Welcome and Introduction:
Dr. Elliot Hirshman, President of San Diego State University (SDSU), welcomed the audience to the Provost Distinguished Lecture Series. He expressed gratitude on behalf of the university community and introduced Jim Senegal, CEO and co-founder of Costco and a proud SDSU alumnus, as the speaker.

Recognition of University Leaders:
Dr. Hirshman acknowledged the presence of numerous university leaders, including the provost, vice presidents, associate vice presidents, deans, and department chairs. He appreciated their dedication to fostering intellectual engagement and academic excellence at SDSU.

Special Recognition of Provost Enwemeka:
Dr. Hirshman paid special tribute to Provost Chukuka S. Nwemeka for launching the Provost Distinguished Lecture Series. He highlighted the importance of bringing new perspectives to the campus during leadership transitions and praised Provost Enwemeka’s recognition of the value of hosting distinguished speakers.

Purpose of the Lecture Series:
Dr. Hirshman emphasized the communal goal of making SDSU a hub for scholars, artists, and thinkers to address significant contemporary issues and develop solutions to societal challenges. He viewed the Provost Distinguished Lecture Series as a crucial step towards achieving this goal.

Introduction of Provost Nwemeka:
Dr. Hirshman introduced Provost Nwemeka, the creator of the lecture series, as the next speaker. He commended Provost Nwemeka for his vision and hard work in developing this important series.

* Jim Senegal, co-founder and former CEO of Costco, was introduced by Dean Joe Belch at a university event.
* Sinegal began his career in retail in San Diego in 1954, working with Sol Price at Fed Mart.
* He co-founded Costco with Jeff Brothman in the mid-1980s and served as its CEO for 27 years.
* Costco is a global company with over 700 stores in 11 countries, 200,000 employees, and $113 billion in annual revenue.

Sinegal’s Accolades
* Sinegal has been recognized for his leadership and business acumen.
* In 2006, he was named one of Time Magazine’s 100 Most Influential People.
* In 2009, he was named one of America’s Best Leaders by U.S. News & World Report.
* In 2011, he was ranked as one of the most favorite bosses in America by Forbes magazine.

Costco’s Unique Approach to Business
* Costco does not engage in traditional advertising, relying instead on word-of-mouth and positive media coverage.
* The company offers a treasure hunt-like shopping experience, with a wide variety of products at discounted prices.
* Costco is known for its generous employee benefits and its commitment to customer satisfaction.

Kirkland and Costco’s Relationship:
Costco and Amazon can coexist, despite being competitors. Costco is a favorite among small business owners who purchase large quantities of goods.

Costco’s Affordability:
Costco consistently offers lower prices compared to other retailers. A study found that Costco’s prices are 12% lower than Amazon Subscribe and Save, and 5% lower than Sam’s Club.

Costco’s Prescription Drug Prices:
Costco offers significantly lower prices for prescription drugs compared to other pharmacies. For example, Costco’s price for a 180-count of 30-milligram Actos was $51.28, while Rite Aid and Walgreens charged $1,529 and $1,766, respectively.

Jim Sinegal’s Journey to Costco:
Jim Sinegal started his retail career at FedMart in 1954 and later joined Price Club in the early stages. In 1983, Sinegal and Jeff Brotman founded Costco, with the aim of cloning the Price Club model.

Costco’s Initial Growth and Expansion:
Costco’s first three stores were opened in Seattle, Portland, and Spokane. The company initially focused on the Northwest region and aimed to grow to 12 stores, with a projected revenue of $80 million per store. In 1985, Costco expanded to Canada and California, and in 1986, it entered the Midwest with stores in Minneapolis and Milwaukee.

Costco’s Midwest Closure and Fresh Foods Introduction:
Costco’s expansion into the Midwest was unsuccessful, and the company closed its stores in that region in 1987. In 1988, Costco began introducing fresh foods, which became a major part of its business.

Costco’s Global Expansion and Merger with Price Club:
Costco expanded internationally, opening stores in Mexico, the UK, and South Korea. In 1993, Costco merged with Price Club, becoming Price Costco for a short time before changing the name back to Costco.

Costco’s Challenges in Asia:
Costco faced challenges in Asia due to limited land availability, which affected store sizes and product selection.

Global Presence and Expansion:
Costco is a global retailer with warehouses in the US, Canada, Mexico, UK, Japan, Korea, Taiwan, Australia, Spain, and soon in France. The company has over 700 warehouses and plans to open new stores in various locations.

Profitable E-commerce Business:
Costco entered the e-commerce market in 1999 and has been profitable since its launch. E-commerce is a vital part of Costco’s business strategy.

High-Quality Products and Limited Selection:
Costco offers a limited selection of approximately 4,000 items, focusing on high-quality national brands and its private label, Kirkland Signature. The company carefully selects products to ensure the best value and savings for customers.

Cost-Saving Strategies:
Costco prioritizes showing savings on every item it sells. If it cannot provide savings, it will not carry the product. The company engages in package innovation and finds ways to maximize efficiency, such as selling large-sized products to reduce labor costs.

Customer Loyalty and Absolute Pricing Authority:
Costco has established absolute pricing authority, meaning customers trust the company to offer the best prices. The company has a strong customer base with 87 million cardholders who are loyal and have high renewal rates.

Core Business Tenets:
Costco has earned a reputation for providing customers with quality products at exceptional prices. The company’s pricing strategy is described as “absolute pricing authority,” ensuring customers receive the best possible deals.

Cultivating a Unique Shopping Experience:
Costco creates a treasure hunt atmosphere by rotating products and offering limited-time specials. The sense of urgency encourages customers to make purchases while products are available. This approach distinguishes Costco from competitors and fosters customer loyalty.

Maintaining Agility and Adaptability:
Despite its large size, Costco strives to maintain the mindset of a small company. The company’s nimbleness allows it to navigate competitive situations effectively.

Emphasis on Quality and Value:
Costco prioritizes quality in all its products, establishing a strong reputation among customers. The company offers name brand products alongside its own Kirkland Signature brand, which provides comparable quality at a lower price.

Market Dominance and Expertise:
Costco holds the position of the largest wine merchant globally, demonstrating its extensive knowledge and expertise in the wine industry. The company’s buying team possesses unparalleled insights into wine brands, varietals, pricing, and packaging.

Offering a Diverse Range of Products:
Costco’s product selection includes apparel, diamonds, and fresh foods, catering to a wide range of customer needs. The company’s fresh food department is particularly notable, with a focus on quality and affordability. Costco sells a variety of products, from prime steaks to Alaskan king crab legs, at competitive prices.

Maintaining Stability and Tradition:
Costco has maintained the price of its 12-inch pumpkin pie at $5.99 for 25 years, demonstrating its commitment to affordability. The company experiences overwhelming demand for its pumpkin pies during the Thanksgiving season, highlighting its popularity among customers.

Global Reach and Diverse Sourcing:
Costco procures fresh produce from 44 countries worldwide, ensuring a consistent supply of high-quality products. The company’s $4.99 three-pound chicken is a cost-effective option for families and students.

Strong Performance of Costco’s Pharmacy:
Costco’s pharmacy has gained significant attention in approximately 35 major cities across the United States due to its competitive prescription pricing. The story highlighting Costco’s pharmacy pricing has been featured on television news broadcasts, generating valuable publicity that cannot be bought.

Optical Department and Food Court Success:
Costco’s optical department has dispensed over 5 million pairs of glasses last year, establishing a reputation as the number one optical chain in the country for several years. The food court and hearing aid stations have also contributed to Costco’s success.

Kirkland Signature Label:
Costco introduced the Kirkland Signature label to establish a consistent brand identity across all product categories and countries where they operate. The Kirkland Signature label has become synonymous with quality and value, covering a wide range of products, including vodka, salmon, clothing, nuts, and cookware. In Palm Springs, Kirkland Signature vodka is the top-selling item, followed by another Kirkland Signature vodka.

Sales Comparison with Established Brands:
Costco’s Kirkland Signature label has achieved remarkable success, surpassing established brands in terms of sales. Last year, Kirkland Signature generated $24 billion in sales, outperforming brands like Gillette and Coca-Cola.

Costco’s Gasoline Prices:
Costco offers competitive gasoline prices, attracting customers to its gas stations. Costco’s pricing structure helps maintain low gas prices, although membership is required to purchase fuel at Costco. The Costco name and the perception of lower prices have proven effective in attracting customers to Costco’s gas stations.

Focus on Employees:
Costco values and invests in its employees. Employees are the company’s best ambassadors through word-of-mouth advertising. Costco offers good jobs, careers, benefits, and opportunities for advancement. Hiring and retaining good people leads to a stable workforce and low turnover. Costco graduates 1,000 employees annually, and many choose to build careers with the company.

Cost-Conscious Operations:
Costco spends 70% of its operating budget on people. The company constantly strives to bring goods and services to market at the lowest possible price. Costco focuses on efficiency and volume to succeed in a competitive business.

Customer-Centric Approach:
Costco offers a satisfaction guarantee on all products and memberships. There are no misleading claims, superlatives, or advertising. Minimum and maximum markups ensure customers benefit from good deals. The company policy prohibits selling seconds or irregulars. Costco pays its employees the best wages and benefits in the industry.

Overcoming Obstacles:
Costco faced challenges in obtaining a beer and wine license in Washington. The company was forced to change its name from “Costco Wholesale Club” to “Costco.” These obstacles led Costco to focus on its core values and principles.

Conclusion:
Costco’s success is attributed to its focus on employees, cost-conscious operations, a customer-centric approach, and the ability to overcome obstacles. The company’s commitment to these principles has resulted in a loyal customer base and long-term growth.

Code of Ethics:
Costco’s code of ethics emphasizes obeying the law, taking care of customers, employees, and suppliers in that order. Neglecting these principles may lead to short-term success, but long-term consequences can be severe.

