THE ETHICS OF JIM SINEGAL, COFOUNDER & CEO OF COSTCO

The Ethics of Jim Sinegal, Cofounder & CEO of Costco

The Ethics of Jim Sinegal, Cofounder & CEO of Costco

Introduction

Costco Wholesale opened its first store in Seattle, Washington in 1983. Founders Jeff Brotman and Jim Sinegal had simple yet powerful idea: allow people to save on basic necessities and consumer staples while taking advantage of special offers on high-end luxury items and durable goods. With $71 billion in sales and more than $1 billion in net income for their latest fiscal year, Costco is leading player in warehouse club segment of discount retail industry, fifth largest retailer in North America and ninth in world. (Greenhouse 2005)

BJ's vs. Costco: Competitive Dynamics

One significant distinction between product offerings at BJ's Wholesale Club and Costco, two warehouse kings in industry, is number of unique items available in each of their stores.

Costco offers 4,000 stock-keeping units (SKUs) whereas BJ's houses 7,200.

While Costco does not offer wide variety of products and merchandise that rival BJ's does, what it does offer is consistency.

Through its private label brand, Kirkland Signature (named after its original warehouse in Kirkland, Washington), Costco has created the proprietary brand that customers trust.

Solution to problem

How it should be done

Bill Hansen, general merchandising manager, attributed this competitive advantage to being "able to ensure we're delivering quality, and over years, Kirkland Signature has become the brand. We've done so well because we're putting very best quality in package…and we've been able to instill in people's minds that when they're looking at Kirkland Signature, they're looking at best quality you can buy at very best prices.

What should be done

" Kirkland Signature has been extremely successful for Costco because of its elasticity as the brand. The Kirkland Signature name can be found on everything from detergent to European cookies to blue jeans. Costco has eliminated the consumer segmentation approach among these products and created superior quality offerings across board under umbrella of their house name.

Through Kirkland Signature, Costco has also found the way to control costs more effectively than rival BJ's. One example of this strategic pricing mechanism is evident in their Kirkland Signature Canned Albacore Tuna.

Problem Solution

Costco saw an opportunity in consumers' dissatisfaction with tuna options and struck the deal with Bumble Bee in 2002 to produce the premium, superior quality tuna fish under Kirkland Signature name.

As Tim Rose, senior vice president of food, ...