Introduction and Objectives
The United States of America's wholesale market is one of the most stable in the world, with numerous wholesalers spread in different parts of the country. The country has been reported to have favorable policies for the industry, thus favoring the exponential growth of the wholesale supermarkets across the different states (Ellickson, 2016). Some of the well-known wholesale supermarkets are Costco and Sam's club. Costco was the second best retailer in the world, after Walmart, back in 2015. Being a multinational corporation, Costco is headquartered in Issaquah, in the Washingtonian state of the United States of America. Costco was founded slightly more than forty years ago and currently operates more than 700 warehouses in different countries all over the world (Costco, 2018). Sam's club was founded in 1983 in Midwest City, in the Oklahoman state of the United States of America. Currently, Sam's club is headquartered in Bentonville, Arkansas, the United States of America. Sam's club is a subsidiary of Walmart and operates in the 44 out of 50 states in the United States of America. Beyond the United States, Sams club has stores in China, Mexico, and Brazil (Sam's Club, 2018).
The comparative analysis based on revenues between Costco and Sam's club is relevant to the study of the financial trends in the companies located in the United States. The investigation is also applicable to the researchers who want to find out the profitability of the companies who are multinationals at different levels in the United States of America. The first objective of the study is to find out the trend of the wholesale industry in the United States of America. The second aim of the analysis is to find out the financial position of the wholesalers in the united states of Americas market. The third objective of the comparative study is to compare the performances between the two global leaders in wholesale, Costco, and Sam's club.
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Literature Review
Lately, it has become a struggle for the wholesalers in the United Kingdom in their competition in dire efforts to emerge the best in the market. The key players in the race are Asda and Sainsbury's (Oddy, 2016). Founded in 1949, Asda is currently a subsidiary of Walmart. Asda is headquartered in Leeds, West Yorkshire, United Kingdom. By the end of January 2018, Asda had more than 640 locations (Asda, 2018). Sainsbury's is headquartered in London, England, in the United Kingdom. Founded close to a century and a half ago, Sainsbury's has more than 1400 stores (Sainsbury's, 2018). The two supermarkets have been at an arm's length as they compete for the title of the best supermarket in the United Kingdom. Both Asda and Sainsbury's have made the grocery sector of the United Kingdom to have a competitive outlook, as emergent giants such as Tesco join the tussle (Economics Online, 2018).
Having over 400000 employees in 2018, Tesco is headquartered in Welwyn Garden City, Hertfordshire, United Kingdom. Tesco is also a multinational wholesale supermarket dealing with the retail sector in the country (Tesco Plc., 2018). The grocery sector of the United Kingdom is highly oligopolistic. The changes in the prices of one store directly affect the other players into the industry (Sparks, 2014). Therefore, Tesco, Asda, and Sainsbury's have been at loggerheads in a long time now where one or two of the leading supermarkets decide to change the prices without consulting the other competitors in the same sector. The local farmers and growers of the groceries supplied to Asda and Sainsbury's have interestingly been affected by monopsony, where many producers deal with one buyer. The trend in monopsony has created a competitive trading platform where the producers have had to increase the quality of their products to make it on the leading supermarkets' shelves (Economics Online, 2018).
The grocery sector in the United Kingdom is an example of one of the most unstable industries in the country. In 2012, the emergence of low-cost supermarkets significantly plummeted the market prehension of the big three supermarkets. Asda, Sainsbury's and Tesco had to reduce their prices. Otherwise, they would be bidding goodbye to the massive number of customers who may have started changing their shopping preferences to Aldi and Lidl, new entrants to the grocery industry (Economics Online, 2018). The market share of both Aldi and Lidl have increased in 2018 compared to 2016, which is an opposite of both Asda and Sainsbury's that have experienced a downward trend. The trend has raised concerns in the leading supermarkets, and the solutions have all converged on a single idea: dropping their prices to enhance their customer retention strategies. In an unprecedented turn of events, Tesco had been trying to outdo both Asda and Sainsbury's in the race for the best grocery store by acquiring 2000 convenience stores in 2015. Tesco has done so even though it was denied the acquisition of Safeway in 2002, which was granted to WM Morrisons (Finch & Treanor, 2003).
The market analysts in the United Kingdom have further attributed the leading supermarkets breakthrough to operating supermarket chains, opposed to independent retailing. The leading supermarkets, such as Asda and Sainsbury's, operate chains, and have gone beyond the borders to increase their presence in the world, and in the end improve their overall sales. The analysis also provided that the supermarket chains had effective plans of mergers and acquisitions. For instance, Tesco had strategically planned to acquire the ill-performing Safeway back in 2002 (Finch & Treanor, 2003). It then bought Booker Group, a grocery store in the United Kingdom, for £37 billion (Monaghan & Wood, 2017). Besides, Asda is a subsidiary of Walmart, the largest store in the world, hailing from Bentonville, Arkansas, the United States of America. Asda had revenue of over £21 million in 2017, while Sainsbury's was way above it at slightly over £26 billion in the same year. From the outlook, Asda has to make deliberate efforts to get to Sainsbury's level.
