Thursday, January 17, 2013

Costco France's Conference at Paris Dauphine

Yesterday I attended a conference organized by my former business school, Paris Dauphine, Master "Distribution et relation client". This master often organizes conferences around the topic of retail and customer relationship management, and we had the opportunity to meet with CEO of Costco France, Gary Swindells.

The topic is very interesting to me, as I have always been a fan of this commercial concept:
  •  I used to be a card member while I lived in the US.
  • When I came back to France I had the opportunity to prepare a presentation for Auchan's marketing department, as I was eager to convince people in France of how good the concept was.
  • I asked Lars Oloffson while he was CEO of Carrefour what he thought about the concept, if he was eager to try it in Europe, especially as he owns Promo cash, a btob card member wholesale chain. He responded to me that it was interesting, that they owned in Brazil Atacadao which is a concept close to Costco, and that they were on their way to launch a test, in the northern part of France. I don't think the project ever happened though.
It was also a good opportunity to see how Dauphine changes, as the main hall and the conference room has been fully renovated. It has been also my pleasure to have the opportunity to meet with Yves Soulabail, one of the main expert of Carrefour's history in France, but also an expert in Bernardo Trujillo's history, the person who invented the "modern retail". He owns a blog I visit almost daily, Carrefour un combat pour la liberté.

What is Costco
Costco is a warehouse, where both professionals and individuals may found products in large formats, at a great price/kg. In order to access their stores, you need to own a membership car you need to pay. Here is a great presentation.

Key figures and quotes of the conference:
  • Costco works with a sales margin of 14%, which is actually very low compared to what other retailers have usually. But actually, I don't think that in this margin they count the money they get from the membership fee people needs to pay to get in ($55, $2 billion in membership yearly). What is interesting with the concept is that the membership fees is somehow the profitability they reach with each customers up front, even before they have bought any products... Which allows them to propose better pricing.
  • $92 billion expected in 2012, which is I believe the 5th retailer worldwide.
  • $148 millions in sales per stores, 13 205 m2 per stores. They even own a store in Korea that makes $478 M a year!
  • 4 000 listed products: 3 500 listed permanently  500 which are in & out promotions, that goes from lobsters to cars, to pants...
  • Customers visit stores on avarage every 10 days, which is actually high... I did not use to go that often...
  • Costco don't communicate, meaning they don't do any flyers, any TV or radio promotions. They just have sometimes local campaigns for store openings. 
  • Sometimes, they lend parts of their stores for "road shows", people that comes with a specific offer, and that shows products. 
  • They believe they would be profitable once they would reach 3 or 4 stores! Which is not a lot actually.
  • They forecast to own 10 to 12 stores in 10 years, and 20 in 15 years. You can clearly see they have a map and are eager to invest large amounts of money to settle in France.
  • The average basket is 130$