Costco Wholesale (COST)

The context of the company's margins and employee policy needs to be explained a little better. Costco's entire business model is predicated on low margins and high volume, and the company's high employee cost is favorable as it creates low turnover, attracts better qualified employees, and lowers the probability of legal action by employees. Also, the company's ability to raise membership fees annually for the past 5 years is favorable, as it suggests higher bargaining power over the company's buyers. Author who provided this claim about membership fees needs to provide statistics showing prices increasing, while membership dropping off substantially.

Costco has been raising membership fees about every five years. Since Costco heavily relies on renewed and new memberships, increased fees may drive consumers to competing warehouse clubs.

Costco has had consistently low profit margins in past years, and Costco's ability to increase margins is limited by its high employee cost.

BJs reported that it's first quarter profits for 2009 rose nearly 42% compared to a year ago. They stated that the gain was a result of strong sales of staple foods like cereal, dairy products, and fresh meat. In addition, the company also saw 7% higher traffic and 1% higher transactions during the quarter. Costco however posted negative profits and revenue during the same period. Is overexpansion costing the company it's customers?

Increasing the number of clubs may cause cannibalization of sales at already existing clubs, instead of allowing Costco to take more market share from competitors like Sam's Club and BJs.