Costco's 2025 Strategy Revealed: Back to Basics & Global Expansion | 5IM

Foreigning us now for five insightful minutes is Todd Barentine, president of the club division for the Barcode Group.

And Todd is here to give us special insight on Costco.

Todd, Costco's been knocking it out of the park, seems like decades now, but particularly in 2024.

What do you anticipate their key initiatives will be for 2025?

Chris, that's a great question.

And Costco is really their own worst enemy because they've just continued to have success year over year.

2025, though, interestingly, is going to be almost a recommitment back to the basics.

And I know that seems a little bit odd, but what they're going to look to do in 2025 is kind of get back to the core of what makes them successful.

And some of those real kind of initiatives and tactics are simple things like, hey, SKU management and making sure that items are coming in on time and then flowing out on time.

And when you think about a limited SKU environment, you know, in and out on time really matters for them.

You know, there's been a lot of challenges over the last several years, right?

Everyone knows what, what the world looked like in 2020, and now here we are in 2024.

Market conditions, global supply chain challenges that really challenged Costco.

So what they're looking to kind of do is get back into some more normalized behaviors with SKU management.

They're also looking to get back to the roots in terms of, hey, treasure hunt, right?

Which really is one of the advantages of Costco.

Bringing items in that are really new and unique, exciting, that drive member value both from a price value sensitivity standpoint, but also just from a creativity and uniqueness standpoint.

Those are some of the real big things that you'll look for here in 2025.

And they're really focused on, well, Todd.

What'S really key for brands and suppliers trying to get products into Costco in 20.

Yeah, good question.

Again, you know, if I were talking to a brand, one of the things that, that we definitely tell them is, hey, value.

And again, value can be measured a couple different ways, right?

Anybody can race the bottom on price.

It's not just about price, but it's also really about, hey, the uniqueness of the item.

Build the quality.

Costco wants to sell the best possible quality goods.

So they don't want you to just kind of take quality down to get to a value on price.

You want you to build the quality up and then lean in with an investment on that costing to give Costco an Advantage.

You know, most people probably know, hey, Costco works on smaller margins than a lot of other retailers, but you know, that's a big thing for them.

So helping to kind of lean in and understand that you're going to get that volume on the backside, that's really the way that that mechanic works for most suppliers.

But, you know, it's really all about value.

Costco buys open so there aren't time to resets, which is different from some other retailers.

So thinking about, hey, how can you launch something and being first to market with Costco, bringing them a unique opportunity that you can partner with them and get them to work back and forth, lean in with.

That's the way that you should approach this retailer.

You know, they're very different.

They're an open book test.

You know, there's not a lot of hidden, you know, fees and, you know, slotting.

You don't deal with that.

It's really straightforward.

Bring your best possible quality, your best item at your best possible value.

And let's see what happens.

Todd, that open, that open insights, really, that's really interesting.

You know, and I want to get back to something you said earlier.

The treasure hunt.

You know, one of the best, you know, absolute best part of Costco is the treasure hunt for its members.

What, what insider intel can you provide into how they continue to use that as a competitive advantage?

Yeah, so Costco is unique in the fact that they are not centrally purchased.

They have eight US Region buying teams that all are focused against a very specific geography.

And so because of that, they can tailor items in their item assortment based on what works for their member within a market.

And because then they have these micro markets they can look at, we'll use the San Diego region as an example.

The San Diego region is essentially the southwest of the US So it's like San Diego proper.

Then it's like Boulder and Colorado and then it's also like Phoenix, Tolleson, you know that area.

They can find items that work for those various micro markets, test them there, build them, expand them, and then it kind of flows and builds from there.

But it's just it.

That is probably the competitive advantage that helps them treasure hunt and bring items in is their ability to be nimble.

They don't have to launch everything at every single warehouse at once.

They can kind of pioneer it, test, prove the concept, get it right, and then roll it out in a bigger fashion.

Wow.

Well, Todd, we know that Costco is planning on going even more international in the next year and beyond.

What does that mean, for brands and for customers.

Yeah, it's an interesting model.

Most people think of Costco as being a US Retailer, but they are a global retailer.

And year in and year out, at supplier day, and you hear it through different meetings, they'll tell the suppliers, hey, we're global.

They want suppliers to start thinking about their global international country regions.

You know, being a global, you know, retailer gives them access to international suppliers, also gives this domestic supplier an opportunity to build an international business.

It works the same way.

Their plans for international are pretty robust.

I think They've got about 180 warehouses right now outside of, you know, North America.

The scale there is to grow that pretty substantially by the end of 2030.

What's really cool about that, though, too, is again, the ability to create treasure hunt that you can test and pioneer an opportunity in a country like Australia.

Right.

Or pick, you know, Taiwan or, you know, you know, even the uk.

And if you think about the Costco member being a pretty, you know, educated and affluent, you know, household by demographic, they're globe travelers.

So having that kind of flow back and forth is another competitive advantage for them.

Great stuff, Todd.

Thank you.

Thank you.