Costco Case Study

C-2

Case 1

Costco Wholesale

Corporation: Mission,

Business Model, and Strategy

Jim Sinegal, cofounder and CEO of Costco

Wholesale, was the driving force behind Costco's

23-year march to become the fourth largest retailer

in the United States and the seventh largest

in the world. He was far from the stereotypical

CEO. A grandfatherly 70-year-old, Sinegal dressed

casually and unpretentiously, often going to the

offi ce or touring Costco stores wearing an opencollared

cotton shirt that came from a Costco bargain

rack and sporting a standard employee name tag that

said, simply, "Jim." His informal dress, mustache,

gray hair, and unimposing appearance made it easy

for Costco shoppers to mistake him for a store clerk.

He answered his own phone, once telling ABC News

reporters, "If a customer's calling and they have a

gripe, don't you think they kind of enjoy the fact that

I picked up the phone and talked to them?"1

Sinegal spent much of his time touring Costco

stores, using the company plane to fl y from location

to location and sometimes visiting 8 to 10 stores daily

(the record for a single day was 12). Treated like a

celebrity when he appeared at a store (the news "Jim's

in the store" spread quickly), Sinegal made a point of

greeting store employees. He observed, "The employees

know that I want to say hello to them, because

I like them. We have said from the very beginning:

‘We're going to be a company that's on a fi rst-name

basis with everyone.' "2 Employees genuinely seemed

to like Sinegal. He talked quietly, in a commonsensical

manner that suggested what he was saying was

no big deal.3 He came across as kind yet stern, but

he was prone to display irritation when he disagreed

sharply with what people were saying to him.

In touring a Costco store with the local store manager,

Sinegal was very much the person-in-charge. He

functioned as producer, director, and knowledgeable

critic. He cut to the chase quickly, exhibiting intense

attention to detail and pricing, wandering through

store aisles fi ring a barrage of questions at store managers

about sales volumes and stock levels of particular

items, critiquing merchandising displays or the

position of certain products in the stores, commenting

on any aspect of store operations that caught his

eye, and asking managers to do further research and

get back to him with more information whenever he

found their answers to his questions less than satisfying.

It was readily apparent that Sinegal had tremendous

merchandising savvy, that he demanded much

of store managers and employees, and that his views

about discount retailing set the tone for how the company

operated. Knowledgeable observers regarded

Jim Sinegal's merchandising expertise as being

on a par with that of the legendary Sam Walton.