In 1983, Costco opened its first store in Seattle, reshaping the retail landscape with its focus on low prices and bulk-buying, inspired by Price Club’s model.
Costco’s inception can be traced to a merger with Price Club in 1993. Originally, Price Club began in 1976 under Sol Price, who was a significant influence on Costco co-founder Jim Sinegal. Sinegal, previously a retail executive at FedMart, partnered with attorney Jeff Brotman to launch Costco after Brotman’s trip to France inspired him to explore the European wholesale style.
The first Costco emerged from an idea shared by Sinegal and Brotman. Brotman reached out to Sinegal after listing potential leaders for a business based on this model. Their collaboration resulted in the first warehouse opening on September 15, 1983, featuring a 100,000-square-foot facility. The design was simplistic, focusing on bare essentials with an open-beam ceiling and cement floors.
Costco’s initial membership was divided between business memberships at $25 annually and ‘Group Gold’ members at $30. Non-members could shop with a 5% surcharge. The concept was straightforward, intended to maintain low operational costs by offering a limited number of unique items. This approach led to Costco’s rapid growth, expanding to Portland and Spokane soon after its Seattle debut.
Sam’s Club, a Walmart initiative launched by Sam Walton months earlier, motivated further expansion due to competitive pressures. This swift growth strategy enabled Costco to establish a strong presence in strategic markets.
By the end of 1984, 200,000 people had joined Costco, generating $1.3 million in membership revenue. Known as pioneers in retail, Price Club and Costco were described as ‘key players’ by The Associated Press. In six years, Costco achieved sales of $3 billion, a remarkable milestone for any business.
Costco’s public offering in 1985 saw shares initially priced at $10, which, due to stock splits, significantly appreciated over time. By 1986, with 17 locations and 3,740 employees, the company was valued at a billion dollars. Subsequently, in 1993, Price Club and Costco combined forces, creating PriceCostco, which soon expanded internationally with openings in the UK and South Korea.
Today, Costco’s model has evolved, yet it retains its founding principles of offering competitive prices in bulk. With a staggering global presence, the company has grown to nearly 139 million members worldwide, reporting over $249 billion in net sales last fiscal year. This growth emphasizes its consistent relevance and adaptability in the retail sector.
Costco’s journey from a single warehouse in Seattle to a global retail giant exemplifies its robust business model and strategic adaptability. From merging with Price Club to navigating market competition, its focus on cost efficiency and customer value has remained steadfast.
Source: Businessinsider
