Costco is one of the largest retailers in the world, with over 800 warehouses that are currently running all across the world. It is operating as an exclusive member’s club, Costco offers many of your favorite products and brands in bulk sizes at an extremely discounted price.
Costco employs 254,000 full and part-time employees worldwide. In the year 2016, Costco had 86.7 million members. This number increased to 90.3 million members in 2017. and 94.3 million in 2018. In 2019, Costco had 98.5 million members. In 2020, Costco had 105.5 million members.
Recently, Costco was the first company to grow from zero to $3 billion in sales in under six years. For the fiscal year ending on August 31, 2012, the company’s sales totaled $97.062 billion, with a $1.709 billion net profit.
Costco is one of the wholesale suppliers you can use for your dropshipping store. Costco is a membership-only warehouse that generates a majority of its revenue from retail sales and a small percentage from membership fees. Therefore, customers must buy memberships to access the warehouse and make purchases. This is executed through direct sourcing and efficient inventory management techniques.
Also, Costco divides its business into three segments: United States Operations, Canadian Operations, and Other International Operations. These 3 business segments are reported by revenue and operating income. Of the three, the United States Operations was the largest, followed by Canadian Operations.
If you are planning to use Costco as your or one of your suppliers; make sure you take a look at Hustle Got Real to manage your dropshipping store easily. This sofware privides with fast stock & price monitoring, you can also set up the Auto Ordering feature; and much more!
Advantages of Costco Dropshipping
A Great Amount Of Products
Using a big supplier such as Costco means you get a wide variety of dropshipping products. Get unique products and stand out against your competitors. Furthermore, Costco will fulfill those dropshipping needs, whether you’re selling multiple niches or want a diverse product range from within one niche.
Great Customer Support
When it comes to American suppliers – no one can compete with the customer service they provide. If there is ever a case of shipping or tracking issues, cancellations, returns, or a problem with a delivered item, you can rely on Costco to help.
Fast & Reliable Shipping
Costco offers high-quality products with just 3-5 days delivery time, which means you will offer your customers fast shipping. Shipping time is definitely a factor for buyers and is key to a successful business.
Reasons Costco Is a Great Company
The warehouse club model employed by Costco (COST) has proven to be extremely popular in the U.S. As of March 17, 2022, the company was operating nearly 820 stores, mostly in North America, and had 114.8 million members. Threfore, It’s safe to say that the vast majority of those dues-paying members are regular buyers of Costco’s jumbo-sized merchandise.
It Makes a Profit Before Selling a Thing
In fiscal 2021 Costco sold $192 billion worth of merchandise and brought in $3.9 billion from membership fees. Business gross margin, excluding membership fees, was around 11%, as it has been since at least 2014.
Costco doesn’t actually make such a large portion of its profit by selling goods. It charges its members to an annual fee for the privilege of shopping at its stores, and these type of fees represent a large portion of Costco’s operating profit. In 2021, Costco’s merchandising costs were about $170 billion on $192 billion of revenue. Selling, general, and administrative costs were $18.5 billion. The total profit for the year was $5.2 billion.
A High Retention Rate
With prices often far lower than at competing retailers, it’s not difficult to make the case to consumers, especially since the average Costco member has a household income of nearly $93,000. This leads to an extremely stable base of members, with retention rates in excess of 91.3%.
High Wages and High Productivity
Costco pays its employees unusually well in comparison with other retailers. In early 2019, it raised its minimum hourly pay to $15, in 2021 it raised it to $16 and the same year raised it to $17. Its average hourly pay is about $18.04 an hour, compared to about $13.99 on average for retailers, according to PayScale. Most Costco employees are eligible for company-sponsored healthcare
How do I incorporate dropshipping into my business?
Dropshipping can be a complement to a traditional ecommerce business model. Assuming you already have an online presence in one or more stores (or at least know how to set that up) – incorporating dropshipping is similar to launching any other new product, with a few distinctions.
Here’s a quick step-by-step guide:
- Research what products would fit well with your strategy, market, and customer base.
- Research how your competitors are selling the product, namely pricing.
- Find the best supplier (i.e. Costco).
- Finalize a fulfillment process that works for both of you and incorporate it into your system. Depending on your sales management software, this could be easy or require ironing out some wrinkles.
- List and promote your new product. Be sure to specify any special conditions, such as changes in shipping times or locations.
Last steps, are the easiest ones if you are using a software like Hustle Got Real that let’s you automate your store. So you do not need to:
- Select which product do you want to list
- Worry about stock and price changes
- Order process
Register now for free to enjoy this and more features!
What are the Benefits of Costco Dropshipping?
There are at least five good reasons that almost any ecommerce retailer should consider dropshipping.
- Minimizes startup risks
- Lowers product costs
- Lower storage and logistics costs
- A broad product offering
Is Costco Dropshipping Profitable?
Yes, dropshipping can be profitable to merchants. Dropshipping is a low-risk business model that allows you to sell products to your customers without incurring huge running costs like a wholesaler would have. Because of these lower costs, it is easier to become profitable with dropshipping a lot faster than other business models.
Learn how you can also make money from dropshipping with our Beginner’s Guide to Dropshipping.