Inside Costco: Secrets of America’s Favorite Stores

I am a Costco member (there are over 54 million in the US), but don’t make periodic shopping trips to Costco. When we do visit Costco we stock up on plain Yogurt and Cheerios ! I have been thinking about owning some COST.

From a business perspective, I have noticed that Costco always strives to provide excellent experience to its members. For example, even on extremely busy weekends (when aisles are packed with shopping carts) checkout lines move fast unlike other retailers. Moreover, their books seem pretty good viz-a-viz other top retailers: low Debt to Equity ratio, high inventory turnover, and decent gross margins (net sales – merchandise costs / net sales) at 12% .

From a supply chain perspective I find their high inventory turns (12.3) and the # of SKUs Costco carries (under 4000 compared to a typical Walmart which carries 100,000) very comforting.

As a marketer, I am impressed that they rely less on traditional channels and more on WOM.

3 short retail supply chain links

1. Unhealthy supply chains. Experts say millions can be saved if the health care supply chain adopts standards and becomes more efficient. Currently entities are spending 31 to 67 percent of their annual budgets to operate their supply chains. Read more
2. General Mills to use supply chain productivity initiatives in order to protect its margins from the pressure of rising commodity costs. Read more
3. The State of the Retail Supply Chain 2009 report. Cost control and customer service continues as key future focus.Many retailers are actively pursuing SCM-based initiatives to overcome today’s challenges. Read more

3 short retail supply chain links

1. Wal-Mart reducing suppliers order-to-cash cycle from 90 days to 15 days. Wal-Mart partners with Wells Fargo & Co and Citigroup to provide supply chain financing to their suppliers. Via on Kevin. Read more here WSJ.
2. Effect of geographic location on retail stock prices. J. Crew (JCG), the much loved retailer based in New York City, and the Buckle (BKE), a teen retailer most Mutual Fund managers have never seen or heard of, based in Kearney, Nebraska. Debt: JCG $98 M, BKE $0. # Stores: JCG 320 but BKE 404 stores. Operating margins: JCG 18.8% and BKE 22.3%. I wonder how they integrate with their trading partners?. Read more here Seeking Alpha.
3. ASN Best Practices. A good podcast on ASN from GXS. Read and listen here.