Docklands, Australia warehouse

© Timothy Burgess

Expanding frontiers

At the 1983 Seattle opening of Costco’s first warehouse, the founders envisioned that if they were successful, the venture could perhaps grow to a dozen locations. Few could have predicted that one day Costco Wholesale would be a name familiar to people all over the world.

by Will Fifield, Dan Jones and T. Foster Jones

The idea for Costco came in the early 1980s, after Seattleite Jeff Brotman, whose family had deep roots in the retail business in that area, was urged by his father to check out the bustling Price Club warehouses in California. The younger Brotman immediately flew down to California and quickly realized he was in agreement with his father: There was nothing similar in the Pacific Northwest.

Looking for somebody to help start and run the new business, Brotman asked around among his contacts and was told there was really only one guy for the job, a man who had worked with Price Club and understood this new warehouse model: Jim Sinegal.

The pair reached an agreement, scraped together $7.5 million from investors to back the startup and in 1983 nervously opened the first Costco, in an industrial area in south Seattle. According to a popular story among company longtimers, the warehouse’s first employees were told to park their cars in the customer lot to make the place look busy.

But the business survived, grew to 10 warehouses within a couple of years and, in an ambitious and complex move, merged with its competitor, Price Club, in 1993, creating a company with almost 200 warehouses and 43,000 employees. Along the way, it helped drive revolutions in the way products are manufactured, distributed, marketed and sold.

According to Costco’s 2022 annual report, its revenue was $222.7 billion. It operates more than 855 warehouses globally—including more than 590 in the U.S.—with 300,000 total employees and 125 million members worldwide, making it the third-largest retailer in the world (based on global sales).

Going international

In planning Costco’s international expansion, some were worried that the concept of paying for a membership to buy items in bulk might get lost in translation. Tubs of peanut butter, a lifetime supply of toilet paper and the means to transport and store such items are typically American, after all. But the truth is, whether you live in Seoul, Sydney or Seattle, the value proposition is the same: A Costco membership is worth the savings on everyday necessities and wow items. Plus, the Food Court’s hot dog and soda combo translates to “a steal” (yep, it’s a buck-fifty around the world) no matter which language you speak.

This shared philosophy is what has led to Costco’s well-known strategies: focusing on a narrow selection of products in a wide range of categories; proceeding with steady, but cautious, growth; and never selling seconds or inferior goods.

Pierre Riel, executive vice president of Costco’s international division, oversees the company’s efforts to launch its operations in new countries. He shares that the company’s philosophy toward expansion is more than just a business plan.

“Our perspective is that by bringing value to people with each new warehouse opening, we’re actually doing something good for the community,” says Riel. “Helping people make ends meet, helping business owners run their businesses … and creating new jobs and career opportunities—all this is healthy for the community.”

Expanding warehouse operations began in Canada in 1985 and in Mexico in 1992. Today, you can also find Costco in Australia, mainland China, France, Iceland, Japan, New Zealand, South Korea, Spain, Sweden, Taiwan and the United Kingdom.

Growth mindset

Even though it’s been 40 years since the first Costco warehouse opened, Craig Jelinek, Costco’s CEO, says, “We still view ourselves as a growth company. We see exciting opportunities, both in existing markets and potential new markets, where our model would be successful.”

As for what’s inside the warehouses, each country features items specific to that part of the world—mostly foods that cater to local taste preferences. The remaining goods comprise many of the same non-food items you’d see in a U.S. warehouse. And, the company’s Kirkland Signature™ items are universally revered for their quality and value.

In addition to warehouses, Costco also has international e-commerce sites in many countries through which it does business.

Jelinek says that no matter where Costco puts down roots, it’s important to maintain a consistent company culture to ensure that all employees worldwide are invested in its business goals. He says that reiterating Costco’s history, values, ethics and merchandising strategies is crucial to overseas success. “We don’t take it for granted,” he says. “We pay good wages and benefits across the board, but beyond that, we pay attention to other needs, like how our employees are managed, developed and treated.”

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