The average customer visits their local Costco 22 times a year. The company has become one of the largest in the U.S., with 473 outlets and more than $50 billion in sales, and is also the largest membership warehouse club chain in the world. Its founder and CEO, Jim Sinegal, has been called the Sam Walton of the 21st century for his low-key style and seeming defiance of all things Wall Street. But, whether investors like him or not, America – and much of the rest of the world – has fallen in love with his discount depots.
When Sinegal’s college presented him with its Most Distinguished Alumnus award, the Costco founder was almost left speechless. “I’ve never been told I’m a most distinguished anything,” was all he could say. With his poor grades and lack of focus in high school, it is doubtful that Sinegal’s teachers ever thought he would amount to much. But, today, with a billion dollar corporation under his belt, Sinegal remains not only one of the most accomplished, but also one of the most admired and liked CEOs in the industry. How did this once reckless young boy become the success he is today?
“My test scores were good, but my grades weren’t that good, because I needed focus. It was at San Diego Junior College (now City College) where I regained that focus, and paid attention, because deep down I knew education was important. I’ve never been told I’m a most distinguished anything.
Our business was founded so that small businesses could come in and buy essentially everything they needed for their business under one roof. Café owners could purchase all of their food and drink, cigarettes and candy, cleaning supplies, pots and pans, toilet paper and towels, pads and pencils, and so on.
One time [customers] may come in and see that we have some Coach handbags and they come in the next time and the Coach handbags aren’t there, but perhaps there are some Fila jackets. The attitude is that if you see it, you have got to buy it because it may not be there next time.
Technology has made us much more productive. With computers, fax machines, and cell phones we have more productive time during the course of the whole day and can react to situations more immediately. Sometimes we have so much information it’s more than we can deal with. Our web site and our e-commerce business are also profitable on a fully allocated basis, and that is somewhat of a milestone.
The reason that the dot-com companies didn’t succeed is that they were very good at the science end but they didn’t understand anything about the art of buying and selling merchandise. They thought that was the easy part but it turned out to be the most difficult. If you don’t have the right merchandise in the right place at the right time you can forget about everything else. All the satellites in the world aren’t going to help you. We only have one bullet in our gun, the right product at the right price.
We have said from the very beginning. We’re going to be a company that’s on a first-name basis with everyone. Imagine that you have 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for you.
Our attitude has always been that if you hire good people and provide good wages and good jobs and more than that – if you provide careers – that good things will happen to your company. I don’t see what’s wrong with an employee earning enough to be able to buy a house or have a health plan for the family.
I think the biggest single thing that causes difficulty in the business world is the short-term view. We become obsessed with it. But it forces bad decisions.
You have to plan the opportunity to think about your business and plan what you’re going to do. You have to schedule it. Otherwise you’re just a hamster running on a treadmill; you’re never going to get anywhere. You’ve got to schedule it. Strategic planning is an important part of running any business and the more so for businesses that operating in multiple states and countries. If you’re a big-picture guy, you’re not in the picture. Retail is detail.“
wow!
What a great article!
After reading your blog, thought you would be interested in this…
CNBC will be airing “The Entrepreneurs” on Wednesday October 1st at 10p ET featuring the founders of Feed Granola Jason Osborn and Jason Wright. They will be discussing the methods which led to their estimated three million dollar a year business. Additional web extras can be found at http://theentrepreneurs.cnbc.com
Please let me know if you would like any additional information.
Thanks,
Kevin
201 735 4730
While I congratulate Jim on his great success, I woudl liek to share a real recent experience with costco.com
I bought a Dell Inspiron 1525 laptop thru’ costo.com. the cost as about $866/-, including a 2 year warranty. It was delivered on Sep 15th. It took me more than four hours on the phone with costco conceirge services and Dell to get the warranty information updated on Dell’s website. Without that, Dell would give no help at all unless I paid for it.So that was the first problem. According to dell, Costco hadn’t sent them the warranty information. so the warrant y appeared as expired [for a new machine!!].
Then, on Sunday 5th, the top of the HOME key on the extreme right of the keyboard came off. I tired to snap it back but failed. It is very delicate and fragile – a tribute to chinese manufacturing. I contacted Dell thru’ their chat line, and was told that a new keyboard and other stuff [ screws, screwdirver, etc] would be shipped and I had to install it myself. I was given a link to a page [ see below]
“http://supportapj.dell.com/support/edocs/systems/ins1525/en/SM/keyboard.htm#wp1180346″
This page contians instructions on how to change the keyboard. I urge you to read it and decide whether this should be attempted by a lay non-technical person. I then called costco conceirge services and spoke to them. I was told that had I bought an HP, Gateway, etc, costco would do something about it, but not if it were a Dell. Now, how was I supposed to know that when I bought the stuff? There were no such warnings on the costco.com website which offered this product. Moreover, I think the costco.com buyer ought to be informed about the very poor quality of Dell machines. Now, I bought the machine from costco.com, not Dell. I was not told that I would have to be at the mercy of Dell. I bought the machine thru’ costco.com, thinking I was in the very good hands of a great company – costco.
The costco concierge services person I spoke to – Ms. TUNISIA, badge #800555 – was not willing to understand my emotional distress, and kept telling me that I had to go to Dell. At times, she was simply rude and impatient. She was doing her job roboticlaly without the slightest concern for my mental state. She did not even understand why this is bad business for costco, and why it shoud be reported to her superiors. I got tired of speaking to her, and asked to speak to her supervisor. I then got Mr. Marco, who was more understanding and has said he will escalate the matter, however I shoudl write to costco direct. after purchasing the machine, I have spent two hours getting th warranty updated, an hour with costco, an hour with dell, adn this note has meant another 30 minutes. tryin to resolve this serious quality issue. Is it true that great American companies are in real decline today? And is Costco also in the same sad situation?
To the above complaint, about a lack of service with his Dell Computer at Costco last October, I’d say this, ‘you decided to buy a computer at a warehouse club, not because of service but because of price’. But then, when things don’t go perfectly right (as can happen with any product) you expect the same level of customer suport, as if you’d paid full price for it at a store which sells ONLY computers.
In retail you always get what you pay for, and big box stores can only pass on so much saving through lower overhead and large buys. Some of it will be made up with less ‘one on one’ customer handholding as yours required.
So next time Sam .. pony up full price at Dell’s website … then if you don’t get your expected level of customer support, you’ve got something to complain about.
Working At Costco is one of the best jobs i have ever had. Jim is a fantastic man with a plan! They realy so care about us employees!!
-Hans
Albany, Oregon