Costco Wholesale Corporation Co-Founder and Former CEO Jim Sinegal

good evening everyone hi thank you all for coming my name is Luiza and my name is Nora and we are the presidents of the Georgetown retail luxury Association tonight were proud to host Jim Senegal the founder and former CEO of Costco Wholesale corporation mr. Senegal co-founded Costco in 1976 and until his retirement in 2011 he remained CEO and president of the branch he began his career in the retail industry in 1984 as an 18-year old college student he went to work for retail legend full price at a discount store in San Diego he remained working for price for almost 30 years before going out on his own and starting Costco today Costco is ranked number 14 in the fortune 500 and ever since it was founded it has revolutionized the American retail space its revenues exceed a hundred billion dollars and it employs over a hundred ninety four thousand people worldwide for decades the company's mission has been a never-ending quest for efficiency and more importantly providing its members with the best possible prices it is an honor to have mr. Sinha go with us tonight to talk about the origins of Costco and how Costco has managed to stay relevant in the fast changing world of retail on behalf of GLA we would like to thank mr. Senegal for being here and sharing his invaluable life experiences with us as well as the global business initiative with dr. Ricardo Ernst and mr. Wilbur Hidalgo we would also like to thank Dean Patricia grant and Miss Maria Anderson from the MSP undergraduate office the McDonough School of Business events team and journalist dedicated members for putting this event together now please join us in giving a warm welcome to dr. Ricardo Ernst and mr. Jimson ago good evening it's a great pleasure I want you to lose a great pleasure to welcome Jim cynical to the McDonough School of Business as was mentioned in 1976 mrs. sinico co-founded price Club that later be called Costco one of the world's largest retailers creating a paradigm shift in the retail industry his strategy and leadership transform his store into one of the most successful retailers in the world gossip goes that the idea for Costco came when mr. cynical took a job at fete Mart in a 1954 during college his particular job was unloading mattresses his technique for unloading mattresses was so unique that got the attention of fed Mars chairman Sol Price who is credited with inventing the big box warehouse concept eventually mr. Senegal became executive vice president of the company that's what you call a very nice career path from unloading mattresses to VP he eventually helped start price flow now mr. cynical started Costco in 1983 and the rest is history Costco has done what very few companies have been able to do change consumer behavior people use two by two two three rolls of toilet paper thanks to Costco we now buy 300 rolls one shot you need to get a bigger house so you can put all these toilet paper we can safely say there is a world before Costco and a world after Costco for those that do not know me my name is Ricardo Ernst I have been a Georgian for over 32 years doing many things including teaching operations and supply chain management so you can imagine the excitement of being with the former CEO of Costco Costco is to supply chain management to cysts what Apple and Google is to innovators a continuous source of learning and inspiration Costco is a global social equalizer it is like going to a sport event you see there all kinds of people from different social levels and economic positions anybody and everybody goes to Costco it is the perfect one-stop shop for groceries gas home goods and electronics let's do a simple test how many of you have been to Costco yes and how many of you have loved it thank you we appreciate your business now let's see let's see if you can guess what is the best selling product at Costco toilet paper ding ding ding ding you're right Costco is the best selling I mean the the toilet paper best selling item is toilet paper they sell more than a billion billion be like in big-boy billion rows every year did you know that Jim yeah it's checking man we have you know we do all this research on numbers you might be surprised yourself the high quality I mean it's a product that you don't think much about high quality until you use it but they high quality and warehouse price of Costco toilet paper make it fly off the shelves every day you're probably thinking about only paper a little differently the next time you use the bathroom now that there is another product that out sells all the rest which is the four point $99 rotisserie chicken you know that Costco sells approximately 60 million chickens over the course of a year so we can call them the chicken company to set the conversation in perspective I would like to share a few figures with you Costco open its first warehouse in 1983 in CRO by the end of 2019 so from 83 to 2019 the company operated over seven operates over 780 warehouse stores generating over a hundred and fifty billion dollars in revenue and expanding internationally still then that is a topic of conversation seventy percent of the retail is in the US so let's find out a little bit more about that later there are over 90 a million cardholders 98 million I'm sure many of the you or you know your parents representing over fifty three million households and a consumer satisfaction so we love Costco so much of 83 out of 100 also very important and actually very close to the heart of Jim 245,000 full and part-time we are very happy employees so in a single word we can say that Costco is a WoW place even though you are not the CEO anymore you have continued a close affiliation with the company I don't blame you I also have a strong affiliation with Costco in my house I always want to go did you know that I love going to Costco my wife finds it fascinating that it is the only place that I even volunteered to go is Costco knowing that it involves carrying a lot of stuff at the end but anyway the format of this conversation is going to be I will be asking a few questions and then letting the audience also ask question given the level of curiosity that I personally have and I'm sure you all have we are planning to be here until midnight which I hope it's okay with all of you I start giving you our purpose right yeah is that okay with you guys no it's not you told me no but anyway okay let's say jump into this serious stuff I have just to get the whole thing and going how do you choose what products to sell at a Costco typical so you know I'll leave your figures a typical Costco warehouse carries only about it's not that many products 3700 Eska use distinct products from treats 3700 to 4,000 while a typical Walmart so you get a level of comparison carries approximately 140,000 so Costco that look so big to you has 4000 Walmart 140,000 how do you choose what products itself well yeah first of all I have to say you are a great lead-in man here I learned some things that I didn't know before well you know when we started in business our business was directed toward the people who own businesses and so we might have as a typical shopper or somebody that ran a restaurant or somebody that ran a gas station so we selected the products to cater to that type of customer and that was an important customer force because we appealed to them on kind of three prong basis we appealed to them on the basis of what they needed to supply in their business maybe if it was a restaurant food that they were gonna serve they might also by their toilet paper at Costco and maybe a television set for their own use so we really appealed to them on the basis of what they used in their business what they consumed in their business and then of course what they had for personal consumption and the direction of the company as it moved on continued to drive toward that type of customer but added more retail type of selänne as we went on but clearly we wanted to be very limited in the selection that we had so you'll often go in and find that there's just one item in a category mm-hmm we would hope that would be the very best item in that category and the best value that was available in that category so if you win we're looking for peanut butter we're gonna be able to supply it to you in your favorite six pound package and then we would also have maybe jiffy one time and if jesse was not the best price would go to Skippy peanut butter so we move around so it's not necessarily a loyalty to a particular brand depending on the opportunistic and then how cute land was born I mean you took us a bit a little bit about having developed this brand I am sure you all know cute land signature register 39 billion dollars in sales in 2018 so why did the companies had to create this brand back in 95 Wow and when we started we were all brand name drops we can carry any and the off-brand didn't carry any private label and as a matter of fact private label in 1983 and late 80s was not very popular on u.s. basis but as we expanded over into England and Scotland and was we expanded in Canada we found that there was a resurgence of private label product and that was driven an awful lot by the fact that the prices of brand-name products were growing so rapidly the pressure that manufacturers had to exceed expectations from Wall Street made them raise their prices on an ongoing basis so you find crazy things like maybe a commodity went down 5% but the price of the finished product went up 6% in order to meet the expectations well that created an umbrella for private label products and we found that in London many retailers were very successful and so we thought that we had to get involved in that and we set some criteria that the products that we would develop would be as good or better than the leading national brand that we had to be able to save our customers at least 15 to 20 percent off of the national brand and that wasn't what the national brand would sell for in a department store or supermarket but what the national brand would sell for at Costco mm-hmm so the savings had to be significant for the customers it had to be a meaningful product and one that was important for our customers and of course we look for a name and you know what kind of a name are we going to come up with the conventional wisdom said that you had to have a different name for every class of product that you had our Sears & Roebuck with the Kenmore appliances and with the diehard batteries and the Craftsman tools and JC Higgins and and we looked at it and we said you know we're in so many countries and we have such a wide array of products we'll have a room full of attorneys that are doing nothing but trying to clear these names for every product so somebody came to us with the name Kirkland Kirkland was where our home office was and they did a design for us that said Kirkland Signature and we liked it we cleared it immediately for every country and every product category that we would have that made it simple and then we promptly moved our home office to Issaquah yeah nobody could spell OS announcer we just cannot do it I'm glad you didn't change it but let me and who makes those products at the Kirkland I mean he suddenly do you find supply it what do you get these supplies we find suppliers on a worldwide basis and oftentimes they are the I'm not going to tell you who they honor but they oftentimes are the leading manufacturer the family they produce the brand products so well oftentimes that's the case not always but it is the case in many instances that it's exactly the same formula the brand that's being sold no I but you have a very significant adventure in in the price of your signature product but you can also have it and sometimes I have seen that you have the notch of the national brand and keaghlan so in do you have any preference for selling yours over the other ones or at the end of day you don't care no we generally like to set them side by side uh-huh because when we set them side by side you're able to illustrate the value that you have on the product they see the price of the national brand and they see the price of the private label and and not without a lot of work and a lot of time we've been able to build a lot of confidence in the consumer that they know if they see the Kirkland brand they and their they've adjusted their minds that they're going to get a good quality product and oh by it takes a long time to establish do you need to negotiate with the national brands because they at the end of the day you're selling basically the same product but cheaper do they get like you get any resistance from them to developing these products and actually showing them on the same shelf well we certainly didn't in the beginning but as the brand became more