Costco Strategy Overview and Suggestions for Further Business Improvements

Unique Online Shopping Experience

As a Wholesale Club, selling bulk items at a discounted price is what sets Costco apart from its substitutes. However, there are things Costco can do to combat its loss of sales to substitutes. Something that could help further enhancing its wholesale niche would be to have more of an online presence. Costco should take its treasure-hunt items online, similar to Amazon’s “lightning deals.” Amazon’s lightning deals are hourly special deals that only have a limited quantity. If Costco did something similar to this with the high-quality brands it uses for their treasure-hunt items, Costco could attract an entirely new set of consumers – the kind of consumers who shop online for convenience and bargain hunters. These items could range from electronics to designer handbags. Online treasure-hunt deals available for only a day at a limited quantity could be a great way to capture that consumer group.

Spread Stores Throughout South America

The best way Costco can manage its potential market loss in California is by further balancing its market throughout the world. Throughout the past few years Costco has expanded dramatically in other countries such as Australia and Japan. However, one continent that has been left mostly untouched is South America. Expanding globally in South America would help lower Costco’s cost structures – contributing to their low-cost model. To do this, Costco should implement a transnational strategy. Many of their other global stores are tailored to local tastes and preferences. For example, in Asia their food court serves seafood topped pizza. Their global stores also have a mix of local goods and American goods. Costco should consider pursuing this strategy in a few areas throughout South America to assess their potential in that area. This could help counterbalance the high concentration of stores in California.

Advertise Through Social Media

The best solution to combat Costco’s aging target market would be to gain the millennial market. The greatest way Costco could gain this group would be to amplify their presence on social media. Right now, Costco has a Twitter and a Facebook, but they are not very active and do not have enticing posts for young adults. Technology and social media is the way the millennial generation communicates – it’s how millennials discover all of their information as they are glued to their smart phones, tablets, or computers throughout the entire day. The best way to connect to this group would be to increase their presence on social media by constantly posting new deals or new products on Facebook, Twitter, Instagram, Pinterest, and Snapchat. Taking a note from Target’s Cartwheel app and creating an app for coupons and special weekly deals/discounts would also be popular with this tech savvy generation. Apps have become more of a common way to navigate through information than online browsers. Creating and gearing these deals towards single, mid-late twenties consumers as well as consumers with a family would really motivate millennials to shop at Costco.

Strategy Suggestion

When evaluating the most beneficial strategy, it is important to assess short term vs. long-term benefits. Having a new online experience would greatly increase sales at least in the short-term. If Costco chose to even out its stores throughout South America, Costco’s sales may or may not increase, but its costs would definitely rise. Marketing and advertising more towards the millennial generation on social media would be a great way to capture and retain a huge portion of the market.

For Costco to thrive in the short-term and long-term, it would need to implement a combination of new online experiences with an elevated social media presence. Online treasure-hunt deals would be a way to encourage customers to buy online. They could combine this with social media by creating some sort of points reward system. For example, if customers use an app with special deals, they may be rewarded with even greater discounts off money spent in the store once they reach a certain level of points. If Costco wins over the millennials, their sales would consequently increase and be maintained throughout the long run. It is also important to take advantage of current technology because of constant technological evolution. If Costco is not able to adapt to the ever changing technological reward systems and social media platforms now, the organization may never catch up. If this happened, Costco would have even greater trouble trying to capture a younger market. However, if Costco implements a combination of innovative online strategies with social media, it will continually gain a new group of consumers who will most likely stay as they age.

Conclusion

Within the past decade, Costco has dramatically grown and expanded business geographically and within its customer base. Costco’s internal and external environments both have strengths and weaknesses. However, in its mature industry, other Wholesale Clubs are not Costco’s only competition – Costco also has to worry about other retailers that may steal its customers. Therefore, it is most important that Costco focuses on how to divert consumer attention towards Costco in order to create long-term customer relationships. If Costco implements a few strategies more in line with modern communication, Costco will further expand its customer base and secure customer loyalty.