Question

evaluate Costco's entry mode into the United Kingdom

Answer 1

Costco Wholesale Corporation commonly known as Costco is largest membership-only Warehouse Club from America with sales close to US$100 billion.It is only behing Walmart when it comes to being largest retailer company.Costco has been grabbing eyeballs from 2013 when it started infiltrating global markets with it's retail innovation practices ,So much so that it's cult like customer base termed it - The Costco Craze.At the moment Costco owns more than 200 global Warehouse Locations spreading in more than 8 countries outside of America.These included locations in Canada, Mexico, the United Kingdom, Japan, Taiwan, South Korea, Australia, and Iceland.

One such country where it's expansion boomed is UK and it's important to understand what Costco did right that it's expansion plan saw success whilst others like Walmart and Tesco failed initially.Costco focuses on strategies for making products less expensive for customers, rather than trying to increase revenue by finding ways to make customers pay more.Few pointers to add to the above strategies were -

1) Keeping less stock in stores to let customers wander in search for it.

2) Protect Costco’s market share against key Western and local competitors already online.

3)Based on the business forecast and competitive rationale—as well as the promise of a low-cost, prebuilt e-commerce platform—Costco senior management approved a proof-of-concept expansion of e-commerce to one new country-United Kingdom.

Costco's UK plan was based on several reasons -

1) High Sales and membership because of the presence of it's old warehouses.

2) Costco's strong brand recognition in UK

3) Britain’s zoning laws restrict warehouse membership primarily to business, so less than half of the United Kingdom's population is eligible to become regular members.

4)UK always had strong affinity for E-commerce so anyway it's market was largely based on online market.

5) Cisco IBSG’s research showed that many U.K. retailers are seeing online growth from European orders, Costco saw an opportunity to use the U.K. website to enter non-warehouse countries like France and Spain through cross-border trade.

6) Providing health insurance benefits to 90% of its employees.