popular we found that there was that cooperation and also they wanted to continue to do business with us and they thought that perhaps in some instances they could continue they have their brand on the Shelf alongside the private label and so they'd have a double hit there if you would be doing business with both the products and that has developed over the years now that we're a significant factor in the retail business it's easier to get suppliers to want to do that type of and cooperate with us regarding the membership model the membership mode is something very interesting and very unique to Costco you're known for offering the best prices that's your signature thing that you know you go to Costco it might same it may seem counterintuitive to tell customers the best way to save money is to pay upfront I mean we pay a membership $60 and then I'm gonna be recovering my $60 over time I mean one shop trip in my case but in any event how can you explain us a bit about the membership model well we thought and I have always felt the membership model develops a degree of loyalty the members feel like they are part of the organization they feel like they're gonna make that their first stop as opposed to going to another store or a retailer they have a tendency to buy more we certainly do communicate to them just as you mentioned that if they're shopping intelligently they're gonna wind up saving that membership fee on one trip for the warehouse and we think that we can conclusively prove that in almost every instance now let's talk a little bit about the international expansion overall the 780 warehouses 539 are in the u.s. we have a hundred in Canada 39 in Mexico give and take 28 in the UK 26 in Japan but you also have operations in South Korea Taiwan Australia Spain Iceland France and China so how is it the how was the evolution I mean what are the challenges how do you deal with that for us in the McDonough School of Business global business is our middle name so well I don't know that we necessarily planned about that well we were in Seattle and Canada was only a hundred and twenty miles away and we said you know how tough can it be well we found out they were trying to act like was a different country they you know they had two languages up there you had to put labels and two languages they had a different system of measurement they had a different financial system and highly lift different laws and regulations and so that was a valuable lesson force thank goodness it was very close to home and we were able to watch it carefully and grow it but we didn't know how successful we would be in Canada Canada was a small country at that time only 30 million people I think our estimation was that maybe we could eventually grow to ten Costco's across the country today we have a hundred we significantly underestimated the market share that was available for us not just in Canada but just about every market that we've gone to and so that's the reason you know in Japan we never thought we'd have an opportunity for 26 vocations and yet Wilbekin continuing to grow that business on an ongoing basis it got us involved in the international business we found that the concept of saving and having value was was translated and could be translated into those various countries and accept it and it's very interesting that in all of the countries where we do business most particularly in Asia and in Mexico American products are very popular they are at least a third of the product selection that we have and they are considered premium products so we we believe it or not wind up sending more products to Asia then we import ourselves what we directly import not the clarify that a little bit because products like Samsung and LG and that are produced overseas and we don't directly import them but we under that we directly import we have a greater influence for the other way and what we're exporting to those countries because the u.s. products are v so popular I was telling somebody earlier today the Japan the biggest selling product that we have is downy prep fabric softener well we thought what they were drinking it we didn't understand why we're so popular and TV and we'd have customers would come in and they would open it and smell it and they'd say this smells like America so we kept the project yeah we didn't know the America had a smell that's good China China recently has been in the news all the time you guys have what has been very successful operation in China but other companies other retailers like Home Depot they close the operation Carrefour the French company they close their operation in China you guys on the other hand has been extremely successful so what is that you think the secret of Costco in China well you know we we saw what was happening with people like Best Buy and with Home Depot and with car floor there was at one time our partner in Europe and we created a little bit of anticipation and angst on our part whether or not we were gonna be able to be successful there and we look for property as a matter of fact my first trip to China was over 25 years ago so it took us a long time to make a determination that we could do business there and getting permission to do business there and so our first place just opened as you know a couple months back and of course got off to a great start the authorities came and asked us to close down because we had created an adiabatic issue there's another part of the story there was a day case day care center immediately adjacent to our building and the parents couldn't get in and get their children and so the authorities who we're very nice said please close so that we can get the children out of there and we did better the news it went viral on screens on the iPhones and everything the story that Costco had to close because they were too busy yeah they know they came our way was that the Chinese parents rather go to Costco than to picking up their kids that's what that I was so I'm very happy you are your I was nervous I didn't want to touch the topic but because you brought it up and now yeah they you know I'm really thinking appreciate that now do you hire locals when you go to all these countries like in China and Korea and Japan so they generally send a contingent of three or four management people over to the country their intention is to be there for four or five years and to move out and for us to