Is Costco good for business?

Business Review USA Staff
- Finance - Apr 26, 2016

Purchasing items in bulk from outlets such as Costco just seems to make good sense for many small businesses. Busy restaurants, for instance, can minimize their chances of running out of popular menu items if they buy in bulk, and office personnel won't always have to run to the nearest office supply store if they're got a stash of bulk items in the supply room. Nonetheless, buying in bulk does have its dark side. Oversupply is one of the risks that businesses take when they purchase certain items in bulk.

The majority of restaurant customers are notoriously fickle, and food trends frequently turn on a dime. Restaurant owners or managers who decides to stock up on the next big thing could find themselves with a stockpile of unused items facing expiration dates. It's best to save stocking up for tried-and-true items and buy trendy ones on an as-needed basis until they become proven performers. It's better to occasionally run out of something than to be stuck with surplus ingredients for a fad that has run its course. Shopping at Costco is cost-effective for those who practice smart shopping strategies, but it can be cost-prohibitive for those who automatically buy everything in bulk simply because of the perceived savings.

How Costco Can Be Good For Businesses

Costco owns several stores specifically aimed at meeting the needs of small businesses, and they are in the process of expanding these stores. Advantages of shopping at these specialized locations include:

  • The stores offer a substantial inventory of high-quality products selected specifically for business use

  • The stores have items that are not available at regular Costco outlets

  • Many of the stores offer next-day delivery for orders that are phoned in before 3 p.m. on the preceding day

  • Expanded business hours make it more convenient for businesses to shop

 

Costco and Supply Chain Optimization

Costco's strategy employs an industry practice known as cross-docking. Cross docking means unloading items from an incoming transport system directly on to its outgoing counterpart, eliminating the need for midpoint storage. This practice reduces the associated costs involved with traditional distribution systems as well as increases efficiency.

Shopping at Costco can be a good business strategy, provided that the person doing the purchasing knows how to shop smart.

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