What You Can Learn from Costco in Turbulent Times!
Although my firm’s focus isn’t on price, but instead Savings Beyond Price™, I still look out for new big ideas that can help our clients save on the front end too. One of these new big ideas I came across is how Costco (72 billion dollar deep-discount high-volume warehouse chain) is coping with hyper-inflation in these turbulent times.
It all comes down to this quote from Costco’s CEO James Sinegal, “The biggest concern to me is that we lose our way and…start thinking it doesn’t matter if … (our suppliers) charge another dime or another dollar or another hundred dollars, “ he says, “Without those disciplines, we don’t have anything”. To put this quote into perspective, Costco never accepts a price increase without looking at every alternative possible to hold the line on price.
A great story that is told about Costco’s “take no prisoner philosophy” is how they dropped their banana vendor Benita (who provided 85% of their bananas) when they tried to add an extra $6 fee per case, even though for weeks Costco had very few bananas in its stores. Costco now buys their bananas from five different countries to get the right price for their customers.
That’s not all! Costco is growing their own pumpkins to help preserve the $5.99 price tags on their store-baked pies. And after Procter & Gamble announced a 6% price hike on Bounty paper towels and Charmin toilet paper, Costco bought hundreds of truckloads at the old price and stuffed them into storage depots. They also have gotten their suppliers to redesign their packaging to fit more items on pallets, to save on transportation cost. These are just a few examples of Costco’s tactics to keep their prices in check by reshaping the way they do business.
The lesson we can learn from Costco in these turbulent times is that it takes discipline, creativity, resourcefulness and guts to hold back your price increases. More importantly, don’t accept ANY price increase without searching out alternatives even when your suppliers wrongly think you have no other choice but to accept their double-digit price increase without question
Filed Under: Best Practices • savingsblog