develop a country team a team that would run that business so I was speaking to someone earlier who had just been over to South Korea or had been working with our South Korea people and he met several of our Korean team over there and they're still now their key management people in their company is the operation of the supply chain in each one of these countries similar to what you have in the US or each one of these is kind of independent that China has their own business model I mean we know what is the message and the value that you are selling and positioning the Costco but the supply chain for each one of these countries are they taking synergies with the one you have in the US or basically these are different models there are synergies that are available that's what's in the US of course because we're a significant purchaser so when we go to China our ability to negotiate with LG as an example is enhanced when in fact if we do so much business in the US and as I mentioned so many US products are so very popular so we do just we do get synergies we we try if you were to walk into a Costco in China or in South Korea you would think you were in a Costco in the only except that you were begin to see a lot of foreign products you begin to see a lot of Korean products but your initial impact would be that this is the Costco trade wars it's a hot topic in Washington DC maybe not in Washington State but in Washington DC is kind of a hot topic is that affected us Costco is a global corporation 12 countries how are trade Wars affecting your business the trade war effect at the moment is de minimis but we expect that it's going to become more and more significant as time goes on at the moment I think China has tried to do some things to mitigate the cost increases but that will only go so far if the tariffs continue at the rate that they are than the American consumer is gonna pay or a lot of trade is gonna be changed to countries like Vietnam and other nations that will be producing the product that you'll see a combination of both those I think happening very shortly but at the moment I would have to say it's de minimis now let's talk about e-commerce the company seems to have embraced ecommerce a bit later compared to other places and but this segment out pays the company overall growth with e-commerce in sites in the US Canada Mexico UK Korea and Taiwan in 2018 for you guys in 2018 Costco's ecommerce sales amounted to 4% of the total net sales what is the e-commerce strategy how do you leverage your global supply chain with e-commerce like a different business I mean I buy we buy many things to recover tell us how how was that evolution of thing well actually we've been in the e-commerce business for a long time we had we started in about 1998 so much longer mm-hmm ago than you might have thought one of the hallmarks of our business as you recall Ricardo at that time there were a lot of people getting into the e-commerce business and in many instances in most instances they fail it didn't survive Amazon was an exception but I think it was because Amazon always had the idea that they wanted to build a business for the long run and a lot of people were in the business looking for an exit strategy there but Amazon survived one of the hallmarks of our e-commerce businesses we've been profitable since the day we started it this year our e-commerce business when you include everything that we do with travel and with business delivery and everything else will exceed ten billion dollars long Oh still a small share and I'm not trying to be a big shot ten billion dollars is still a lot of money would take it any minute but but it's small relative to the total picture which is 150 billion dollars but it will continue to grow it'll be an important part of our business and it is an avenue for us to continue to be very competitive but those people who are in the e-commerce business they have to watch our pricing very carefully is managed separately the e-commerce I mean are they synergies with the ispotter part of the business where we and when you well purchase do you have liked it because some of the products are in this store and then every next time you go they might not be there so why or how is it that you approach do you buy like a bulk and then you get a good deal and then after the that particular product you sell at all then you don't if you don't get a good deal next time then it vanishes I mean it's not in this store anymore how is the the idea of the 4,000 items roughly 4,000 items we carry about 3,000 of them are basic and you're gonna find them in one form or another every time you came in now use that peanut butter example mm-hmm again you'll find jiffy or you'll find Skippy but you're gonna find peanut butter in the biggest jar we can make now that's basic and that's something you will find that's 3,000 of the items about a thousand items are constantly changing and that's what we think of as the treasure hunt type of items the type of items that when you come in you see them one time maybe you come in and you see that we have a North Face jacket and you come back the next time and we don't have a North Face jacket but maybe we have they go for the handbag or maybe we have a underarm or sweatshirt that we have and we purposely run out of those things we try to create an atmosphere and an attitude that if you see it you better buy it because it might not be there right right and so constantly changing those items are moving around creates that treasure hunt thank you so you aggressively have within the company people that go and purchase I mean they are in the look for what should be like a good product I mean how what is the criteria for choosing and buying there are always looking for that type of thing I mean something like a north face jackets pretty easy you don't you know doesn't take a road scholar to figure out that's going to sell at a Costco and will and so will you know some of the other brands a waterford crystal or some of the other products that we talked about so we but we're constantly looking for them and now that we have become successful in the beginning getting those products was extraordinarily oh now it's a little easier because we are a a good form of distribution for the product now sometimes you have branded products like let's say you have a Bose noise cancellation product at Costco how is bose justifying that they