Unlike the United Kingdom and the United States of America where the wholesalers are in constant competition with one another, the wholesale supermarkets in Australia have had slack in their growth. The light at the end of the tunnel has illuminated the likelihood of exponential growth shortly. Characterized by wholesale supermarkets from outside the country, the Australian wholesalers are attempting to revive the level of competition that was once in the market. Some of the Australian wholesale supermarkets are Woolworths, Aldi, and Coles. Woolworths is headquartered in Cape Town, South Africa and has stores across Australia. It has more than 18000 employees across South Africa. Woolworths has risen to become one of the dominants of whole supermarket sector in Australia (Woolworths Holdings Limited, 2018). Headquartered in Melbourne, Australia, Coles has more than a hundred thousand employees. Coles is a subsidiary of the Coles Group and Westfarmers. Just like Woolworths, Coles has become a national player in the wholesale sector (Coles Pty., 2018).
With more than 10000 stores across the globe, Aldi is a German wholesale supermarket based in Essen, Germany. The company employees a more than 150000 employees in total and is widespread in Australia (ALDI, 2018). The suppliers to the leading supermarket chains in Australia have realized an increase in the sales of their products to the stores. The market analysts in Australia have suggested that the market growth rate is expected to be 2.8% in 2018, after having been supposed to be 2.5% in 2017. That is good news for the supermarket chains as the grocery sector takes a leap towards sustainability in the country. Nonetheless, the expected industrial growth rate is going to be shared among the leading supermarket chains in the country. The strategy used to win the growth rate share will determine the position of the individual wholesalers in Australia. The experts stated that Aldi was expected to have 61% of the percentage of the market growth rate, followed at a distance by Woolworths at 27%. Coles may lag far behind at 6%. Therefore, the competition among the wholesale supermarket chains in Australia is not as pronounced as it is in the other countries (Pash, 2017).
In its quarterly financial report to April 2017, Woolworths indicated a 5.1% rise in sales of food to hit $9.27 billion, compared to the last quarter. The management of the company, in what they saw as a jinx broken, stated that the company expected to rake more in the food sales in the next quarter in the same year. Coles was left behind in the breakthrough of its competitor, Woolworths. Coles recorded a much slower growth rate than Woolworths, according to the quarterly financial reports in the company. Sales in food and liquor at Coles were up by 1.2% to $7.6 billion. The increase in the liquor and food sales had only increased by 0.3% in the three months, and the food sales had risen by 0.4 % (Pash, 2017).
In the meantime, the Germany-based Aldi was accelerating upwards in the Australian wholesale supermarket sector, overtaking both Woolworths and Coles. The former has been making useful advancements into the Australian market, with a better strategy than both Woolworths and Coles (Pash, 2017). The latter has had an uphill task to up their market game and competed with Aldi. The plan by Woolworths to invest in multichannel customer experience, back in 2015, was set to increase the overall financial performance of the wholesaler on the Australian market. That will be a success story for the chain.
Comparative Analysis
The comparative analysis between Costco and Sam's club will follow the following aspects. The first aspect is the revenues. The second aspect is the latest products and services that both Costco and Sam's club are offering their customers to retain them. The third aspect is the processes in the two supermarket chains.
The total revenue of Costco in 2015 was $116,199,000,000. In 2016, the total revenue at Costco rose to $118,719,000,000. This represented a 2.2% increase in the total revenue. The company had made deliberate efforts to increase its revenue in the year after 2015. In 2017, the revenues at Costco again rose to $129,025,000,000. This time, the growth rate was 8.6%. The growth rate had shot higher in the year. The management in the giant wholesaler in the United States of America and beyond anticipated for an even bigger skyrocket in the total revenues that the company rakes from the market. The following is the graphical analysis of the total revenues in Costco over the three years.
The revenues for Sam's club in 2015 were $ 58.0 billion. In the following year, 2016, the revenues for Sam's club dropped by 2.1% to hit $56.8 billion. The drop in the revenue was because of a decline in the sales made by Sam's club in the various stores they have all over the world. Efforts we put in place to improve the revenues in the company deliberately, and in 2017, there was a 0.9% skyrocket in the total revenues of the company to hit $57.4 billion. Sam's club, with the integration of better customer service strategies, targets to improve the incomes again in 2017. The following is the graphical representation of the total revenues at Sam's club in the three years.
