Today it’s a business powerhouse.
But its founders launched it with credit cards and personal savings.
Today Costco is a go-to place for great values. Selling everything from cereal to ink cartridges to fine wines. But it had a humble beginning, when two entrepreneurs put their personal assets on the line.
In 1983 lawyer Jeff Brotman took a trip to France. There he saw an interesting new type of commerce — “hypermarkets” – stores that combined the merchandise of a department store with the trappings of a discount supermarket.
He returned home wondering if the concept could work in the U.S.
From his retail contacts, he drew up a list of executives who might be able to run such a business. That’s how he linked up with Jim Sinegal, a former executive with Price Club, a pioneer of warehouse shopping, which opened its first store in an old airplane hangar in San Diego.
Brotman and Sinegal decided to clone the Price Club business-model in the Pacific Northwest – at the time, one of the nation’s least competitive markets. With friends and acquaintances, they raised $7.5 million and opened Costco — a store where small business people could pick up everything they needed at one location, from office supplies to electronics to food.
And amazingly, they financed it with check books and personal credit cards. “We were all-in,” admits Brotman. “If we failed, we’d be broke.”
It was a big risk – so big that one retailer, Sony, refused to sell them any merchandise. At all.
The first Costco store opened in Kirkland Washington, a suburb of Seattle. And it was a phenomenal success. Within 10 weeks it exceeded $1 million dollars in sales.
Stores in Spokane and Portland quickly followed. So did Sony – today Costco is one of its biggest distributors. Within just three years, Costco was selling $1 billion dollars in merchandise.
The formula for success? Hard work.
“We worked almost constantly,” explains Brotman. “Fortunately our wives worked with us, so we weren’t totally separated from family.” Good thing. Because Brotman and Sinegal were on the road nearly every week — for ten years!
Today, Costco is the largest warehouse chain in the world, with 550 warehouses, 90,000 employees and annual sales of $90 billion. In 2012 the company ranked #4 in the Fortune 500.
Costco stores have bakeries, delis, pharmacies, eye care centers, tire centers, food courts and gas stations. And offer shoppers everything from web hosting to fitness memberships to group vacation packages.
The club’s 55 million must be happy. They renew at an incredible 86% annual rate.
Jeff Brotman and Jim Sinegal exemplify an axiom featured on our website: Re-think your industry. Costco – a store with everything from doughnuts to diamonds.