[95767] in Discussion of MIT-community interests
Attn: Please-Claim Your $50-Costco Points-Today.
daemon@ATHENA.MIT.EDU (CostcoRewards)
Sun Feb 26 17:46:18 2017
Date: Sun, 26 Feb 2017 15:46:49 -0700
To: mit-talk-mtg@charon.mit.edu
Reply-To: CostcoRewards@updatedmemberbonuspoints.com
From: CostcoRewards <CostcoRewards@updatedmemberbonuspoints.com>
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<td id="First">Costco-Rewards Program:<br>
Your-Bonus is About to-Expire!</td>
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Greetings mit-talk-mtg@charon.mit.edu,<br>
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There are only 24 hours-remaining to claim your $50-Costco Reward before it-expires!</p>
<p>Tell us about your latest shopping-experience at Costco and we will reward you with a $50-RewardCard...Please make sure that you do not miss-out.</p>
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<span style="font-weight: bold"><a href="http://rewardinfo.updatedmemberbonuspoints.com">Go Here to Claim-These Costco-Points Now</a></span></p></td>
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<p>If you would.like to halt-these memberads-you can.go <a href="http://xeyr5.updatedmemberbonuspoints.com">right-here</a>.<br>
#--2885 Sanford_Avenue_Southwest No.4O442.<br>
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<p>A good friend of mine was raving about Costco recently, going on about how she couldn’t resist shopping there at least two to three times a week. She said sometimes she doesn’t even plan on buying anything. She just loves wandering around in the enormous, double-football-field-sized warehouse, hunting for what’s new (Costco turns over its entire inventory 12 times per year). She is also obsessed by what the big designer or luxury “surprise” of the week might be — stuff like Waterford Crystal, Coach handbags or Omega watches, to name a few, all selling out quickly for shock-and-awe low prices. And even though she may have shopped with no intention of purchasing, she says she always finds something that seduces her to buy.</p>
<p>As she is telling me about her compulsive obsession, or obsessive compulsion, for this almost out-of-body experience she has every time she goes to Costco, I think I observe a slight tremor — almost as though she’s going through some sort of withdrawal. The next thing out of her mouth is, “I must plan a dinner party for this weekend so I can get over there tomorrow and get some steaks and another case of red wine.” Just to give you some context, world-renowned chef Julia Child bought her meat from Costco, and the retailer is the largest purveyor of fine wines in the U.S. Incredibly, to me, my friend did plan a dinner party just as an excuse to go to Costco. Now that redefines the neurological addiction I’ve been writing about for years A “Costcoholic” Indeed!</p>
<p>She is just one of the over 75 million “mainlining” Costco members (and growing at a high single digit percentage rate annually), with an average annual income of $100,000, paying a $55 annual membership fee (or $110 for an executive level membership). Three million members a day enter Costco’s stores to get their fix.</p>
<p>Yes, you read those numbers right. In today’s over-stored and over-stuffed retail environment, the equivalent of almost one-fifth of the U.S. population is paying for the privilege to shop at a particular store. And this is not a one-off, let’s-see-what-it’s-like kind of visit. The renewal rate is a whopping 90 percent each year. I guess that captures the power of an addict’s behavior.</p>
<p>Not only is 80 percent of Costco’s gross margin and 70 percent of its operating income derived from its Costcoholics’ membership fees, Costco collects most of its profits 12 months in advance, not at the eleventh hour of the fiscal year like most other retailers.</p>
<p>These “druggies” bought enough stuff during Costco’s 2015 fiscal year (ended August 30), to pump revenues up to $113.7 billion (a 3 percent increase over 2014). Costco is the second largest retailer in the U.S. after Walmart, with 488 warehouses. Internationally there are 90 Costco warehouses in Canada, 36 in Mexico, 27 in the UK, 24 in Japan, 12 in Korea, 11 in Taiwan, 8 in Australia and 2 in Spain. And Costco plans to open 32 net new warehouses in fiscal year 2016.</p>
<p>A Combination Drug</p>
<p>At the core of Costco’s model is a philosophy that was embedded by its founder and CEO, Jim Sinegal, from its inception in 1983, then passed on to its current CEO, Craig Jelinek, when he took the helm in 2013. This philosophy was handed down to Sinegal by his longtime employer and mentor, Sol Price, who was the pioneer of the “warehouse store” retail model, launching Fed Mart in the 1950s and Price Club in 1976.</p>
