Co-founding and Growth:
Jim Senegal, a former mattress unloader at FedMart, co-founded Price Club in 1976, which later became Costco Wholesale Corporation. Costco revolutionized the retail industry with its focus on efficiency and providing the best prices to its members. By 2019, Costco had over 780 warehouse stores, $150 billion in revenue, and 98 million cardholders.

Unique Products and Limited Selection:
Costco’s strategy is to carry a limited selection of approximately 3,700 SKUs, compared to Walmart’s 140,000. The company carefully selects the best products in each category and aims to provide the best value to its customers. Costco also offers its Kirkland Signature brand, which has become extremely popular and generated $39 billion in sales in 2018.

Expansion and Challenges:
Costco has expanded internationally, but 70% of its retail operations remain in the US. Despite its success, Costco faces challenges, including competition from online retailers and increasing pressure on its profit margins. The company aims to maintain its competitive edge by focusing on customer satisfaction and staying true to its mission of providing high-quality products at affordable prices.

Criteria for Kirkland Signature Products:
Products must be as good or better than the leading national brand. Customers must save at least 15 to 20% compared to the national brand’s price at Costco. Products must be meaningful and important to Costco customers.

Naming Kirkland Signature:
Costco faced the challenge of finding a name that would work across multiple countries and product categories, avoiding the need for numerous clearances and legal complications. The name Kirkland was chosen because it represented the location of Costco’s home office at the time. The design “Kirkland Signature” was created and cleared for use in every country and product category.

Sourcing Suppliers for Kirkland Signature Products:
Costco sources suppliers on a worldwide basis. Suppliers are often the same manufacturers that produce products for national brands.

Private Label Products:
Costco often sells the same products as national brands but at a lower price. The private label Kirkland brand has built consumer confidence and loyalty. Cooperation with national brands has developed over time.

Membership Model:
The membership model creates loyalty and encourages members to make Costco their primary shopping destination. Costco communicates that members can save the membership fee on a single trip to the warehouse.

International Expansion:
Costco has expanded internationally, with operations in various countries, including Canada, Mexico, Japan, and China. The concept of saving and value has been translated and accepted in different countries. Costco exports more products to Asia than it directly imports. American products are popular in Asian countries.

Success in China:
Costco’s success in China can be attributed to careful planning, property selection, and cooperation with local authorities. The first store in China had a great start and even caused traffic issues, leading to temporary closure. The news of Costco’s closure due to its popularity went viral on social media.

Hiring Locals and Country Teams:
Costco sends a contingent of management personnel to new countries for four to five years to develop local teams. These teams eventually take over the operations, leading to a strong and independent country team.

Supply Chain Synergies and Differences:
Costco leverages its significant purchasing power to negotiate favorable terms with suppliers worldwide. While there are synergies with the U.S. supply chain, each country has its own business model and product offerings. Foreign products are incorporated into the product mix to cater to local preferences.

Trade Wars and Impact on Business:
Trade wars have a de minimis effect on Costco’s business at the moment. However, the company anticipates that the impact will become more significant over time. Consumers may face higher prices or a shift in sourcing to countries like Vietnam.

E-commerce Strategy and Integration:
Costco has been in the e-commerce business since 1998 and has been profitable since its inception. The company’s e-commerce sales will exceed $10 billion in 2018, still a small portion of total sales. E-commerce is part of the overall business and is not managed separately.

Product Selection and Treasure Hunt Approach:
Costco maintains a core selection of basic items that are always available. Additionally, it offers a rotating selection of “treasure hunt” items that change frequently. This approach creates excitement and encourages customers to purchase items when they see them. Buyers actively seek out unique and desirable products to offer customers.

Branded Products and Price Differences:
Costco sometimes sells branded products at discounted prices. Manufacturers may enhance products or find creative ways to differentiate them from products sold in general retail. The company’s large customer base makes it an attractive distribution channel for manufacturers.

Products Costco Does Not Sell:
Costco has a policy of not selling guns, ammunition, or marijuana, even in areas where they are legal.

First Quality Products:
Costco’s commitment to quality ensures first-rate merchandise, unlike seconds or irregulars. Cigarettes, once a top seller, have been phased out due to declining demand.

Employee Satisfaction:
Costco values its employees and focuses on creating a positive work environment. The company’s turnover rate is only 5%, significantly lower than the retail industry average of 60%. Costco promotes from within, offering career opportunities and job satisfaction.

Challenges and Opportunities:
Trade wars pose a challenge, but Costco remains optimistic about future growth. The company has consistently underestimated its market share potential. Costco aims to succeed by selling merchandise at low prices while maintaining profitability and adhering to strict cost-cutting disciplines.

Dealing with Resistance:
Costco faced resistance during its early days, with people doubting its business model. The company persevered despite these objections, remaining focused on its goals.

Inspiration and Mentorship:
Jim Sinegal does not mention specific books or mentors that influenced his success. He emphasizes the importance of hiring good people, providing good jobs, and promoting from within.

