At Costco, California is King. Why this is important to your success as a supplier.

Although Costco originated in Seattle, WA and their headquarters remain in that area today, for Costco revenue, California is King.

If you are going to do business with Costco in the US, let’s discuss why California is key for success.

First, let’s review Costco’s another incredibly strong year with their newly released fiscal year 2021 numbers:

165,569 square foot Costco warehouse in Torrance, CA

• 22 new international warehouses, including 2 relocations: 12 net new in the U.S., 4 net new in Canada and 4 new Internationally.

• Net sales increased 18% to $192B globally.

• Membership revenue increasing 9% to $3.9B.

• Costco’s memberships increased to 111.6M.

Let’s look at specifically to the importance of California to Costco.

US net sales: 141B

CA net sales: $40B (28% of net US sales)

Global warehouses: 828

US warehouses: 572

California warehouses: 131 (23% of US warehouses)

How do these numbers effect your decisions on distribution and product pack out?

Being in California can significantly helps reduce operational costs are critical when dealing with Costco. As we detail below, Costco a master at maximizing operational efficiencies and they expect their suppliers to do the same. Being in California and on the West coast in general helps minimize cost and improve speed to Costco's depots.

Costco strives to master these 3 items:

1. Volume purchasing on a reduced # of SKUs (or items)

2. Efficient distribution and reduced handling of merchandise using cross-docking vs warehousing.

3. No-frills, self-service warehouse facilities

The payoff for Costco is that they are able to operate profitably at significantly lower gross margins than most other retailers. Passing this savings onto their members is how Costco continues to retain 91% renewal rate in the US.

High volume and consistency make Costco a fantastic customer for suppliers who get it right- and getting it right, means getting your supply chain right.

More info:

Take a look at a past article from 2019, "Why We Ship From the West Coast" where we break down a national program by region. 53% of total shipments stayed on West Coast. 360 pallets went to Mira Loma alone. That’s 15% of the order!

As a conclusion:

When considering your warehousing and pack out locations for Costco, always consider the importance of California. We love it here. Get in touch with us.

Until next time.

Cheers,

TCPG