<p>Price never allowed employees to use the word "discount." The way Price’s mind worked was to focus on the lowest possible markup rather than the deepest discount. In Sol’s mind, the word discount equated with cheap. So the core ingredient in Costco’s addictive drug is its value proposition that stands for high-value products at the lowest prices.</p>
<p>How does Costco manage to offer such down-and-dirty prices? For starters, it has enormous economies of scale. Costco buys more apple juice, diapers, pasta, towels—in fact, more of any product it decides to offer its members—than just about any other retailer, allowing it to negotiate the lowest prices from vendors. It sets the standard for the lowest pricing in the industry; not even Amazon can beat it. As a result, the Internet has disrupted Costco less than it has other retailers.</p>
<p>And since 80 percent of its gross margin and 70 percent of its operating income come from its membership fees, Costco keeps margins razor thin, with markups at 15 percent or less, compared to 25 percent for supermarkets and 50 percent for department stores. Costco’s prices are on average 30 percent below large supermarket chains’.</p>
<p>Because of the relatively low number of SKUs that Costco carries, the Costco model is simpler, cheaper and easier to execute, and it is inherently more productive than that of the average retailer. It requires less time to sort, restock, reorder and deliver product. Costco eschews carrying multiple brands of products that are similar, except of course when it has its Kirkland Signature private label brand to sell. Think about it: A major supermarket chain like Kroger KR +0.91%’s might offer 40 different peanut butter SKUs; Trader Joe’s has ten; and Costco? It has two. Costco’s 4,000 total SKUs is narrow, but it allows them to buy huge quantities and charge lower prices.</p>
<p>A second part of the Costco drug combo is the treasure hunt—the discovery of something not needed, but impulsively desired. Each store’s main aisle is designed in a racetrack layout, which leads customers to circle the entire floor and view the entire mix of product offerings, often enticing them to buy things they didn’t necessarily set out to buy.</p>
<p>Costco’s product categories range from tires and diamond rings to food, clothing, electronics, cleaning supplies, home décor items and everything else in between. And don’t forget gas and the automobile aftermarket. More than 66 percent of its sales are food. Approximately 75 percent of merchandise sales are in what the company calls “triggers”— bulk sales of staple products like cereal, ketchup, detergent and paper towels—that people use day in, day out. Need 20 pounds of sirloin steak or five pounds of whole cashews? Then Costco is your place. Eggs come in cartons of 90. Diapers are ten dozen to a box. You can buy Colgate Advanced Whitening toothpaste, but only in a pack of four eight-ounce tubes.</p>
<p>The other 25 percent of sales at Costco are in so-called treasures—opportunistic finds that Costco stocks to surprise and delight its customers. These are electronics, appliances and other less frequent purchases at extremely good prices. And then there’s the fun stuff. Brands such as Andrew Marc, Calvin Klein, Adidas , Chanel , Breitling and many more, for incredibly low prices, compel the treasure hunters to keep coming back. Behind the curtain, these products are acquired from distributors, rather than the brands themselves, sold individually (not in bulk)—and often sell out quickly.</p>
<p>The three million shoppers per day who visit Costco stores are some of the most neurologically connected consumers on the planet. Many admit to falling prey to “the Costco effect,” shorthand for spending more than they’d planned to spend. One of those very connected customers, Kimberly Peterson, started a blog in 2006 to share news of what she bought at Costco with her mother and sister. Today, AddictedtoCostco.com has 2 million readers and generates enough ad revenue that Peterson was able to quit her day job and run the site full time.</p>
<p>Costco has immense respect for its customers and, unlike its main competitor Walmart’s Sam’s Club, has lenient return and payment policies. So if you’re unhappy with your six-pound wheel of Brie, you can get a full refund. AddictedtoCostco.com’s Peterson recalls once standing in line behind a man who was trying to return a violin a year and a half after buying it because his daughter didn’t want to play anymore. Costco cheerfully gave him a full refund for the instrument. Financing is made easier. Costco is expanding the number of payment methods it accepts and has added gift prizes for frequent purchasers. For the moment, it only accepts American Express and its own private-label card, but that will change in April, 2016 when it will accept Visa and MasterCard.</p>
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