Costco Online Shopping Company

Posted: January 5th, 2023

Costco Online Shopping Company

Student’s Name

Institutional Affiliation

Abstract

The innovation and advancement resulted in the modification of business operations such as e-commerce, which highly affected its customer relations, as evident in the Costco Company in the United States. The paper addresses the various changes in the Costco Company resulting from E-commerce improvisation, such as company membership. The article also addresses the multiple services a customer enjoys upon the subscription to the various membership rates, such as cashing back. The company is located within the suburban setting due to the large space that is demanded storage of the bulk products. The paper also addresses the various drawbacks that the company is likely to face if it concentrates on targeting the aging generation through package shopping among the customers. The article also addresses that through Kotter’s change approach, a change in policies can be adopted and incorporated within the company as managed to protect future challenges.

Costco Online Shopping Company

Advancement in technology translates to better modes of conducting business as well as shopping habits. The invention of the various online platforms culminated in e-commerce, where business transactions are currently operated via online platforms. This has dominated modern society throughout the 21^st century (Li et al., 2021). Thus, the customers can order the various goods online according to their preferences from multiple suppliers who have incorporated the online shopping platform into their systems. In the United States, Costco offers an online shopping platform from where various customers can order their goods. However, as illustrated below, the company faces a drawback in the sales realized from the online sales due to the extra charge that the company charges on the unsubscribed members as well as subscription fees for the members, which shuns away potential customers and can be corrected through stipulated recommendations devised from Kotter’s 8-step approach.

Company Overview

Costco online shopping has risen over from the Costco wholesale corporation in the United States to become a multinational company which supplies good to various companies. It has been in existence since 1983, when it was opened by Brotman and James D. Sinegal in Seattle. The company became a corporation in 1997 following the corporation with Price Company. The company enjoys the world’s largest supply of prime beef, organic food, and wine since 2016. In 2019, the company was ranked among the top 14 on Fortune 500 rankings in United States corporations on account of the total revenue generation (Rahman, 2020). The company houses its headquarters in Issaquah, Washington, located in the United States. As of 2021, the company enjoys the control of over 804 warehouses worldwide from where they supply goods to various clients. The company is speculating about expanding its operations in Sweden and New Zealand as of 2022.

The Costco Company targets various individuals living in suburban settings. This target market led to the sprout of online services. This is because the multiple individuals residing within the suburban neighborhoods are always busy; hence prefer online shopping from where they can order the various goods from the company website. The company is located within suburban settings since bulk storage requires a relatively larger storage capacity (KIM, 2019). The company location and the combination of the value, technology, and humane customer services explain the company’s success. The ability to perform bulk purchases from suppliers enables the company to set lucrative prices which attract customers. The Costco Company improvised the company membership from where the customers subscribe to reap more benefits from the company, especially in the online shopping service incorporation to its business transaction. The subscription explains the increased profitability of the business.

Diagnosis

Advancement in technology led to improvising the new modes of shopping and goods delivery, commonly known as online shopping. Costco Company was not left out in devising the business transactions technique as it targeted various customers, particularly the suburban settings where their stores are strategically located due to the large storage capacity in which the company demands. In order to get a good grasp of the consumers and customers, the company improvised the subscription method for membership into the company. The subscription method led to the sprouting of the rank dubbed as Gold star membership, where customers become registered to the company and pay a membership fee of $60 (Jalbert, 2019). The Gold star membership guarantees the customers an annual Costco bargaining power throughout the year. The Gold star executive rank membership in Costco Company demands a $120 membership fee, which guarantees a 2% cashback on the customer purchases. In addition, the company offers a business version for both rank membership at the same rate charge.

The various Costco membership guarantees the company to reap higher profits and expand the company despite digging deeper into the individual members they have subscribed to. For instance, for an individual to cover their extra $55 cost, they have to sacrifice and be ready to spend a relative minimum of $230 monthly or equivalence of $ 2,750 annually (KIM, 2019). However, only the individuals who spend twice the monthly $230 or $2,750 annually enjoy the Costco Company’s full membership. In addition, only individuals who can spend and make a purchase of $37,500 are the only individuals who enjoy a cashback of $750. Although this membership account for 39% of the company membership base, it translates to almost two-thirds of the overall company sales. This, therefore, illustrates the customer base challenges where the company targets the rich customers since an average Costco shopper should have a monthly financial income of about $93,000 annually (Rahman, 2020).  In addition, the customers who are not registered as members of the Costco Companies have to incur the extra cost of about 5% of the product to enjoy the privilege of shopping in the company and delivery.

Although Costco Company purchases various companies in bulk, it still presents a challenge to the customer. For the single products available at Costco Company, the prices are so lucrative to the company. According to Jalbert (2019), the Costco Company’s bulk purchases enable the company to acquire various products from different companies at relatively low prices. This attracts multiple customers to buy multiple products from the company at relatively low prices. However, the overall transactional costs for all products are relatively high due to the policies and rules improvised by the company. This is because the customers, according to the Costco Company, cannot purchase a single product from the company’s website even if the customer requires only one single product (KIM, 2019). For instance, a customer in need of one shampoo cannot purchase a single product but rather buy a three-pack. This attracts huge amounts of the initial cost of purchasing the products, hence the customers’ impulse buying. This leads to more of the products purchased going to waste, especially the perishable products despite the high cost incurred in buying the product.

