Costco Wholesale Corporation

Costco Wholesale Corporation, which was established in 1983 as a single store in Seattle, became the biggest membership warehouse club chain the world, employing the so-called “less-is-more” concept. With such concept, Costco Wholesale Corporation also looks upon themselves as the membership warehouse club that has the capability to sell top-quality food, hardlines, softlines, and other goods usually in a large number or bulk quantity at the lowest possible price. Costco now has over 457 stores which are situated in most parts of the United States and is still growing.

Their success was mainly attributed to their sales volume, good consumer acceptance, generally good services and customer care, and the lowest possible price offered. Furthermore, Costco sells, provides or displays items or products from limited suppliers or from a small number of suppliers. Variety of items is also reduced and this is done to reduce the risk of purchase decision and encourages a consumer to buy such product or service. Another benefit of this is that loyalty on a certain product or service is created or improved.

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The corporation’s goal is to provide more discounts and cheaper prices to the customers, focusing more on the customers, rather than to the competition. It is able to provide lower cost and greater discounts because the corporation’s marketing style is to reduce overhead cost by reducing fancy outlet designs, taking almost everything to simplicity. Costco also pays to its workers and employees, giving them good salaries and benefits, resulting to the tremendous low rates of theft and turnovers by its employees.

Since Costco is known for its cheap prices and sales in large or bulk quantities, it had created policies, just like other competing membership warehouse clubs, regarding merchandise returns and exchanges. Costco had been formulating and had been modifying its product guarantees in order for their goal and or concept to be followed. These guarantees, in order to improve a business’ quality or to be used as stepping stones for a corporation’s growth, such as the Costco, must be effective.

Costco Wholesale Corporation provides information regarding the guarantees that they offer on products and memberships, but it seems that their guarantees vary from one Costco branch to the other. In Costco found or established Japan, “What is Costco? ” t On membership: We will refund your membership fee in full at any time if you are dissatisfied. ” With regards to the corporation’s guarantee, a policy regarding computer returns was created.

This is in relation to Costco (Japan) unconditional double guarantee. Costco Wholesale's return policy for all desktop and notebook computers is six months from the date of purchase. After six-months from the date of purchase, all services and technical support will be subject to the applicable remaining manufacturer's warranty. While on the other hand, the guarantee of Costco Wholesale Corporation in their online store, “Costco Returns”, states that: “Costco.

com Costco guarantees your satisfaction with the merchandise you purchase from us. Costco. com products may be returned to any of our hundreds of Costco warehouses worldwide. Or, if you wish to return or exchange merchandise directly to costco. com, contact us at customer service. Effective November 4th, 2002, Costco Wholesale’s desktop and notebook computer return policy is six-months from the date of purchase. After six-months from the date of purchase, all service and technical support will be subject to the applicable remaining manufacturers' warranty. ” According to Christopher W. L.Hart, “effective guarantees must be unconditional, meaningful, easy to understand, easy to invoke, and easy to collect” (72).

A guarantee is said to be easy to understand and communicate if the guarantee that is created is written in a simple manner, using concise language and directly state what the guarantee is about or what it offers. This is done in order for customers and employees to know or learn what to expect and what is expected of them, respectively. Evaluating the guarantee stated by Costco in Japan, it can be observed that it is indeed easy to understand, and is easily communicated.

It clearly states in its guarantee on the merchandise, that they can provide satisfaction to the customers for every product that they sell and directly states a promise to give a full refund, in cases that the former statement is not fulfilled. Also, with regards to their membership, it was also directly stated that if a customer was disappointed or frustrated, they (Costco), would give a full refund. Furthermore, with regards to some items or products they sell under the exemption of a full refund, the policy regarding these products is also clearly stated.

Evaluating the guarantee given by Costco in their online store, though understandable, it is not easily understood as compared to the previous guarantee. It does not state the company’s promise, or what the company would do or give in return if a customer becomes dissatisfied with their goods and services. “Subject to the applicable remaining manufacturers’ warranty” seems vague and that customer’s would already think twice when it comes to invoking refunds.

The guarantee stated at Costco’s online store (costco.com) should be stated in fewer words, pinpointing more on the necessary information, terms, and policies. With regards to a meaningful guarantee, two considerations or concerns are raised by Hart. A guarantee is said to be meaningful, first, if the guarantee provided by the company or corporation addresses the service that is of most importance to the customers. Second, a guarantee is said to be meaningful or of good quality, if it is meaningful financially or that a guarantee should focus on what a customer would enjoy more.