Building an Institution:
Costco focused on building a lasting institution rather than pursuing an exit strategy or selling the company. The goal was to create a company that would endure for decades, providing security to stakeholders.

Disciplines and Great Team:
Costco’s success is attributed to its ability to sell merchandise at low prices while maintaining profitability. The company assembled a great team of merchants and buyers who excel at purchasing and selling merchandise. Costco provides a fun and enjoyable work environment.

Recognizing Good Fortune:
Sinegal emphasizes the importance of recognizing good fortune in business success. He believes that businesses that don’t acknowledge their fortunate circumstances are foolish.

Financial Success:
Since going public in 1985, Costco experienced consistent growth in sales, net income, and stock price. The company delivered on its promise to reward shareholders through its financial performance.

Cultural Significance:
Sinegal shares an anecdote about Pope John Paul II blessing people in front of a Costco store in Juarez, Mexico. He contrasts this with Walmart’s lack of similar cultural significance.

Q&A Session:
The presentation concluded with a Q&A session, where attendees had the opportunity to ask Sinegal questions about Costco’s culture and his insights on building a successful business.

Culture:
Costco prioritizes its culture above all else, as it dictates every action the company takes. Maintaining their culture is an ongoing effort to ensure they continue to “do the right thing.”

Expansion Lessons:
Costco learned from its unsuccessful expansion into Minneapolis and Milwaukee: New concepts may face challenges when moving from the coasts to the center of the country. Careful site selection and perseverance are crucial for successful expansion. Exiting a market can be difficult and painful, but sometimes necessary.

Philanthropy:
Costco engages in philanthropy to give back to the communities where they operate. They prioritize initiatives that can impact all their warehouses, such as supporting Children’s Hospitals, the United Way, and education. Costco budgets for philanthropy, recognizing their responsibility to use shareholders’ money sensibly. Employee involvement in philanthropic efforts is encouraged.

Business Decisions:
Costco’s decision to keep Pepsi instead of Coca-Cola in their food court was a business decision to maintain the $1.50 price for the hot dog and soda combo. The company considers both customer feedback and financial viability when making such decisions.

Kodak and Uber as Examples of Rapid Change:
Sinegal emphasizes the need for Costco to adapt to changing market trends, citing Kodak’s decline and Uber’s success as examples.

Customers Vote at the Checkout Stand:
Sinegal stresses that customers decide the company’s success, and Costco must continuously improve to maintain their patronage.

Future Innovation Crucial for Costco’s Survival:
Sinegal acknowledges the importance of innovation for Costco’s future success, emphasizing the need for the current management team to be as innovative as the previous one.

Sinegal’s Mindset in His 20s:
Sinegal reveals that he was unsure of his career path in his 20s but focused on working hard and learning from experienced professionals.

Jim Sinegal’s Humble Beginnings and Recognition of Good Fortune:
Jim Sinegal had modest aspirations early on, aiming to earn $30,000 a year. He attributes his success not only to hard work but also to sheer luck.

Saul Price as Jim Sinegal’s Mentor:
Saul Price was Jim Sinegal’s mentor, whom he greatly admired for his business acumen and toughness. Sinegal learned valuable lessons from Price, who emphasized the importance of efficiency and customer focus.

Advice for Young People Seeking Success:
Seek out mentors who can provide valuable guidance and insights. Avoid staying in a job or business that is drudgery; find something you are passionate about.

Recognizing Costco’s Potential:
Jim Sinegal recalls a specific moment when he realized Costco had something special. During the opening of Costco’s second location in Portland, sales in the first half of the day reached $35,000, twice the amount they had ever done before.

The Cautionary Tale of Sears:
Jim Sinegal cautions against providing advice to other companies, especially those with complex challenges like Sears. He acknowledges that Sears was once a dominant retailer but has struggled to adapt to changing market dynamics.

Sears and Roebuck’s Downfall:
Jim Sinegal acknowledges Sears and Roebuck’s past success and quality but notes their subsequent decline. He emphasizes the importance of avoiding the same pitfalls by studying their history.

Mentorship and Influences:
Sinegal credits a college history professor as his best professor and a significant mentor. He also highlights his father’s courage and hard work as a significant influence.

Environmental Initiatives:
Costco’s efforts to eliminate bee-killing pesticides are being implemented globally, despite regulatory challenges. Sinegal emphasizes the importance of environmental sensitivity in all business operations.

Advice for Aspiring Wholesalers:
Sinegal stresses the importance of persistence, believing that it can overcome obstacles and lead to success. He advises entrepreneurs to critically evaluate their product, pricing, and presentation.

Costco’s Weakest Link:
Sinegal identifies technology as a potential area of weakness, acknowledging the company’s efforts to invest and keep up with rapid changes. He also mentions criticism regarding Costco’s internal focus and limited external hiring.

Innovation and Internal Promotion:
Sinegal acknowledges the criticism that Costco is too internally focused and may need to hire more external talent to foster innovation. However, he believes in promoting from within the company and maintaining a balance between internal and external hiring.