I think Costco has the best strategy due to the cost efficient distribution through the use of the cross dock distribution. Cross docking allows the club has the ability to minimize inventory, improve product quality and increase responsiveness to any changes in the market conditions. Does one rival have a somewhat weaker strategy than the other two? Yes; BJ’s because they’re not as popular and they’re concentrated in the Eastern United States, which allows the company to streamline distribution and marketing. They’re also not benefiting from the economies of scales, because the margins are very thin and making low costs/high volumes are essential to profitability.
Costco aim is to be a cut above by offering many unique or unusual items. Their marketing strategy for stores is like a treasure hunt. This high and low shopping experience is a powerful elixir for middle class shoppers and the same experience is carried out on the on line site by not offering commonly available products to keep customers hunting to entice that I have to get it now it may not be here again shopping experience. 3. Costco Wholesale is the world’s largest membership warehouse club.
How do they do it? Costco beats Walmart, not by competing on price. Instead, they offer a highly targeted and subsequently refined shopping experience. Costco is structured around its key strengths: 1) Know your customer: Costco goes after a certain type of customer: small business owners who are status conscious and who have money to spend on bargain-priced premium items like Dom Perignon champagne, luxury watches and tech gadgets. The reason why Costco decided to focus on small business owners is that they realized that these people are often some of the wealthiest people in their communities: they have successful businesses, they want to buy good stuff, but they don’t want to spend a lot of money.
Old Navy and IKEA are both accessible stores that can be found across North America and online. Both companies make eye-appealing products for the whole family, but do not age well. For example, IKEA pre arranges its products to lessen the thought of assembling products. When products become less of a hassle for the buyers, they tend not to look at the cons of the products. IKEA does this buy distracting its customers by making their products colourful, stylish, and cheaper than other competitors’ products.
They need to enforce distinctive cost-saving methods in their production, operations, and selling that has allowed them to draw in the foremost affluent customers in discount selling. The central focus of their business model turned around high sales volumes and fast inventory turnover by giving fee-paying members beautifully low costs on a restricted choice merchandise that include a mix of across the country branded and illicit private-label products in an exceedingly wide selection of merchandise classes. This is an awfully appealing business model because it provides the power to control fruitfully at a lot of lower profit margin by securing marketer volume getting agreements, economical distribution, no-frill self-service warehouse facilities and supplemental membership fee revenue. Another magnet is because of the high sales volume and fast inventory turnover style of this business model, the accelerated money conversion cycle permissible Costco to gather the funds for inventory before marketer liabilities changing into due. This provided for marketer finance and also the ability to require advantage of early payment discounts that additional reduced operational prices.
By Costco finding ways to insure they are cost efficient they are able to offer their customers reasonable prices. Out of the three rivals BJ’s seem to have a weaker strategy out of the rivals. One thing that hurt their strategy is they are not well known and focuses most of their business in the eastern part of the U.S. Another thing that could hurt BJ’s strategy is their smaller packaging.
The bargaining power of suppliers is weak because good substitutes for supplier products/services exist and the number of suppliers is large relative to the number of industry members and there are no suppliers with large market share. The bargaining power of buyers is strong because buyer costs of switching to competing products are low and the industry’s products are standardized or undifferentiated. This analysis reveals that the strength of competition in the industry is strong especially since the recession that began in 2008 caused buyer demand to decrease. This decrease in buyer demand strengthened the intensity of competition. What factors are critical to success in the U.S. family clothing stores industry?
Costco’s business model is based on a best-cost strategy. It entailed generating high sales volumes and rapid inventory turnover by offering fee-paying members attractively low prices on a limited selection of nationally branded and selected private-label products in a wide range of merchandise categories. It is an appealing business model. Because it combined with the low operating costs achieved by volume purchasing, efficient distribution and profitable at significantly lower gross margins than traditional wholesaler, mass merchandisers, supermarkets and supercenters. 2.
Competitive force of substitute products A high competitive force of substitute products exists in the North American wholesale club industry because switching costs is not high in the said industry. For example, members in Costco can easily switch to BJ’s and Sam’s club in the next year because the membership fees are quite similar. (Costco membership fee ranges from $50-$100, BJ’s membership fee ranges from $45-$90 and Sam’s club’s membership fee ranges from $35-$100). Moreover, wholesale clubs meet the same needs of their customers – providing more affordable goods compared to supermarkets. Aside from this, customers who do not want to pay for a membership fee and would just want to buy the same goods can buy them from supermarkets, but with a higher value.
There will be plenty of business to be earned. Although the threat of new competition entering the industry is low because the established companies have competitive advantages (of low-cost structures, economies of scale, and brand loyalty), competition from current competitors is intense (DeFoe, 2012). The bargaining power of the consumers is also something to take note of. Customer’s taste, preferences, and expectations influence the demands for products and services (Hoovers, 2013). The Home Depot has to provide the products that the customer’s want, which leaves little room to stand out from competitors.