The guarantee stated by Costco in Japan, is indeed meaningful, as it noticeably indicates that it would provide full refund for both products and membership fees. In this guarantee, price, which is considered by Hart as the most important element for a meaningful guarantee, is evident. Costco’s guarantee is meaningful relative to the price of the product or service. Costco would return the price which the customer paid, in full, if the customers are not satisfied with their products or services.

On the other hand, the online store of Costco only states or offers a return or exchange of a product bought by an unsatisfied consumer. One meaningful thing is that in the statement of their guarantee, the customers are informed that they have several outlets or that stores where the customer could return or exchange the merchandise. This helps the customers by immediately identifying where customers could go or convey their problems. Again, better promise or customer return should be created, or if such promise or payback exists, it should be clearly declared in their guarantee or policy.

In the further evaluation of a good guarantee, a guarantee is said to be easily invoked by customers if the process that a customer has to take is simple, trouble-free and undemanding. The process of invoking a full return of a good or service should be straightforward and uncomplicated or understandable. This will help customers who are already displeased, to favor or buy again such goods or services by the business establishment. In addition to an easily-invoked guarantee, Hart states that “customers should not be made to feel guilty about invoking the guarantee — no questioning, no raised eyebrows, or "Why me.Lord? " looks.

A company should encourage unhappy customers to invoke its guarantee, not put up roadblocks to keep them from speaking up” (5). Looking on Costco’s guarantee on this aspect, complains, letters and calls conveyed to the customer service of Costco can be used. How Costco responds to these complaints and the measures they take to help the customers and the process of invoking a refund can also looked into. The process of invoking a refund is easy. There are no forms to be filled or series of questions to be answered.

A customer just needs to bring the product to the Costco warehouse. From the statement of the guarantee in Costco’s online store, it was stated that there are a lot of Costco warehouses where the customer can return or exchange the product, though a list of these warehouses were not given. Some reported complaints were about growing membership bills even if a customer had already left the list of Costco’s members. Also, there were some complains regarding Costco’s customer service or how Costco deals with complains or requests from customers.

With regards to these complaints, Costco creates ways of helping these customers in other ways or that, in most cases, the managers send letters of apologies to unsatisfied customers. There was an incident that a customer was asking for the tires he bought to be installed in the front of his minivan (“Consumer complaints about Costco – tires”). Costco did not respond to this request and kept a firm stand that these new set of tires should be installed in the rears. Costco states that it is best for the tires to be installed in the rears, even if the vehicle was a front wheel drive.

They offered a video and articles stating or defending their claim regarding the installation of tires on the rears. Major sales representative Chris Biggers, sent a letter in response to the complaint regarding the installation of tires on the rears and stated that Costco aims or looks on the safety of both its employees and members (the consumers). With regards to the treatment of Costco employees and managers to the discontented customers, I think that Costco tries their best in addressing the complaints and that they still maintain a good relationship with the consumers.

Other wholesale corporations such as the Wal-Mart experience the same complaints, worst, they have more. Wal-Mart had been continuously complained because of their “unfriendly” treatment with customers. Their customer service and care was insufficient and sometimes, there are incidents of discrimination. Costco on the other hand have strong principles that they apply for the benefit of consumers and that they humble themselves to maintain the good relationship that they have with the customers.

It is just that customer’s are already irritated that they fail to see the efforts of Costco in helping them. Further personnel training and teambuilding should also be exercised by the company in order to nicely and properly address disgruntled customers, most especially those with tempers. There were complains filed against Costco, stating that their refunds or certain products were not being received by the customers or that Costco is unable to give the necessary benefit or compensation for a poor service or low-quality product.

If a refund was promised, the problem was that no certain dates of such reimbursement were given by the customer service, oftentimes resulting to unclaimed refunds. In terms of the refunds, Costco is at the losing end. Costco provides the cheapest price as much as possible, by keeping a mark up that is not higher than 14 percent for unbranded products or items and mark up not higher than 15 percent for non-private-labeled items, unlike its competitors who has mark ups up to 25 percent, or even 50 percent.

Suppliers also exert pressure on Costco regarding product returns. I recommend improved customer service hotlines or more customer service centers that are accessible to the consumers for easier management of complaints and quick response to customer needs. Also, the policy regarding the guarantee they provide should be further developed, but taking importance not to render the guarantee impractical for both the company and its consumers.

Works Cited

1. "Consumer Complaints About Costco - Tires". 2004. ConsumerAffairs. Com Inc. August 31, 2007.
2. Costco Wholesale Japan, Inc. and Costco Wholesale Corporation. August 31, 2007.
3. Greenhouse, Steven. "How Costco Became the Anti-Wal-Mart. " The New York Times, 2005.
4. Hart, Christopher W. L. "The Power of Unconditional Service Guarantees. " The McKinsey Quarterly, 1989.

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