can sell it at Costco a significant discount when at the end of the day they're selling it full price another version or a minor variation of the products that you sell that happens you guys sell laptops you guys sell computers you sell TVs so it's not like kind of a categorization for the branded products to use you as a distribution channel well I mean there's several answers to that I mean in some instances there are enhancements that are put on to the product that make it a better value so that it's different than what is being sold in the general retail environment in other instances the manufacturers have come to the conclusion that if they're not gonna sell Costco and they're not gonna sell Walmart and they're not gonna sell on Amazon who were they gonna sell mm-hmm this is a very significant part of the distribution of products across our country and so it it's become more channeled on that basis and they've become very creative and trying to figure out ways to do business with with customers even though the price element of it is always a challenge you know it's difficult for somebody to look and and suggest as an example that they're gonna sell a pair of Calvin Klein Jeans for $30 that will sell for $60 in the department store are there any products you would not sell we've never sold guns or ammunition we we have never sold marijuana events it's legal even even though one time in Riverside California somebody was stopping he had a couple big cans in the back of his car with label-less tomato juice and so the police opened the cans and it was marijuana and he said I don't know where that came from I just shopped at Costco ha ha ha ha ha course he was lying then they they booked a minute huh but see those types of pie waiting we won't sell seconds or in your regulars it's all gonna be first quality high quality merchandise as cigarettes you stopped selling at some point we we have in our business delivery system we have cigarettes we don't have them in there from general warehouse is any longer and we've been phasing out of those for a long period of time interesting at one time when we first started in business it was the biggest selling product that we have cereal well let's talk them now about you are very famous because you're very good to the employees I mean people at Costco love you now we can see why just talking with you with five minutes we all love you but it's kind of interesting that the company has two hundred forty five thousand full and part-time very happy employees one of your quotes is Wall Street is in the business of making money between now and the next Tuesday we are in the business of building an organization and institution we hope we'll be here 50 years from now Costco employees including about one hundred and sixty three thousand US workers are a very happy bunch the turnover rate the turnover rate at Costco is only five percent for employees of over a year and it's more like 60 percent for retail overall so what do you do what is the magic of keeping the employees so happy certainly wages are a part of it benefits are a part of it that's just the part we've always had the feeling that a few hire good people and provide good jobs and good wages and good career opportunities and we promote almost 100% from within our company if you provide those types of things people like it enjoy what working for you and they enjoy working for a company that's going to try to do the right thing for them and for the customers mm-hmm and so we we don't want to turn our people we want to turn our inventory what are the challenges moving forward well if the challenges are always difficult I mean the the situation with the trade wars at the moment is certainly gonna be a challenge for all I think we'll figure we will figure it out all of us collectively and in the economy I think that we have always underestimated the amount of market share that we had available for us i I told you the story of Canada but we have consistently underestimated that and I think we have a lot more opportunities to succeed in the future but disciplines I mean selling merchandise at low prices anybody can do that mm-hmm the secret is to be able to do it and make a profit and operate with the disciplines that are necessary so if I had that point to one single thing I would say the discipline of cutting and containing costs at every level of our business will be the secret as to how well we're doing 20 years from now great I would like to open it for you guys I mean I am enjoying this too much as you can see but I would like to or any of you that would like to ask questions we have microphones here and there so please tell us your name make it like a short version of the question and I'm sure Jamie is gonna be more than happy to answer the question good start hi this is Roy first thank you for the great talk going to Costco is like Disneyland for me so the question is I'm sure when you start the company there's some resistance there's people like mocking you or not it's not gonna work how did you deal with that and then the second thing was there some books or some things you read that inspire you to keep driving that far and keep building this thank you I couldn't hear the question okay so what I'm asking is I'm sure when you start building the company there's resistance and objections of people in front of you like telling you this not gonna work this is not you know just now working out and is there any books or mentors or coaches that you had that's helped you push this far that's assuming there was the theory you're writing the book guys of the theory so you know you can if not like some advice that you wish you told yourself when you're like 25 or 20 years old well I think yes I wish I had done it but I wasn't smart enough when I was 25 to do that I mean that I mean I had to learn the craft of the business I worked in the retool when I was 18 years old and a sophomore in college I wanted to be an attorney they've erected my studies in that way I had even selected the law school I was going to go to they had not selected me but I fell in love with the retail business working part-time and so I had to learn that business and I was fortunate to learn it from a man that Ricardo alluded to earlier he's a Saul Price who became my lifelong mentor and I learned an enormous amount from him but it took years for me to get as good as him if I don't think