7 ways Costco AVOID FAILURE (business model explained)

Success leaves clues, so in this video I'm diving into the super successful empire that is Costco. For context, Disney does around $80b in revenue, Costco does $250b... so many people are shocked here the size of this business, but when you find out the tactics behind their business model, it starts to make more sense.

If I could own any business in the world, it would Costco.

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Who am I?
My name is James Sinclair and I'm the founder and CEO of The Partyman Group of Companies. I started building my business when I was just 16 as a family entertainer after that I built up an entertainment agency, then moved into building a leisure and day nursery businesses. Today we operate a £30 million business which includes leisure, childcare, outdoor attractions, commercial property, arts and crafts manufacturing as well as one of the UK’s oldest Ice cream companies; The Rossi Ice Cream Company.

⌚️Timestamps:

[stevedavenport]

Proud to say I am from where Costco started, Seattle, USA.

The Kirkland brand refers to a bedroom community of Seattle where they had their HQ for a while.

Their corporate HQ is now located in Issaquah, WA...about 15 minutes east of Kirkland in the foothills of the Cascade mountsins.

[bjkjoseph]

Memberships also helps keep out the shoplifters, Walmart and target and my local supermarket are being hammered by shoplifters and they are raising the prices on everybody else, thanks to the liberals decriminalizing shoplifting, but Costco is doing better than those other stores, in New York City supermarkets are closing down left and right

[costradissocial]

You forgot about the pizza counter on the way out. I read a few years ago that Costco was rated the second largest pizza seller in the US just behind Dominoes. I'm not sure if this still stands, but pretty impressive.

[doggydogdaily]

1)Cash Conversion Cycle.
2)Low Level SKU.
3)Sticky Customers.
4)Residual Income
5)Cultural Statement.
6)Proprietary Products.
7)Recession Proof.

[opulentpi]

Great video, shopped there a few times yet never thought to think once about their business model. Thanks for the insight.

[thenoodlebuddy]

James love your videos and absolute hidden gem here on YouTube! Keep up the good informative work

[readmycomment]

Great video. Cashflow is king, more small businesses should consider these tips in their model.

[Iamthesheese]

You should watch the brands that built America, I think its on the History channel. It covers all of the biggest US brands from their inception, its really good. They have series on the food, brands, & men that made America.

[WintuhLiving]

Great video James and I love all the podcast and info you give out… I much prefer the day in the life videos though

[tombowman]

Been waiting for a dip in Costco stock in some time. It's just to good a company for it to happen. So I watch from the sidelines like every bad investor does.

[Professional_Youtube_Commenter]

conversion cycle is great. But you cannot ignore the margin. what vthe the GP on those fast conversion.

Early lesson I learnt from ebay selling is you can price your items low and sell them quicker. But just dropping the price by £1 on items, can make the profit only a 1/3 of another seller who is selling for £1 more. It was a difficult one. You have very little sales by the profit on each sale is acceptable. Or you can make 10p profit on a sale of £6 items and work like a mad dog shipping humoungous qty of stuff, .


Illustrated example below.


two retailers both buy a pen for £1 to sell

retailer A sells it for £1.20 and has a 12x conversion 240p
retailer B sells it for £1.30 and has a 8.4x conversion

retailer A total GP is 240p
retailer B total GP is 252p

I know I use to conversions rates of the two giants you mentioned. I'm not implying that is the case with those giants. But I would like to see how those higher conversions relate to the profitability of some of the conventional supermarket which have less converisons buy higher margins.

In costco people just buy just for the value. But profits are thin..

[Ben_conduit]

What a great video, learned so much in this one, thank you James!! 🙏🙏

[Malekfahad]

Hey James, really nice video ! I was wondering if I could help you with Best Quality Editing in your videos better than your Editor with good pricing and also make a highly engaging Thumbnail which will help your videos to reach to a wider audience ? Pls let me know what do you think ?

[alastairwhite]

Great video James! I can’t believe Kirkland is bigger than Nike

[harrythebookworm]

This video seems a very similar to the aquired podcast 😅analysis

[davidbrian]

Costco isn’t good value though all the products in there apart from Kirklands can be bought cheaper somewhere else kirklands like for like can also be bought cheaper elsewhere

[stephenlaverty]

The great investor Charlie Munger loved Costco, its a genuine cash machine, super vid btw

[garyburgess]

Did you get that bouncy table from Costco??
It hurts my eyes 👀 😜

[divyv]

Hey James, very good video . I can do better editing in your videos which can help you to get more engagement in your videos . Pls lmk what do you think ?

[ssbomber]

Honestly, I don't get it. Just a soulless warehouse selling a load of cheap stuff stacked on pallets. Yes they make a lot of money but their margins are absolutely tiny.