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Creating a Company That Cares: Costco's Climb to the Top

Article Overview: Sinegal was in one of the top two positions of power of a rapidly expanding company, when he decided to give it all up on a whim. Sinegal wanted to be on his own, to have the feeling of success that only comes from when you have started your own company from scratch. And so, in 1983, Sinegal joined forces with Jeff Brotman, a lawyer and the son of a former clothing retailer, and created his own warehouse retail club.

Creating a Company That Cares: Costco's Climb to the Top

Sinegal was in one of the top two positions of power of a rapidly expanding company, when he decided to give it all up on a whim. Sinegal wanted to be on his own, to have the feeling of success that only comes from when you have started your own company from scratch. And so, in 1983, Sinegal joined forces with Jeff Brotman, a lawyer and the son of a former clothing retailer, and created his own warehouse retail club.

On September 15, 1983, Sinegal and Brotman opened their first Costco warehouse in Seattle, Washington. Based on a similar business model as Sol Price’s Price Club, Costco began charging a membership fee to its customers. In the beginning, it too catered primarily to small business owners.

Over the next ten years, Costco would continue to grow in both membership and sales. In 1993, after a decade of steady success, Sinegal decided to acquire the company he had helped his once boss grow. With the merger of Costco and Price Company, PriceCostco was formed, and effectively doubled the size of both. There were now over 206 locations of this growing retail company, which was conducting more than $16 billion in annual sales.

PriceCostco was being run at the time by both Sinegal and Sol Price. But, in 1994, Price left the company to found Price Enterprises with his son, Robert. In 1997, following the departure of his partner, Sinegal officially changed the company’s name to Costco Wholesale. The next year, at Costco’s annual meeting, Sinegal announced his new ambitious plans for expansion. “We expect to open about 18 or 19 stores this year and next,” he said, “then grow to about 25 or 30 a year worldwide after that.”

Today, by focusing on a strategy of high quality goods at low prices, Sinegal has managed to grow his retail warehouse club into one of the largest in the world. His company has a record 90 percent renewal rate for business membership, and individual customers have proven equally as ready to embrace a new $100 per year executive membership. Costco’s services have expanded to include everything from optical centres, pharmacies, photo centres, hearing aid centres, food courts, and gas stations. All of these have become major contributors to the company’s overall growth, with some, such as the optical centres even being rated among the best in the country in both quality and price.

Despite Costco’s tremendous success, Sinegal has maintained his salary of only $350,000, plus stock options. Among the CEOs of billion dollar corporations, he is one of the lowest paid. Conversely, Costco employees are some of the highest paid in the retail industry. In fact, Sinegal has frequently butted heads with investors who believe he is too generous to his workers.

But, Sinegal has never been one to care what others think. He stuck to his vision to create of the largest, most widely respected companies in America, and he is not yet done.

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Article Tags: ambitious plans, business membership, clothing retailer, costco, costco warehouse, costco wholesale, creating a company, expanding company, jeff brotman, membership fee, pricecostco, quality goods, retail club, retail company, retail warehouse, seattle washington, small business owners, steady success, warehouse club, whim



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