann an im­pres­si­veim as­cent to the foood food-re­tai­ling eli­te, it fa­ces a pro­blempr at­trac­ting mi­lleenn len­nials. The mo­del doesn’t seem sseem to ma­ke sen­se to this ge­ne­ra­tion:ggen so­me sur­veys sug­ges­ts­sug Costco isn’t even in theirtt­he top fi­ve fa­vou­ri­te food re­tai­lers.ret

It will be in­ter­es­ting to see how mi­llen­nials ap­proachpr Costco as they ma­tu­re­tu in the mar­ket­pla­ce. As well, ba­rely th­ree per pper cent of Costco’s sa­les are ge­ne­ra­ted ge­ne­ra­teed on­li­neo and the com­pany seems con­tent with that numb­ber. num­ber. Ho­we­ver, if the mar­ket mo­ves furt­her in this di­rec­tion, as are mi­llen mi­llen­nials, Costco may be in trou­ble.

Ser­vi­ce is al­so an is­sue. The sim­ple fun­ctio­nal chec­kout sys­tem at Costco, with no bag­ging sup­plies or ser­vi­ce, can be an­no­ying. Mo­re de­man­ding cus­to­mers, who don’t mind pa­ying a little ex­tra for this ser­vi­ce, may end up going el­sew­he­re for gro­ce­ries.

Char­ging mo­re to gi­ve mem­bers ac­cess won’t ac­tually chan­ge much for the com­pany. In fact, tho­se who see mem­bers­hip fees as a sunk cost may want to spend mo­re.

And Costco’s suc­cess in Ca­na­da will con­ti­nue to sup­port its glo­bal ex­pan­sion.

So the next ti­me the Costco as­so­cia­te goes th­rough your re­ceipt on your way out, just say, “You’re wel­co­me.” -TROYMEDIA

Troy Me­dia co­lum­nist Syl­vain Char­le­bois is dean of the Fa­culty of Ma­na­ge­ment and a pro­fes­sor in the Fa­culty of Agri­cul­tu­re at Dal­hou­sie Uni­ver­sity, and aut­hor of Food Sa­fety, Risk In­te­lli­gen­ce and Bench­mar­king, pu­blis­hed by Wi­ley-Black­well (2017).

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