Private labels and ancillary businesses
Costco's private label brands are in the pink of health. Labels such as Kirkland Signature are wildly popular and account for a whopping 20% of the firm's revenue. This brand offers a wide range of goods and competes fiercely with well-established national brands since it offers comparable quality, but it is 10%-20% cheaper. Costco has been bolstering its share of private label brands by growing its overall product range at around 0.7% per annum. The company plans to continue growing the portfolio until it reaches 30% of overall revenue.
Costco has a robust line of ancillary businesses that contribute to its bottom line in a big way. These include photo centers, food courts, pharmacies, hearing aid centers, optical dispensing centers, car washes, gas stations, and print shops. Although ancillary businesses account for slightly less than 20% of Costco's revenue, they have grown admirably in the past five years with their growth rate outpacing Costco's core business growth. Five years ago, they accounted for 13.5% of the firm's revenues; that figure has now grown to 19%. An average Costco customer spends $255 per year at the firm's ancillary businesses. That figure has been growing at 10% per annum for the last few years.
In contrast, the firm's average customer spending on general merchandise has been growing at just 1% per annum, which implies that customers have kept the size of their shopping baskets at about the same level. Costco gas stations have also been instrumental in attracting new membership signups.
Private labels and ancillary businesses
Costco's private label brands are in the pink of health. Labels such as Kirkland Signature are wildly popular and account for a whopping 20% of the firm's revenue. This brand offers a wide range of goods and competes fiercely with well-established national brands since it offers comparable quality, but it is 10%-20% cheaper. Costco has been bolstering its share of private label brands by growing its overall product range at around 0.7% per annum. The company plans to continue growing the portfolio until it reaches 30% of overall revenue.
Costco has a robust line of ancillary businesses that contribute to its bottom line in a big way. These include photo centers, food courts, pharmacies, hearing aid centers, optical dispensing centers, car washes, gas stations, and print shops. Although ancillary businesses account for slightly less than 20% of Costco's revenue, they have grown admirably in the past five years with their growth rate outpacing Costco's core business growth. Five years ago, they accounted for 13.5% of the firm's revenues; that figure has now grown to 19%. An average Costco customer spends $255 per year at the firm's ancillary businesses. That figure has been growing at 10% per annum for the last few years.
In contrast, the firm's average customer spending on general merchandise has been growing at just 1% per annum, which implies that customers have kept the size of their shopping baskets at about the same level. Costco gas stations have also been instrumental in attracting new membership signups.
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