Costco and Wal-Mart: A Tale of Two Very Different Competitors

Jan 10, 2005

By George Anderson

One retailer is associated with blue state politics; the other red.

One is said to enjoy good relations with unions. The other is called the evil empire by organized labor.

One has parking lots filled with middle income and more affluent consumers driving up in newly purchased cars and trucks while the other tends to have a higher percentage of pre-owned models filling its spaces.

The two companies are Costco and Wal-Mart, and as different as they are, they are also similar in a number of respects:

  • The two are intensely focused on the customers who shop in their stores.

  • Food is used to drive customer traffic (both individual consumers and businesses).

  • Both companies have business models that strive to take unnecessary costs out of the supply chain so that savings can be passed on to customers.

  • Selection is limited and the companies sell in bulk through their warehouse club stores (Costco Warehouse and Sam’s Club).

  • The companies use low prices on established branded products to create a distinct point of difference with competitors.

Bob Nelson, the vice president of finance and investor relations at Costco, provided the San Antonio Express-News with an example. “We are typically catering to a member who wants to find value in premium merchandise or high-end goods,” he said. “We’re not trying to procure a polo shirt and sell it for $7.99. We try to find a Ralph Lauren shirt and sell it at $29.99 when, at stores, it’s retailing for $69.99.

Each has a growing private label program. Costco’s Kirkland brand is seen as being more upscale while Wal-Mart’s tiered-program targets shoppers looking for a lower-price alternative to national brands.

They both pump gas.

Moderator’s Comment: Provide your own comparison of Wal-Mart and Costco. Does either one have anything to fear from the other?

Another similarity between the two companies is the healthy respect each has for the other.
George Anderson – Moderator

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