Costco, America’s third largest retailer, has annual receipts that eclipse those of big box retailers like Target and Home Depot. The warehouse store has more than 57 million member shoppers, which makes it popular with entrepreneurs seeking to broaden their product’s exposure and increase their sales. The company provides its customers with a wide variety of merchandise and regularly works with new suppliers to get unique products into Costco stores; however, the retailer only stocks books that have earned a position on the bestseller list.
Do Your Homework
Art Jackson, vice president of general administration for Costco as of publication, told vendors at a San Diego event that getting to know the warehouse chain is crucial to their attempts to place their products with the company. He suggested visiting local stores to become familiar with the wide variety of goods available and how they are displayed. Prospective vendors should ensure their product fits with but is not identical or nearly identical to the merchandise currently carried.
Assess Your Readiness
Without exception, products sold by Costco are required to generate minimum weekly sales of $500 to $1,000 in every store where the item is placed. Ensure you have the ability to produce enough product to meet demand. You must also be prepared to provide any licenses, certifications or permits associated with your product; for example, if you make barbeque sauce, you’ll need to show your food safety permit and public health department record. Additionally, know the percentage of your total revenue the product you place in Costco would represent; the company will not enter into an agreement that exceeds 20 percent of the partnering business’ receipts.
Prepare for a Road Show
Costco routinely tests new products' potential by placing a few items in a local warehouse for four days to determine their popularity with customers. The company decides whether to undertake a larger scale rollout of a product based on the success of the pilot offering. You will be required to submit verification of your ability to supply sufficient product to meet projected consumer demand prior to entering into a contract with Costco.
Costco works with suppliers who reflect the communities they serve and has instituted a Supplier Diversity program. Companies owned by ethnic minorities and women are eligible to participate if the owners are U.S. citizens and the business is certified by the National Minority Supplier Development Council, Women's Business Enterprise National Council or a similar government agency. Qualifying suppliers are invited to apply for the diversity program through Costco’s website.
- Justin Sullivan/Getty Images News/Getty Images