Kotter’s 8-Step Approach

Sense of Urgency

The institution of a change within an organization is not a drastic event but rather a gradual process, as guided by James Kotter in his eight-step leadership change approach. Therefore institution of change in the Costco Company in the online department will follow the James Kotter model of change. The process of change in the Costco Company will be initiated by creating a sense of urgency in the company (Galli, 2018). Sense of urgency entails explanation to the shareholders on the immediate change required to be adopted by the company to mitigate an alarming situation (Weiss, 2016).  This process will be through the creation of awareness among the shareholders of the company on the reasons why the various policies on the delivery and purchase of the products should be initiated within the company to help safeguard the existing customers and target more customers, which will yield more income due to increased sales. This process will incorporate the explanation to the company’s key shareholders on why the company misses a high number of potential customers due to increased member subscription and the extra fee charged on the non-members. The high number of potential customers is particularly those within the youth age bracket who comprise the highest potential customers; hence, the policies’ adjustment will tap in these target customers.

Creation of a Guiding Coalition

Following the successful creation of awareness on the Costco Company’s key shareholders, a team of leaders will be instituted to guide the change implementation process. This process will be successful by choosing the right individuals fit to undertake the implementation of the change (Galli, 2018). The individuals involved in the team will be selected from among the various company staff who show the potential of being committed to guiding the process of implementing the strategy, especially those within the sales department and the customer relations department, as they are the highest influencers of the customers. The various team members will be in collaboration with the team leaders to initiate the change. The guiding team must also show a great power in influence the various stakeholders of the company to adopt the change (Weiss, 2016).

Development of a Change Vision and Strategy

The team leaders selected to assist the team leaders in driving the change in policies will also formulate a change implementation vision and strategy. The plan’s vision will entail a clear manifestation and illustration of the difference concerning the future. The vision will, for instance, illustrate the changing nature of the population where the young generation forms the majority of the people in the society. According to Galli (2018), the young generation, which includes the majority of the community’s population, prefers the purchase of cheap individual products rather than a pack of affordable products. The focus of targeting the youth assures the company of continuous income to the company since the youth are always buying cheaper products and influence their friends to purchase affordable products, especially if there is no subscription fee. The youth also prefer buying products from a company where they are assured of redeeming the subscription fees. Therefore, the team will help refine the vision and strategy to improvise while advocating for the change within the Costco Company.

Communication of the Change

While initiating a change within an organization such as Costco Company, communication is key. Through the team members’ aid, the leader will communicate the transition to the company staff and the various company stakeholders. Effective communication between the leaders of this change plan and the employees as well as the managers will spark the support for the implementation process (Galli, 2018). A repeated communication between the leaders and managers will assure an effective understanding of the strategy’s need. The means of communication of the need for change and the recommendation will be to seek a way of convening a meeting with the leaders of the company to address the change and through posting of memos on the various notice boards.

Empowering the broad-based action

Upon successful communication to the Costco Company on the need to lower the membership change and the adoption for the single product purchase, the team in charge of the planned project will formulate the best membership rate. The team will also help implement change within the customer relations department, where they will encourage the subscription of the youth to the company membership.

Creation of Short-Term Wins

The project team will help implement the plan and visualize the possible goals and outcomes from the adoption of the plan by improvising short-term goals generating strategies. A short time developing goals creates enthusiasm and motivation among the employees in supporting the planned change instead of when the employees see the plan as difficult to achieve the goals, which translates to decreased morale. To motivate the employees to support the planned change, the team will create awareness among the youth in subscribing to the membership of the Costco Companies as well as mobilizing on the youth to purchasing the products from the Costco online shopping site as a method of proving the success the proposed plan. While ensuring the improvements are closely tied to change effort, the guiding team and the company will provide the company employees are motivated to adopt the change to mobilize the youth to subscribe to the company membership. This will have an impact in influencing the company stakeholders to adopting the change (Weiss, 2016).

Consolidation of the Gains and Implementation of Change

The guiding team, as well as the management, will try to improvise the various mechanisms that will seal the multiple drawbacks that come along with the implementation of the program (Galli, 2018). For instance, the guiding team, as well as the management team, will initiate the means of motivating the various sales representatives in targeting the youth in marketing. This method aids in preventing the reversion of the institution to the previous models of the company, which targeted the old and the packaging individuals.

Anchoring Change in the Culture

Within this process, the guiding team and the management team will initiate the various method of motivating the human resources and reward programs and institutions of infrastructure that create a positive environment that favors the business setting. For instance, the institution is an effective means of rewarding the sales representatives who present the company’s high sales, especially those targeting the youth customers.

Conclusion

The advancement of technology has contributed to the increased use of the internet, translating to the sprout of e-commerce. The Costco Company in the United States adopted the change where they improvised the company members of the company to enjoy the various services such as cashing back and home delivery instead of incurring extra cost. The process shuns away from the different potential customers from shopping from Costco Company. However, through Kotter’s change Approach, the company can institute the change, which encourages more customers by reducing membership fees and institutions of single product purchases. The company traced its origin to 1983. The company is ranked among the highest revenue generating company in the United States. The company charges a membership subscription to enjoy cashing back though the products are sold as a pack rather than an individual product. It highly favors the suburban customers.

References

Galli, B. J. (2018). Change management models: A comparative analysis and concerns. IEEE Engineering Management Review, 46, 3, 124-132.

Jalbert, T. (2019). Merger Opportunities among Club Shopping Stores. Global Journal of Business Pedagogy, 3, 1, 54-65.

KIM, J. J. (2019). The Empirical Study on Purchasing Behavior between Costco Wholesale Members and Non-Members. The Journal of Distribution Science, 17, 9,.25-33.

Li, J., Huddleston, P., & Minahan, S. (2021). International retail format transfer: A comparison study of Australian and US warehouse club members. Journal of Retailing and Consumer Services, 59, 102358.

Rahman, M. H. (2020). Financial Analysis of Costco Wholesale Corporation: Exploring the Strengths and Weaknesses. The Bangladesh Journal of Agricultural Economics, 41, 1, 17-34.

Weiss, J. W. (2016). Organizational change (2nd ed.). Retrieved from https://content.ashford.edu/