Industry Analysis Part A

B.

Task Environment Audit (Industry and Competitors) 1. INDUSTRY Analysis - GLOBAL a. Description of each Industry/segment including Market Share Analysis Costco is identified as a major player in the Warehouse Clubs & Supercenter industry along with Sam’s Club and BJ’s Wholesale. According to NAICS, this industry specified with code 452910, “comprises establishments known as warehouse clubs, superstores or supercenters primarily engaged in retailing a general line of groceries in combination with general lines of new merchandise, such as apparel, furniture, and appliances..” The breakdown of the Warehouse Club and Supercenter industry from the parent industry of Retail Trade is as follows:

Industry NAICS Detail

Code 44-45 452 4529 45291 452910

# of Description Retail Trade General Merchandise Stores Other General Merchandise Stores Warehouse Clubs & Supercenters Warehouse Clubs & Supercenters

Estab.

Sales

1,114,637 40,723

3,056,421,99 7 445,224,985

31,368 2,912 2,912

224,482,103 191,252,396 191,252,396

% of Estab .

% Sale s

3.7%

14.6%

2.8% 0.3%

7.3% 6.3%

% Estab.

% Sales

GM

GM

77.0% 7.2%

Although Warehouse Clubs & Supercenters (WC&S) only make up .3% of the retail trade industry in terms of number of establishments, this industry earns only 1% less than other general merchandise stores in terms of sales. If the WC&S industry is compared to General Merchandise Stores, it pulls in 43% of the industry’s sales with only 7.2% of the industries establishments running with a WC&S classification. According to Hoover’s Online, warehouse clubs are seeing customer membership at an all-time high. While annual membership fees range from $40-100, Costco’s offers its memberships from $45-60. • Source: US Census Bureau. – Industry Statistics Sampler The supermarket industry lost market share to such warehouse clubs and supercenters. Currently in North America, supercenter Wal-Mart has achieved the number one spot of top 10 Mass Market Retailers, with Costco coming in at number 3. On the global scale, Costco is the seventh largest food retailer. In regard to the warehouse industry, Costco rivals both Sam’s Club and BJ’s for the number 1 spot. KEY COMPANIES Top 10 Mass Market Retailers (North America) (Annual Sales)

1. Wal-Mart 2. Kroger 3. Costco Wholesale 4. Target 5. Walgreen 6. CVS/Caremark 7. Albertsons 8. Safeway 9. Ahold USA 10. Loblaw

50% 43%

Source: Mass Market Retailers, August 2006 Top 10 Worldwide Food Retailers (Annual Sales)

1. Wal-Mart 2. Carrefour 3. Tesco 4. METRO AG 5. Kroger 6. Royal Ahold 7. Costco Wholesale 8. REWE-Zentral 9. Lidl 10. ALDI Source: Supermarket News 2006 Top 5 US Warehouse Clubs (Annual Sales)

1. 2. 3. 4. 5.

Costco Wholesale SAM'S CLUB BJ's Wholesale Club Smart & Final PriceSmart

Source: Hoover's, Inc.

b. c.

Financial Performance of each Industry/segment - Past, Present, and Future Overall assessment of the competitive nature of each industry using Porter’s model