Costco
A membership warehouse retailer selling a small range of bulk goods at capped markups.
Costco caps markups at 14% and carries about 3,800 SKUs, earning roughly 70% of operating income from membership fees. It pays $26 an hour against Walmart's $19.50 and sees 7% first-year attrition and 93% US member renewal. Lesson: protect price trust, pass scale savings to customers, and let fee-based loyalty compound, as Amazon's Prime copied.
- 1Retailer takes one brandRetailers typically take one player per category
- 2Skylight wins Costco slotCostco stocks Skylight devices
- 3Shelf signals qualityBeing in Costco signals quality
- 4Slot becomes a moatOne slot per category guards the spot
From Skylight retail notes
What was said about Costco
Costco gives Skylight a quality stamp and a category moat. Skylight sells on its own site, Amazon and retailers like Costco and Best Buy, plus internationally. Being in Costco signals quality, and retailers typically take only one player per category, so a slot works as a moat.
Retail is described as "the biggest influencer of all in our world."
Retail channels like Costco bring lower subscription attach than Skylight's own site. Skylight accepts weaker attach in retail because being everywhere has driven higher overall growth. The tradeoff makes post-purchase education more important for converting retail buyers to subscribers.
No attach rates are given for Costco or other channels.
Costco
Caps markup at 14%, carries about 3,800 SKUs, turns inventory 12.4 times a year and gets about 70% of operating income from fees. It has 124 million members, 860 stores, $230 billion in sales, and pays $26 an hour against $19.50 at Walmart.
Costco gives Skylight a quality stamp and a category moat. Skylight sells on its own site, Amazon and retailers like Costco and Best Buy, plus internationally. Being in Costco signals quality, and retailers typically take only one player per category, so a slot works as a moat.
Retail is described as "the biggest influencer of all in our world."
Retail channels like Costco bring lower subscription attach than Skylight's own site. Skylight accepts weaker attach in retail because being everywhere has driven higher overall growth. The tradeoff makes post-purchase education more important for converting retail buyers to subscribers.
No attach rates are given for Costco or other channels.
The Home Depot: How America's aging houses built the best stock of the last 45 years
Marcus and Blake's first store walk was at Costco because Home Depot no longer embodied great retail. A Costco-style model could not replicate Home Depot's education-driven bigger projects.
How Skylight Doubled Subscription Prices to $79 – Michael Segal & Mark Ungerer
Being in Costco is a stamp of quality for Skylight, and retailers usually take only one player per category, which makes it a moat. Retail channels give weaker subscription attach than Skylight's own site.
Trader Joe’s: Hawaiian shirts and counter positioning
Costco makes about $1,200 per square foot against Trader Joe's $2,000. It had $275 billion in revenue, about 10x Trader Joe's, marks up 11 to 14%, and trades at 1.6x revenue.
How Jensen Works
Its leader Jim Sinegal said that if you're not spending 90% of your time teaching, you're not doing your job.
Lessons from Jeff Bezos's Shareholder Letters
Founder Jim Sinegal told Bezos that value trumps everything, with a roughly 14% markup cap and a membership fee as a one-time pain. After that meeting Amazon moved to everyday low prices.
IKEA
Kamprad admired it as the greatest retailer, and co-founder Jim Sinegal visited IKEA to study its knockdown furniture. IKEA's $1 hot dog in 1995 mirrored Costco's.
Starbucks (with Howard Schultz)
Jeff Brotman and Jim Sinegal told Schultz to look at the cars in the parking lot to see his customers. Beans sold at Costco lifted volume at nearby eastside Seattle stores despite an internal revolt.
Sol Price: The Founder Who Taught Jim Sinegal, Sam Walton, Jeff Bezos, and Bernie Marcus
Runs on Price's formula of low markups and membership fee profit, and kept the $1.50 hot dog and soda unchanged. It drew 22,000 applicants for 200 jobs and sells prescription drugs cheaper than almost all competitors.
Amazon.com
Jim Sinegal taught Bezos that loyalty and absolute margin dollars matter more than margin percentage. That idea, combined with a fee upfront, became Prime.
Walmart
It runs a gross margin of about 13% against Walmart's 24%, and does $217 billion in sales against Sam's Club's $75 billion. It beat Walmart by giving up more margin and cutting store polish.
More in Shopping
ShoppingAmazon
An online retailer and platform company that also runs AWS, Kindle, Echo and Prime.
38 sources · 94 tips
ShoppingWalmart
A discount retail chain built on everyday low prices, started in small Arkansas towns.
14 sources · 41 tips
ShoppingNike
A global athletic footwear and apparel company that began as a shoe importer called Blue Ribbon Sports.
10 sources · 46 tips
ShoppingIKEA
A Swedish furniture retailer selling flat-packed, low-priced home furnishings through large stores and a catalog.
3 sources · 34 tips
ShoppingWhatnot
A live stream shopping marketplace where sellers auction and sell products to buyers in real time.
4 sources · 15 tips
ShoppingHome Depot
The world's largest home improvement retailer, selling tools, building materials and supplies through big-box warehouse stores.
5 sources · 20 tipsFedmart
A San Diego membership discount store founded by Sol Price in the 1950s.
2 sources · 12 tips
ShoppingEtsy
An online marketplace for unique, handmade and vintage items from independent sellers.
4 sources · 22 tips