Thread by @kegill

GEE. This sounds A LOT like cooperative business models.

A BIG reminder that grocery store margins were historically very low single digits. Ditto most department stores (although theirs were a bit larger due to slower turnover).

THAT ALL CHANGED IN GREED IS GOOD 80s.

https://twitter.com/investing_city/status/1179974257779982336

Costco is using the countervailing power of its large membership (customers) to negotiate price with mostly very large sellers.

Yes some aren’t huge (Tillamook farmer cooperative comes to mind). But most name-brands: big.

Costco also used its market power for private labeling, a staple (pun intended) of traditional grocery stores. It invests in research and prepares healthy take-home-to-cook food.

Look: Walmart or Kroger could have done something similar. But they decided their stockholders were their primary stakeholder. And Walmart squeezes suppliers while keeping too many employees without benefits.

Not Costco.
Its leadership recognizes that customers (members), employees, suppliers, community are All Important. Not just stockholders.

Revenue, fiscal 2018/stock (rounded)
Walmart: $500b / $118
Costco: $142b / $292
Kroger (Fred Meyer): $121b / $25

Target is NOT comparable. It doesn’t sell fresh seafood, meat, chicken; freshly prepared cook-at-home foods. It is a dept store with some basic processed grocery items.

Slightly more than half (3/5) of Walmarts have wide-ranging food products similar to Costco. No Costco has the home/clothing inventory of Walmart. Remember: they shuttered Sam’s.

And WalMart treats suppliers and employees with equal disdain.

nytimes.com/2017/06/01/bus…

supplychaindive.com/news/Walmart-s…

OTOH, Costco’s customer focus yields a Net Promoter Score second to Apple.
businesswire.com/news/home/2018…®-Report-ForeSee-Ranks-50-Top

Costco’s low employee turnover rate is unparalleled in retail and a function of company values:
<<Costco’s values are summed up in a phrase “always do the right thing, even when it hurts.” >>
smartbrief.com/original/2017/…

Without its commitment to all of its stakeholders, Costco could not command that annual membership fee, @investing_city. BTW, ours is paid for each year by our rebate check: we are executive members.

Proud Costco member since 1990.

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