2.) Place/Distribution
The Costco Wholesale Corporation is based in Issaquah, Washington. They have 504 store locations as of December 2006, with 371 warehouses in the United States, 70 in Canada, 5 in Japan, 5 in South Korea, 4 in Taiwan, 19 in the United Kingdom, and 30 in Mexico. Being located on prime real estate sites is not a top priority of Costco (Annual Report 2006). The belief is that their low prices will attract customers rather than the location or elaborate facilities. Costco has had success using an infill strategy when selecting an area to build a warehouse. An infill strategy is the use of land within a built-up area for further construction (Wikipedia.com). They have learned that their stronger markets can support increasing numbers of their warehouses in closer proximity to each other (Annual Report 2006). Furthermore, Costco enters new markets, but they do not do it as aggressively compared to entering existing markets. Costco is tentative when entering new markets because they rely on word-of-mouth advertising, and they are fearful of the lack of familiarity with the warehouse. Obviously, it would hurt their business if they are not able to reach their target market