LYCOS RETRIEVER 
Costco: Costco Membership
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Costco's high expenses are problematic to Costco's overall profits. Costco has been trying to decrease expenses in order to gain a larger profit margin by making changes within company structure, such as employee costs. Another factor that Costco must be aware of is customer loyalty. Costco's business model is built upon customer membership, who join and renew annually. This directly monetizes customer loyalty as unsatisfied members may not renew and represents a real cost to Costco's business.
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Costco is a wholesale warehouse retailer with more than 490 membership stores throughout the world. The Issaquah, WA-based company offers everything from bulk foods to computers. In 2006, Costco reported sales of $60.16 billion and 118,000 employees.
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Costco has extremely loyal members; they have renewed their membership at an 86% renewal rate. When a member begins shopping at Costco they are amazed at the prices and how fast certain bargain priced merchandise sells. The member then feels compelled to take their time when shopping so they can cover the entire store... no bargain will be missed. From this stage the member starts going more and more often, after all why shop other places when the prices are so good at Costco. Members seem to develop an addiction to shopping at Costco.
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Over the years, Costco has gradually expanded its range of products and services. Initially it preferred to sell only boxed products that could be dispensed by simply tearing the shrinkwrap off a pallet. It now sells many other products that are more difficult to handle, such as fresh produce, meat, dairy, seafood, fresh baked goods, flowers, clothing, books, software, vacuums, appliances, home electronics, jewelry, art, fine wine, hot tubs, and furniture. Many stores have tire garages, pharmacies, hearing aid centers, optometrists, photo processors, and gas stations. Optometrists working at Costco locations will see patients without Costco memberships. However to fill prescriptions through the optical department, membership is required.
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Customer loyalty is the ultimate factor for Costco's success. Customer loyalty can be measured through yearly renewed membership. Although Costco has been steadily increasing membership rates over the past 6 years, Costco's customer loyalty has stayed at a constant 86% since 1999, except for a 1% dip in 2002. As of 2006, Costco had about 48 million members world wide.
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Costco memberships can be refunded in full at any time. Costco guarantees their products with a full refund at any time. Exceptions: Televisions, projectors, computers, cameras, camcorders, digital audio players, and cellular phones must be returned within 90 days of purchase for a refund. Costco gives a free two-year warranty for new TVs and computers (one-year for refurbished TVs and computers.)
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