Learn the Lingo: They are Warehouses and Depots. Not "Stores" and "Distribution Centers" [Updated]
Updated: Oct 26, 2022
While most retailers have distribution centers and stores, Costco names theirs a little differently.
To ensure you are using the right terminology when talking to Costco buyers, here's a guide as well as some interesting information on the Costco's global scale.
Costco Warehouse = Stores (for other retailers)
Costco retail locations (Dec 31, 2019):
United States: 645 locations
Mexico and Canada: 139 locations
Outside North America: 100 locations
Costco retail locations (Sept 20, 2022):
United States: 838 locations
Mexico and Canada: 147 locations
Outside North America: 113 locations
Look up on your next trip to Costco.
This may seen obvious at first but, each Costco warehouse location is actually a warehouse. The large orange and green structures (aka pallet racks, or the steel) on the side of Costco warehouses are dual purpose. Bottom level holds pallets for sales and the upper levels are inventory. This is unique from other retailers "stores" since virtually all the space in each warehouse is dedicated to sales.
Each Costco warehouse is big. The average size is approximately 146,000 square feet, with some larger locations approaching 200,000 square feet.
This adds up to a significant amount of space dedicated to customer sales. At the end of 2019, Costco warehouses contained approximately 113.9 million square feet of operating floor space: 79.9 million in the U.S.; 14.0 million in Canada; and 20.0 million in Mexico and outside of North America.
Beautiful examples of Costco architecture. From left to right:
Costco Warehouses in Coral Springs, FL, USA, Melbourne, Australia and Shanghai, China.
Costco Depot = Distribution Center (for other retailers)
Costco operates 24 depots worldwide (Dec 31, 2019):
Combined, Depots have approximately 11.0 million square feet for the distribution of most merchandise shipments to Costco warehouses. Some large individual depot locations approach 1 million sq. feet.
As we have talked about in other articles, a relatively small amount of merchandise is inventoried at these locations making it different than a typical distribution center. Depots are designed to cross dock merchandise vs store merchandise which is are the core of Costco's efficient supply chain.
According to The Food Institute, "Costco is expecting to open 21-22 new warehouses each year, with 75 percent to be located in the U.S. and 25 percent located outside the country. The retailer expects this U.S. to international ratio will balance out to 50/50 as the domestic retail market becomes more saturated."
On March 17th, 2020 Costco purchased last-mile specialist Innovel for $1 billion. This marked the biggest acquisition in the company's history. This ex-Sears/Kmart unit will accelerate e-commerce growth while also leading to:
Improved member experience
Reduced costs to Members
Reduced Lead time
Rapid expansion of their LTL Big & Bulky program
Creating space in core warehouse business for other future growth areas
We recently added a Glossary section to The Costco Packaging Guys site. Helpful definitions for a plethora of terms unique to the Club Store and packaging world.
Check it out!
Until next time.