I ever achieved that and the most interesting book or did I read a book I remember a book that I read once called self-renewal written by the guy that started the organization in town I'll think of it when I leave here I'll think of it yeah so we emailed you the name of self-renewal was the name of the name of the book and it was about 50 years ago and it was kind of enlightening and inspiring excellent you you're the lucky one cool thank you hi I'm well I won't say my family loves the Costco food court my dad's favorite pizza is Costco pizza so I was just wondering what's your favorite item and also what was the rationale behind a warehouse store opening up a food court with really low prices opening like what was the rationale behind opening a food court in a warehouse store why did you open a food court and he loves it okay well I I heard the pizza part and well your part of it was the fact that we had all of these people running around in the Costco I mean there's you know schlepping very heavy stuff and obviously they must be hungry we should be feeding them they're here in addition to the samples that we do and we decided to put in the food court and that was 37 years ago we put in the hot dog and and over the years we have enhanced that hot dog it now is a still a dollar 50 cents after all these years it's a hot dog and a drink it's a quarter pound dog actually it's slightly larger than a quarter pound dog I can go on and on about this and and and by the way people will tell you that's probably my favorite item I had one today because of anagon City you know that that's one of my favorite items one of my favorite items also was the Costco Kirkland Signature shirt so I buy I buy those every time I see them so I got a lot of favorite product sir thank you thank you hello my name is Cooper Hanson I first want to thank you for coming to Georgetown today okay I first want to thank you for coming to Georgetown today both my parents work at Costco there's 25 year employees I helped get here with the sunshine Brook foundation so it just means a lot that you came here well I want to start with a two-part question I've been interested in being that the company's approaching four years of success what are cost goes play to maintain its culture with much of its core reaching retirement age and then secondly with the expansion and growth even that of China a few months back what role does Costco take in the sustainability of all its products especially in regards to consumables you kind of went over it but I didn't know if you go further in depth first okay why don't you come again but it looks like another thing yeah sorry what part did you hear what we're gonna make your life easier why don't you repeat the whole okay so both my parents are twenty five-year plus employees yeah we got that okay I got here with the sunshine Brook foundation so special thanks to that okay so my first part of my question was being that the company's approaching 40 years of success what our Costco's plans to maintain its culture with much of its core reaching retirement and then secondly with the expansion and growth even that of China a few months back what role does Costco taken the sustainability of all its products especially in regards to consumables you know the culture aspect of it is you know I have a saying that culture is not the most important thing it's the only thing culture of a company drives it were an organization or an institution like this drives every decision that you make and if you have a culture where you try to survey and and convince everyone that doing the right thing in every instance is is the way you want to operate your business then everyone feels more comfortable in dealing with that and that culture either exists or it doesn't exist and we've seen examples of countries or companies that have had a bad culture where people started doing the wrong things because they thought that was the way that we're supposed to act you know it's not easy to sustain I think it will be sustained because I think the people that are managing the company now in my I'm gone now I'm retired their longtime employees they believe 100% what the culture of our company is and I think they will sustain it over the periods of time as far as sustainability itself we are very conscious of that I mean we have as an example you've probably noticed we don't have grocery bags you know we know we put everything back in the boxes that the most advice came from we do everything that we say we have we have solar systems on the roof of about 25% of our buildings now wherever there sunshine we can't do it in Seattle much but we can there so we try to save on energy in that fashion we have skylights in all of our buildings we do that we're trying to use every form of sustainability that we can kind of end there where we can be competitive and also keep our business running in the right direction we follow up on we we have an entire department within Costco the deals with sustainability not just in the US but in every country where we do business all right my name is shall we - originally from Taiwan I can attest that people Taiwan love Costco Pizza and the inside looked exactly the same as the cost goes here thank you very much for spending your time with us today I have two questions first question is I saw I read online that there were studies saying that the business model of Costco majority the profit comes from the membership fees not from the margins from the products so I'm not sure if you can elaborate on that a little bit and the second question is since you formally stepped away last year how active you are you still with Costco and if you're not so active you know what are you spending your time doing nowadays thank you well the membership fee is very important obviously we mentioned to you before there it you know within grains a certain element of loyalty to the business people feel like they're part of the organization and have a vested interest it is a good portion of the profit to the extent that we get the membership fee where if we use that those dollars to lower prices and over the years as we have increased the membership fee we have consistently taken and and put every dollar back into the lower prices of the product so it's part of the formula it's part of the stress that we have for running our business you second question is these receptive wait