Costco’s business model is to keep prices low, produce high sales measurements and to retain lost profits via marketing membership. In this model, consumers must pay a membership fee to access low-cost products available only Costco stores. These limited offers keep Costco customers returning to the store.
Costco’s strategy is offering low cost to its consumers. This strategy involves maintaining the lowest prices possible which is called Cost leadership strategy. Costco’s strategy correspondingly requires membership subscriptions to create a low cost of operation within their position. The use of this strategy is primarily to gain an advantage over competitors; keeping operating costs and overhead low, supplying items that sell rapidly, and charging low prices that kept customers coming back to shop. Generic strategy of cost leadership is essential to strengthen Costco’s business model.