Case Study

Fadi AbubakerJessica DietrichSonia Galvez

Katie JenningsChristina Walthour

• Company Overview

• Key Issues

• Alternatives

• Recommendations

• Conclusion

Agenda

Sonia

Company Overview• Founded in 1979 by James Senegal

• Largest U.S membership warehouse club▫ 54M Costco cardholders▫ 550+ clubs

40 states 9 countries

• Multi-channel retailer

• #9 on TWICE’s “Top 100 Retailer”

• Over $90B in global sales estimated in 2012

Sonia

Key Issues

Market

Saturation

•Members-only warehouse business: •Highly competitive•Constraints U.S. expansion

Retail

format

• Similar to other warehouse dealers

• Smaller format

• Regional mall locations

Profit

Margins• 2% thin-

profit margin

• Leverage sales

Sonia

Product Mix

Fadi

Market Position

Fadi

Life Cycle

Fadi

Costco On Track?

Fadi

Financial Highlights

Fadi

Financial Highlights (con’t)

Fadi

Strengths• Channel leader• Affluent

customer base• Multi-channel

offer• Popular private

brands• Strong corporate

culture

Weaknesses• Older locations• Low household

penetration• Low profit

margins (<2%)

Opportunities • Global store

growth• New concepts• Ancillary

services• Expand gluten-

free product line

Threats• Real- estate

issues• Cannibalization• Competitive

single-category killers

• Market saturation

• Slow economic growth

External

Internal

Christina

Alternatives• Increase foreign market expansion

• Increase merchandise mix

• Acquire smaller warehouse clubs

• Utilize mass marketing tactics

• Increase markups

• Offer shared membership

• Shared membership

• Relocate older locations

Katie

Recommendations • Acquire BJ’s

▫ BJ's is a small % of the market size ▫ Increase:

New market territory penetration Revenue or profits Economies of scale

▫ Limit competition

• Offer Shared Membership▫ 10-20% of loss of all shoppers ▫ $50-$500 membership cards

Jessica

Recommendations (con’t) International Expansion

8% of revenue from int’l sales

Expand 6-8 units per year Analyze the market

Families, businesses Europe, China, India

Package Sizes: Cater to various

demographics Not just known for bulk

items

Jessica

Conclusion• Markets

▫ One-stop shopping

• Food, houseware, apparel (4,000 SKUs)▫ Sam's Club & BJ's

Execution

$127M per club/$1B online

Customer Service

Direct Distribution

Jessica

Questions???