Monday, May 14, 2007
Costco and Wine
Tonight the President, CEO and director of Costco visited our Successful Entrepreneurship class. Mr. Sinegal is one of the co-founders. The Costco story is one that is quite amazing. Competing with the likes of Wal-Mart, Target and Home Depot, the wholesale chain is now one of the fifth largest retailer in the world (I think I have my numbers right -- don't quote me). They attribute their success to their ability to contain costs with their operational efficiencies, but more importantly to always doing the right things for their: customers, employees, suppliers and shareholders. In terms of operations -- they focus on selling the products that will give them the biggest volumes. (Hold on I am getting to my wine related fact...) For the consumer, they deliver and gained a reputation for selling high quality products. Mr. Sinegal mentioned their wine section as excellent in terms of quality (and, of course, price). So here is a question for you all: can you imagine buying an expensive wine at Costco? Do you think that a premium wine sold at Costco might have a negative impact on the brand equity? DISCUSS.
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4 comments:
I didn't even know Costco HAD a wine section...
My first reaction was "oooh, not sure if my first thought for fancy wine would be Costco." So I am guessing that I think it wouldn't be that great for brand equity. But then again, that's assuming that I really know what brand equity is...
I love buying booze and wine at Costco. They have a pretty good selection and the prices are good. A couple thoughts that square this circle...
First, what oenophiles consider "quality" wines is quite different than what the average Costco consumer considers as a quality wine. Costco has a lot of wine in the $15-30 range. In that range, I don't think having product at Costco hurts the brand. I think of Costco as offering high quality products but at better prices. That's quite different than putting quality wines at Wal-Mart, or even Target.
Second, the real high quality stuff at Costco is there because it has a strong enough brand that it doesn't get hurt by being at Costco. That's why you find Dom Perignon at Costco, and sometime La Grande Dame, but no other champagnes of that quality. That's why you find Johnny Walker Blue but not an esoteric single malt of the same quality and price point.
As surprising as it seems, Costco's plan works. Costco is the largest wine retailer in the US because of it!
Since Costco is down the road from my office, it is the supplier of choice for our team's "red and white nights." We definitely prefer Costco over the local specialty wine store.
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