Costco offers a limited depth of range carrying only 4,000 items for sale at any one time
– “As a rule of thumb, a retail business generates 80 percent of its sales on 20 percent of its merchandise. Our concept is to zero in on the most sought-after items, to quite literally limit our merchandise assortment to the 20 percent, and to make the 100 percent of our sales on that 20 percent.”
– “The temptation to add sku's is one of the most terrifying aspects of this business. We must constantly remind ourselves that we are not in the full-line retail business. We need to take an 'intelligent loss of sales' instead of broadening our assortment in order to compete.”
– “This game requires discipline. Costco must be willing to forgo many items customers may want--low-fat this or that,for example. Instead Costco focuses on relatively higher priced goods that it can price competitively and build repeat business… Costco bakeries don't sell basic white bread, because margins are already so low there isn't much room for Costco to improve on them.”
– “Costco offers about 3,600 active items compared with a typical supermarket that might carry about 25,000 items. We have a wide range of categories - pianos to Rolex watches and 100-pound bags of rice - but they all represent quality national brands and that helps us to nearly eliminate advertising costs, which are almost nil. By offering large sizes,Costco provided substantial price savings on all merchandise… We've brought better quality, higher ticket and larger sizes to our members, as well as services.“ Richard Galanti, CFO, Costco, May 1990
– “They typically don't offer the depth of merchandise that retail stores do. For example, an appliance superstore may sell some 15 different microwave ovens; a warehouse store may stock three or four, each in different price ranges.Larger inventories are kept only on items that will sell quickly, such as soda pop or laundry detergent. And brand names change often, based on what the club can buy most cheaply: one week, the most heavily stocked detergent could be Cheer, the next week, Wisk.
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