Costco Change Project Brielle Mulcahy, Drew Norris, Landen Segner, Natalie Lay, Taylor Jarratt

Costco Wholesale Corporation is a membership warehouse club known across the United States and internationally. Costco is a leader in the warehouse industry and is number #15 on the Fortune 500 list.

Strengths

  • Membership renewal rates were 90% this year (Costco Wholesale Corp., 2017)
  • Membership fees accounted for 72% of $3.67 billion in revenue in 2016 (Levine-Weinberg 2017).

Weaknesses

  • Costco is behind in their technology and appeal to the younger generation.
  • Costco's main customer membership base is the Baby Boomer Generation (Peterson, 2014).
Costco's website features outdated Iphones

Opportunity

  • Currently, it is highly unlikely for millennials to shop at Costco (Tuttle, 2014).
  • Costco has an opportunity to attain a new customer demographic through targeting millennials and Generation X

Threats

  • While the number of households that only use Costco has dropped from 14.9% to 9.8%, the number for Amazon Prime and Costco customers has grown from 4.8% to 11.3%.
  • Walmart’s total company revenue for 2016 was $480,130 billion. Compared to Costco, whose total revenue for last year was significantly less at $116,073 billion (Cohen 2016).

After evaluating the SWOT, it can be concluded that Costco is a strong company. Costco has room for improvements in their use of technology and appealing to the younger generations.

Proposed Change

Costco should convert younger customers into renewing members through creating a specialized membership more convenient for millennials.

  • Silver Star Membership: 10 visits to Costco a year - $20
  • Adding another 10 visits within the year - $25
  • App update: virtual membership card, records customer visits, shop and scan feature

Costco’s membership fees account for a large portion of their income, with 72% of its $3.67 billion in revenue in 2016 (Levine-Weinberg 2017). Their current customer demographic is the Baby Boomer Generation (Peterson, 2014). With membership fees being highly important to revenue, attracting Generation X and Millennials is essential for Costco to thrive into the future.

Kotter's Change Analysis

  1. If Costco wants to be relevant in another forty years, then Costco’s leadership will need to begin to find some means to reach out to a younger generation.
  2. To build a coalition, Costco should hire an independent contractor.
  3. Costco's strategic vision is to add a new membership option and to improve their use of technology.
  4. To enlist a volunteer army, Costco will need to inform current employees of the change.
  5. Remove technological barrier through improving the Costco app.
  6. Implementing the new app update is a positive change that can be made in a shorter amount of time, generating a short-term win.
  7. Appealing to the next generation through improving e-commerce and the use of technology through the Costco app is essential for long-term sustainability.
  8. Institute change through adding the Silver Star plan and improving the Costco app.

In conclusion, while Costco is a strong company, improvements are needed to ensure Costco's long term success. Adding a membership plan more attractive to millennials and improving the Costco app will improve the company's sustainability.

Credits:

Created with images by JeepersMedia - "Costco" • Orin Zebest - "Christmastime Costco" • JeepersMedia - "Costco" • JeepersMedia - "Costco" • JeepersMedia - "Costco" • JeepersMedia - "Costco" • krismerri - "shopping baskets"

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