Can This Bargain Warehouse Save Your Portfolio?
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Vic Wisemann Investors Observer.com |
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Costco (COST) is a company that I know quite well, both as a consumer and prospective investor. I shop at Costco as a long time member and have always found the business model and strategy fascinating.
"Membership has its privileges." That slogan belongs to American Express (AXP), but it might better apply to Costco, whose determination to deliver value and innovative products to its 23 million members, has made it one of the country's top retailers. Costco has succeeded by flouting industry norms. The big box retailer charges customers a base yearly fee to shop in its sprawling stores, which offer quality goods at low markups. Consequently, its margins are among the slimmest in retailing. The privileges also extend to employees, who are paid well and enjoy generous health-care benefits.
This formula has generated fierce loyalty among both shoppers and workers, while rewarding long-term investors. Small businesses are big customers at Costco, but the company also has managed to make discount shopping fashionable for affluent Americans by offering fine wines, books and big screen televisions at low prices, and staples such as paper towels and razor blades in bulk.
By offering one-time specials like discounted Prada bags or Callaway (ELY) golf clubs at individual outlets, Costco has created a treasure hunt atmosphere in its stores.
Costco is among a handful of retailers...
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