Three Reasons Why Costco Is Beating Wal-Mart And Target

November 18, 2013 Leave a comment

Three Reasons Why Costco Is Beating Wal-Mart And Target

ASHLEY LUTZ NOV. 15, 2013, 2:23 PM 12,274 53

Business at Costco is thriving.

The retailer is posting gains even as competitors like Wal-Mart and Target have struggled to attract cash-strapped consumers.  Analysts at Trefis have pinpointed a few reasons for Costco’s incredible success.

1. Customers want deals. It’s estimated that shoppers can save up to 55% on groceries from buying in bulk at warehouse chains, write the analysts at Trefis. Costco also keeps prices low by keeping store displays at a minimum and offering fewer items. The retailer only marks up merchandise 15%, compared with a 25% average for most grocery chains. “Due to these bargains, the warehouse club industry sales have grown at a higher rate than general merchandise store sales over the last decade,” the analysts write.

2. Costco is hyper-focused on local markets. The brand “grants its local store managers some discretion over the products that are kept in stores,” the analysts at Trefis write. Demand for salsa is highest in the Southwest region of the U.S., so stores there are sure to stay stocked up, for example.

3. Costco changes its brands often.  “Customers always find something new at its stores and get a ‘treasure hunt’ experience,” say the Trefis analysts. The retailer occasionally offers some high-end items like Coach purses and Dom Perignon champagne to further intrigue shoppers.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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