From the outlook of the analysis of the total revenues of the two supermarkets, it is evident that Sams club us at a higher position in the market compared to its counterpart, Costco. The following are the reasons for the trend. First, Sam's club has more presence than Costco. Back home in the United States of America, Sam's club is present in 44 out of the 50 states in the country, outdoing Costco. Across the borders, Sam's club has more presence in various countries compared to Costco. The sales strategies and techniques used In Sams club gave superseded those used by Costco, hence the difference in the revenues.
The products and services from both Sam's club and Costco indicate the level of technology used in both companies in the modern business world. The advent of technology in the United States of America has revolutionized the sales and marketing of products, as well as the manufacturing of the products themselves. The rise in the level of technology has affected the wholesale supermarkets in the country in different ways. Commonly, the increase in the level of technology has led to a rise in the use of computers to manage the inventories of the supermarket chains.
In the recent past, many customers in the United States of America and beyond have preferred Costco for offering the most affordable prices on medications. Therefore, the supermarket has invested in providing products and services that improve the general wellbeing of the customers, and at the same time minding their pockets. A critical acclamation from the public within and without the United States of America has led to the supermarket chain providing hearing aids as one of the best products. The move has made the competitors of the supermarket such as Sam's club and Walmart to redesign their customer inclusivity in the products and services they offer them.
Differently, from Costco that has invested in the healthcare sector to get in touch with its customers, Sam's club has invested in energy to retain the existing customers and attract others to all its stores in the various countries in the world. The best product at Sam's club has been batteries. Consumer experts in the United States of America have stated that the consumers get to pay up to $1 less on each battery especially when they buy them in bulk. The experts went on to claim that energy purchased in small quantities is usually expensive.
Looking at the products from both supermarkets, Costco is likely to get more in touch with its consumers more since it provides a product that touches on one of their basic needs, and in this case: healthcare. With its hearing aid, Costco is likelier to appeal to more customers than Sam's club is. All the same, the media used in the marketing and promotions for the hearing aid determine the rate of their sales more than the cost affordability of the product and its availability, according to the analysts. The hearing aid has had a significant positive impact on the sales made at Costco in the last year due to its appeal to the target market.
The processes at Costco and Sam's club determine the efficiency of the companies, and consequently the consumers' preference on the supermarket chains. The operations may range from those that affect the internal environment of a company to those that affect the external environment of the organization in question. Often, processes are developed by the organizations to take care of the internal environment of the firms, such as maintaining the customer base that a particular organization has. Some of the processes at both Costco and Sams club target the operations management, sales and marketing, supply chain management, customer service and employee motivation.
At Costco, the process that has contributed to the highest amount of sales is the quality management. The human resource training in the company is done regularly to ensure that the employees of the company are skilled and carry out their duties efficiently. In the end, the efforts contribute to the appeals made by Costco to its extensive customer base in different parts of the world. Moreover, the quality of the services offered by Costco to its customers has to be enhanced severally so that the company does not squander money in investing in customer service efforts that may not attract the target customer at all.
At Sam's club, the process that has contributed to the most efficient operations of the company is the restructuring of the team that is concerned with product purchases. The move by the supermarket has positively shaken the services, providing better opportunities for the company to rake in huge returned from investing in its operations management. The restructuring of the team further contributed to the efficiency of the team as the employees whose roles were passive were put in different units. The functions in the groups, precisely the leadership ones, were reduced from six to three. However, the restructuring of the employees assured them of the retention of their jobs.
Both Costco and Sam's club had a change in their operational aspects to ensure that they have prioritized the needs of the customer more than they have always done in the past. Nevertheless, the restructuring of the product purchase teams at Sam's club is set to bring in more value to the company than the quality management practiced at Costco. The main reason why it would turn out that way is that Sams club has integrated quality management by reshuffling the employees in that it has increased the efficiency of the workforce. Having a broader perspective on operational adjustment, Sam's club will appeal better to the customer.
Conclusion
The tussle between Costco and Sam's club, both based in the United States of America, has led to the reshaping of the various operations in the said companies to edge one another in the market competition in the country. The situation has been likened to what is happening in the United Kingdom market, among Asda, Sainsbury, and Tesco. The scenario, in a small way, has been compared to the competitive wholesale supermarket competition In Australia, where a new market entrant, Aldi, a German multinational, has turned the tables for the dropping growth rate in the wholesale sector. The other players are the South Africa based Woolworths and the Melbourne based Coles.
Comparatively, Sam's club has raked more revenues than Costco in 2015, 2016 and 2017. The primary reason for this trend lies in the extensive presence of Sam's club in the various countries in the world, more than Costco. Nevertheless, the latter has not been left behind in the innovative approaches, after having integrated, affordable healthcare solutions to its consumers in different stores. The supermarket has come up with a cost-effective hearing aid. Sam's club has maintained its prestigious place at the top of the market by restructuring its workforce to provide for more efficiency in the handling of customers.
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