Furthermore, the Costco model demands an ever-changing assortment of goods. Packaging is critical, in that it must be designed to drive the average ticket consistently higher. Costco and other club stores rely heavily on packaging strategy to squeeze out growth.
Costco also pulls value from their logistics. The company operates what they term depots, which are state of the art distribution facilities, which the company feels gives them a competitive advantage.
Costco has also focused on marketing and customer service as a way to derive value. One such program is a new extended warranty policy on electronic goods, the largest non-food segment of Costco's sales. Combined with a concierge service, this warranty has lowered the costs associated with product returns.
Related to both marketing and procurement, Costco has made use of strategic alliances to improve their bottom line. For example, in 2007 they developed a business supplies program to forge stronger relationships with office supply manufacturers. This resulted in savings to the customers and allowed Costco to capture part of that billion-dollar business.
Human resources have also played a key role in Costco's value chain. The company runs as smoothly as it does in part because they have retained most of their key managers and executives for over 20 years. In cultivating this loyalty, Costco has been able to avoid the high costs associated with new managerial and executive talent and the inevitable learning curves associated with turnover at the top.
These four merchandisers all have different approaches to the value chain. Wal-Mart seeks to squeeze value from every aspect of its business, something that goes back to Sam Walton. Target has a similar approach, but puts stronger emphasis on branding and its product mix. The value chain at Costco is driven largely by its purchasing and distribution, with packaging playing a key role in improving one of the club store industry's biggest cost drivers - the average ticket. Sears has place significant emphasis on human resources as part of the value chain, and followed Wal-Mart's strategy...
So for each of these companies, they have tried to find their own ways to drive value and differentiate themselves.
Works Cited
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Eavis, Peter & Kapner, Suzanne. (2007). Mapping Lampert's next Sears Move. Fortune.
George, Jim. (2006). Club Stores: Show us the Value. Packworld.com.