Jim Sinegal’s Learning Journey:
Sinegal, initially aspiring to be an attorney, fell in love with the retail business while working part-time at 18. He learned the craft of the business from his mentor, Saul Price, and continuously sought to improve his skills.

Influence of “Self Renewal” Book:
Sinegal found inspiration and enlightenment from a book called “Self Renewal,” which emphasized the importance of personal and organizational renewal.

Costco Food Court:
The idea for the food court emerged from the need to cater to the hungry shoppers at Costco. The iconic $1.50 hot dog and drink combo, a quarter-pound dog, has remained a popular favorite item.

Costco’s Culture:
Sinegal emphasizes the significance of culture in driving every decision within an organization. He believes that fostering a culture where doing the right thing is prioritized leads to more comfortable interactions and better business practices.

Maintaining Costco’s Culture:
Despite approaching 40 years of success, Sinegal is confident that Costco’s culture will be sustained. He attributes this to the long-time employees who now manage the company and their unwavering belief in the company’s culture.

Costco’s Sustainability Efforts:
Sinegal highlights Costco’s commitment to sustainability, particularly in regards to consumables. While he does not delve into specifics during this segment of the presentation, he acknowledges the importance of addressing sustainability in the company’s operations.

Sustainability Efforts:
Costco is committed to sustainability and takes various steps to reduce its environmental impact. They use solar systems on their buildings, skylights to save energy, and reuse boxes for packaging. A department dedicated to sustainability ensures that Costco stays competitive and environmentally conscious.

Membership Fee:
Membership fees are an important part of Costco’s business model and create loyalty among customers. The fees are used to lower product prices, which benefits members. Over the years, as membership fees have increased, Costco has invested the revenue into lower prices.

Post-Retirement Activities:
Jim Sinegal, former Costco CEO, enjoys retirement and engages in various activities. He serves on the boards of business schools, the Fred Hutch Cancer Research Center, and a scholarship program. Sinegal speaks at universities and continues to visit Costco stores in different cities.

Innovative Products:
Costco aims to bring innovative products to its customers and is always searching for new and exciting items. The limited space available for products necessitates careful selection. Costco buyers travel worldwide to find unique products and are constantly exploring the market for potential additions.

Product Sourcing:
Costco has buyers in various locations across North America and travels globally to source products. They bring in products from all over the world to offer a diverse selection to their members.

Lesson Learned from Business Cases:
Keep to your core competency as a business. Innovate and do what you do better. Avoid feeling pressured to do everything your competitors do.

Balancing Core Strengths with Innovation:
As a leader, stay true to your company’s strengths. Keep your core group of executives interested in innovation. Recognize how the world is changing and adapt accordingly.

Incremental Nature of Innovation:
Innovation happens in small steps over time. Kodak film didn’t disappear overnight; it declined gradually.

Importance of Adaptation:
Businesses that fail to adapt and innovate will become irrelevant. Sears, once an American icon, failed to adapt to e-commerce and became irrelevant.

Pharmaceutical Side of Costco:
Costco entered the pharmaceutical business to diversify its offerings. There were regulatory challenges in dealing with distributors. Customers don’t need a membership to use Costco’s pharmacy. State laws require pharmacies to serve anyone with a prescription.

Key Points:
Costco entered the prescription business to offer exceptional value to customers, challenging the high prices typically associated with prescription drugs, especially generic medications. Costco’s focus on delivering the best products at the lowest prices has earned it a reputation for providing exceptional value and service. Focus is crucial in business. Costco’s success stems from its commitment to a limited product selection, allowing it to deliver exceptional products while avoiding distractions from core competencies. Mentorship plays a significant role in entrepreneurial success. Jim Sinegal emphasizes the importance of finding a mentor who can provide guidance and support. Passion is essential for job satisfaction and success. Sinegal encourages entrepreneurs to find work they truly love and are passionate about to avoid drudgery and toxicity. Costco’s entry into the online travel agency business was driven by the opportunity to offer value and convenience to its members. The company acquired a small, successful travel business in Seattle and expanded its services from there.

Company Purchase and Subsequent Challenges:
Costco acquired a company offering travel packages with the aim of providing savings and attractive offers to customers. Shortly after the acquisition, the tragic events of 9/11 occurred, causing a complete halt in travel, leading to the near collapse of the newly acquired business.

Perseverance and Positive Outcomes:
Despite the initial setbacks, Costco persevered and the travel package business eventually became a significant part of their offerings, providing satisfaction to customers. Costco’s cruise, travel, and resort packages gained immense popularity, receiving a high satisfaction rating of 96% from customers.

Questions and Answers:
A question regarding the consumption of relish and onions in various countries at the bar was asked, but the focus shifted to Jim Sinegal’s specific talent and the key to his business success.

Jim Sinegal’s Response to Talent Inquiry:
Jim Sinegal humbly responded that he doesn’t possess any special talent, acknowledging the role of unloading mattresses in his early days and an amusing encounter with a woman who mistook him for George Clooney.

Conclusion:
The presentation concluded with Ricardo Ernst thanking Jim Sinegal for his insightful contributions and the audience applauded his achievements.