now that I'm retired what makes you think I'm doing anything here's how you speak well I'm I I am on the board of business schools at three universities it's Seattle University and Notre Dame University and at San Diego State University where I went to school I'm on the board of the Fred hutch Cancer Research Center on the board of another scholarship program in the state of Washington I speak at about ten universities a year so but can you admit that this is the one that you're the happiest in the early I I guess I'm happy with all of them and and I would and I still go into a Costco and every city that I'm in so I Tuesday I was in Chicago at Costco and yesterday I was in Boston Costco and today at Pentagon City so I still get got to take a look at him do you go to check the bases or to eat the pizza what today was for a hot day hi my name is Catherine win and I'm at Georgetown alum thank you for coming today I'm sorry I lost my voice but um growing up I was a daughter of Vietnamese immigrants I'm one of six so we loved Costco but I probably shouldn't tell you this but my mom would always take us during lunch time and she would set all six kids free to eat samples for lunch while she shopped so that was one of the reasons we love Costco but we do love your store my question so I used to practice law and I recently launched a company it's a food company and my question is close to my heart which is a lot of companies and rude stores nowadays are creating programs to bring in innovative products and new products does Costco have any plans to bring in emerging products and innovative products or your does your business model really only allow for those tried-and-true brands that you can bring value to your customer's review if you want to if one of the targets is to bring innovative products to Costco innovative innovative products of course we're constantly looking for innovative products as a matter of fact we love them we love them because we like to be first with something but when you only have four thousand items you only have so much space to those items but we're constantly scouring the market looking for what we think is the next exciting product we would love to be the first one we would have loved them in the first one to sell an iPhone as an example gotcha I think thought I'm sure a lot of people would make that statement so and is it how do you find I guess those questions been asked but logistically do you have summits to find new products or are your buyers out there looking for the products themselves we're all over the world looking for products whether there's you know very few countries that we don't travel to today we bring products in from all over the world and all over our country all over North America certainly and we've got buyers in about eight different locations across North America that are doing just that looking for those types of products thank you thank you hi thanks so much for coming out I have about a hundred questions I could ask about the beer Kirkland Lite okay 50 oh I'm gonna I'm gonna save everyone some time there so a lot of the cases we read in our program business case after business case so a big lesson is keep to your core competency as a business stick true to what you do well but at the same time you need to innovate you need to do what you do better and a lot of times you'll feel like your competitors are doing something so you have to do that it can feel very urgent so my question you is really about leadership how do you as a leader stay true to your company's strengths well at the same time kind of keeping that core group of executives around you you know interested in innovative innovation and things like that well as you know the world is changing I mean look at uber look at iPhones look at all the changes that are taking place but generally speaking innovation is incremental it happens step at a time and becomes incremental we're looking for innovation I mean when we started in business selling film and film processing was a very big part of the business I mean it was crazy we'd loved it it was you know a customer would come in and buy the film and then they had to bring it back to get it developed and then they had to come back and pick it up I mean three trips wouldn't about that but pretty soon that all went away the film went away the processing went away everybody takes pictures on the telephones now you have to be smart enough in business to recognize how those changes are taking place and not make the mistake of hanging in there and we saw mistakes made by many people who didn't change and didn't make the innovation it was necessary but innovation is as I mentioned incremental I mean Kodak film didn't drop off the shelf one day it dropped off over a period of about three years and when it happened it was gone and you have to be prepared to change your business or you're not going to survive you you won't be you'll be a dinosaur for sure and a classic example of that unfortunately is Sears this is a company that was they say icon it was a knight an American icon yeah at one point in time it was the company that was the Costco of the land everyone shot yeah all of Middle America shop there today Sears is irrelevant unfortunately and it's a sad thing because they were an American icon and if you think about it they were the leaders they had the Sears catalog you're all too young to remember the Sears catalog Idol the Sears catalog was a credible the whole country waited for that catalog to come up when these thousands and thousands of products I just think how easy that would have been to translate into e-commerce business right but they did so they didn't take advantage of the innovation at that point and as they say today unfortunately they are irrelevant thank you we have a couple more running out of time but go ahead hi my name is Adam Roth I'd like to know a little bit more about the pharmacy cool side of the business so you know why Costco decided to enter that and if there were any specific regulatory challenges there or dealing with the distributors there and then you know I know I think that part of the business you don't have to be a member to use the pharmacies so that's an also interesting aspect that I like to get your your opinion on by the way years I think you may be the only person in the room besides me that knows that you don't have to be a member to use the pharmacy