What is costco model and how is most successful model ever for services.

What is costco model and how is most successful model ever for services.

Costco is making money by charging the membership fees other than getting revenues from selling goods. The last year’s sales data of Costco shows that they lost $0.1 billion by selling goods, but their membership fee revenue is around $10 billions, so they have pretty good revenues overall. They are different than other merchants like Walmart in many aspects:

(1) They only sell one good brand for one type of products so they are able to negotiate with supplies to get the lowest price. When customers get into Costco, they don’t need to worry about the quality of goods, all of those products are selected with specialists by Costco.

The future of shopping will fall into two categories: one is general goods that within everyday’s usage, what people want is just good quality with lower price like tissue, utensils. For these types of goods customers are not very interested in spending time on picking between brands, just to pick one big brand name is good enough for this type of shopping. Another type of shopping is rather more on personality or privacy part like underwear, phone, laptop. People will keep shopping for themselves.

(2) As a costco’s member, you can take advantage of the group price, this is like you are working with a group of people, it’s advantageous to stay within a group, so that the cost of living is lower. companies who provide membership will become a intermediate to help all the members to negotiate price with venders. since they have advantages in negotiating price and quality, so people within the group benefit from that. it’s like you hire a daily to help you to save money but still keep same quality of life.

The future trend for physical product will be merged in services, instead of buying products you are buying services. Therefore, I want to figure out how we are able to provide a services by membership with costco's model. you are able to enjoy all the best services with lowest price.