On someone’s excellent recommendation, I watched this MSNBC piece on Costco, which was absolutely brilliant. Despite being a seemingly no-frills operation, the documentary showcased the immense amount of work going on behind the scenes, that keeps Costco being as successful as it is.
Amongst other things, these were the key take-aways:
1. Level 5 Leadership is key: Jim Sinegal is (and his successor are) another example of successful Level 5 leadership. To date, I had NO idea who founded or ran Costco. But my family and I love going there every chance we get.
2. Work hard to make it look effortless: What looks easy and effortless, really isn’t. An immense amount of research, and work goes on behind the scenes of this seemingly “no frills” business.
3. Word-of-Mouth is cheaper and more powerful, but it also means harder work. Costco relies on word-of-mouth. There is no advertising revenue. But that means more research, more dedication to making smarter choices. Toilet paper
4. Everything is about the Culture. Maintaining the Culture and Core Values of a company is key to any company’s success. It takes continuous work and commitment, but it has HUGE payoffs. Jim says that at around 20:00, and he even highlights why. Watch more to find out.
5. Know your Customer. Costco’s key customer is the middle-class and upper middle class. They know that their customers usually come shopping after a long day at work and don’t really want to spend a lot of effort making choices. Instead, Costco makes it easy to make decisions, and they stock everything within their customer’s price point, and to their taste.
6. Treat your Employees Well: This isn’t rocket science and yet I’m constantly surprised by how many people just DON”T get this. Find good employees and treat them well. They will stay. There is a reason why Costco boasts one of the lowest employee turnovers in the United States. They pay their employees well, provide good benefits, and keep them happy.
7. Stock a few items, but stock well: This is possible only if you know your customer well, which goes back to the need to research well. Costco usually stocks very few products in any category, but these are usually well thought out and win big…toilet paper and wine, to name a few, are BIG sellers. So they get the best in those categories and never let their customers down.
8. Even a small unknown company can be a BIG player: Who knew that Costco is the world’s largest buyer of fine wine? Well it is, and because it is such a huge player, they can even make powerhouse (sometimes egotistical) wine countries like France and Italy cater to their needs. Its similar to how California’s emission policy dictates world emission standards (because California is the world’s single largest car market), or for that matter how Gandhi brought down the British empire. Its not how small or unknown you are…its the power you can wield.