my two grandchildren didn't know today when I took them over to us so that is the Kasich state laws in many states require you to be able to service anyone who walks in to get a prescription and they do that because oftentimes people that are sick can't travel long distances and they have to be able to take advantage of the closest place where they can get a prescription we got into the prescription business because a colleague of mine at Fed Mart who was an expert to it run 47 stores and pharmacies and understood the business we recognized the value that we could bring to the customers I mean it's legendary the pricing that goes on with prescription drugs most particularly generic drugs we've had stories done on us free I mean done on six o'clock and 11 o'clock news touting our prescription prices and they will use examples of different pharmacies where a thirty days supply would be 360 dollars in another place it was 290 dollars and another place it was a hundred and sixty-seven dollars and a Costco was twelve dollars and 18 cents I mean it was that dramatic picture and so it was we were able to show an enormous value and those types of products and we love to do that I mean and I mean we love to do it because we like to build the reputation for doing it but we think we also provide a great service by doing that thank you thank you good evening gentlemen thank you both for your time mr. cynical a question for you - you know guide some of the entrepreneurs that we may have in this room just wanted to see if you could elaborate on some of the he experiences in your own entrepreneurial journey when you started this entrepreneurial wisdom that he would like to share well I mean you know one of the things and I didn't really answer and make a comment about work but the other gentleman said about focus like you're taught in school that you should be focusing on something your core competency don't don't disband your core competence competency stay with it and again keep it and there is a tendency oftentimes in business to do exactly that to find the next new thing and then we forget about what your core competency is so that's a danger not focus focus is very important in business really zeroing in on what you want to do and making sure that you're delivering on that promise Costco has you know the fact that we only have 4,000 products compared to 140,000 items shows the focus that we have and paying attention to that we're going to deliver the best product that we can I'm not going to worry about carrying a lot of other products in the show so the best business plan is that I would suggest two things for people who are in business school number one if you have a chance to get a mentor take advantage of how lucky was I to have a mentor who I considered to be the smartest person I'd ever know and I've known a lot of smart people but he was the smartest and I know how lucky that I had that experience during the lifetime and then the second thing is if you get involved in something that's drudgery and that you don't like and you hate going to work get out of there run as fast as you can to the fastest exit and get out of there because the longer you stay the more toxic it's going to become and you're not doing the organization any good and you're not doing yourself any good so find something that you truly love and can become passionate about and you'll never have to work another day in your life thank you thank you let's take this too quickly because you know we promised we were gonna finish on time so go ahead quick and quick and then we go okay so you know that Costco is also in the online travel agency business and I personally booked my Christmas tree bound Costco so my question has two parts so first of all how does Costco - it does a is it contracted to some other company or does Costco to buy yourself and second part is why costs going using dead pieces because ot a so I mean I'm not hearing the question in what business we don't travel on a Costco travel I travel travel so how and why Costco do that well you know we we got into the travel because there was a travel business in Seattle that had been pretty successful and we looked at the package and we bought the company I mean it was a very small company I mean it couldn't be had in making eight eight employees we bought the company they had some pricing on packages that we thought were attractive and after we talked to some various people who produced these packages we thought that we could show a 30 40 50 percent savings on some travel so we bought the company and right after we bought the company 9/11 occurred and of course travel stopped completely so we almost went out of out of business before we got it off the ground here but we stuck with it and today it's a very big part of what we offer to our customers in the annal and a great satisfaction level not only do we have some terrific cruise packages and travel packages resort packages that are available but the element of satisfaction on the part of our customers is tremendous we get like a 96% rating on favorable rating on the packages that we've produced for them so they like it now did I miss the first part of your question first part of question is so my question is two part one part is how the other part is why so I think my question is answered thank you thank you last question so everybody's been asking to that's why it's gone on so long and I will keep it to one since it's the last one or tight on time one question was about the relish and the onions consumption in different countries at the bar but the main question is you know what do you feel like your specific talent what were you excellent at that allowed you to be as successful in business as you are what was your superpower the secret sauce I mean we know that you were unloaded mattress well you know I read that help I was I was going through a warehouse in Chicago one time and a woman was on the shopping cart and she was looking over her glasses at me like this and kept looking and she finally said are you who I think you are and I said George Cloney she said exactly [Applause]

Channel: Georgetown McDonough

Views: 15,403

Rating: 4.8947368 out of 5

Keywords: GeorgetownGlobal, #globalretail, #Costco, GeorgetownMBA, GlobalMBA, InternationalMBA, InternationalBusiness, GlobalBusiness

Id: XnEHpT4cieE

Length: 57min 43sec (3463 seconds)

Published: Mon Dec 09 2019