Go back to San Diego in 1954, a group of local businessmen approach an attorney, Sol Price, looking for investors in a new retail concept: a large warehouse-style store featuring department-store-quality products at lower prices. The idea they proposed was that selling a lot of goods in a no-frills setting could be a new and profitable niche in the retail world. They called the store Fed-Mart, and over the next two decades the company grew into a successful regional chain in the southwest.
A German retailer purchased Fed-Mart with plans to make it into a leading national retailer, but failed. Sol Price, a top manager with Fed-Mart, and his son Robert were now unemployed. Mulling around new ideas, they came up with a membership-based warehouse retail operation and called Price Club. They opened their first store in San Diego in 1976 in an old manufacturing building built by Howard Hughes. Several Fed-Mart managers came to work at Price Club including Jim Sinegal, who started at Fed-Mart unloading mattresses when he was 18 years old.
This bit of history is important to this story because at Fed-Mart, key relationships were formed and a set of operating principles for running the company
were clearly defined and spelled out by their president at Sol Price. They included pricing, displays, policies for handling customer complaints, rules for advertising and more. The very first item on the list: “Customers come first, integrity is the cornerstone upon which we much build consumer confidence that creates customer loyalty.”
A retailer in Seattle was interested in the Price Club model, flew their son Jeff Brotman down to check it out and he came back with glowing reports and there was nothing like it in the northwest. The Seattle group looked for a CEO and chose Jim Sinegal who agreed to manage the new start-up. In 1983, the group scraped together $7.5 million from investors to open their first store in an industrial area of south Seattle.
Fast forward to 28 years as Jim Sinegal announces his retirement as the CEO of the third-largest retailer in the U.S. – Costco. It has $89 billion in revenue, 64 million members with 600 locations including 81 in Canada, 32 in Mexico, 22 in England, 9 in Japan, 7 in South Korea, 8 in Taiwan, 4 in Puerto Rico and 3 in
Australia.
Jim Sinegal ingrained five simple and down-to-earth business principals into the Costo’s corporate culture that made the company what it is today. The following are excerpts of these principals:
