Posted on : 2023-10-06 06:09:58
Article : Good Evening Friday Management TASK 262- One common thing about the operating models of Costco and Walmart is that both of them focus on saving money through reduced operating expenses but each with its own unique features. Would it be with inclusive participation of stores staff??
In retail industry -unique marketing strategies are very much needed for profitable sustenance with large foot print and customer numbers. Retail giants Walmart and Costco are well-known brands in the US retail industry. However, compared to Costco, Walmart has a larger footprint both domestically and internationally. It has also made some acquisitions like Flipkart of India to expand its international customer base and e-commerce capabilities. Each week Walmart stores around the world including physical and e-commerce stores serve more than 265 million customers. The customer base of Costco is much smaller. However, it is still among the leading competitors of Walmart and has maintained a strong competitive position in the US retail industry. One thing that is common about the operating models of Costco and Walmart is that both of them focus on saving money through reduced operating expenses. Both have established an efficient operating model but each with its own unique features.
Costco operates on membership- based business model and as of 2019 the company operated 785 membership-based warehouses of which 546 were located in the USA and rest in different countries. In 2019, the company also opened its first store in China receiving an exceptional reception and by the day the store opened around 139,000 people had signed up for memberships. The total number of Costco members in 2019 was 98.5 million which was 4.2 million higher than the previous year. Its business model has proved successful since the company successfully retains a very large percentage of members each year and is investing in e-commerce to strengthen sales and find revenue growth. In 2019 e-commerce sales accounted for around 4% of its net sales. Comparatively Walmart has pursued a slightly more aggressive e-commerce strategy. Its share of ecommerce sales as a part of its consolidated net sales was also higher compared to Costco.
The business model of Walmart is very different from that of Costco and unlike its membership model, Walmart is open to all. It is why a large number of its customers are also from the lower-income segment. The company sells to a very large segment of customers and with time its number of affluent customers has also increased which is mainly because of its investment in technology and e-commerce that led to growth. As of January 2020, the company had 11,501 stores operational worldwide of which 5,355 were operational in the US including 599 Sam’s Club stores. In the US, Walmart runs four main formats of stores that include discount centers, supercenters, Sam’s Clubs, and neighborhood markets. Apart from these Walmart runs e-commerce websites and has experienced a sharp rise in its e-commerce revenue in fiscal 2020 compared to the previous year.
Share your perceptive views on Walmart and Costco possible competitive edge and similarities in business functional. You can post comments on our comments box or mail to us. Our Management Solution will be posted on our Good Morning Monday Management Solution for TASK 262 on 9th Oct 2023.
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