Costco

“NVIDIA took it one step further. There was no free milk in the fridge. So if you wanted to drink coffee at NVIDIA, and you wanted some milk, you actually had to chip in a dollar every month to the milk club, and the milk club would stock Costco milk in the fri…”

“Our first order was actually for Costco for a contract manufacturing brand, and it was 300,000 bars.”

“Costco was repeatedly attacked over its decades of life by activist campaigns that have accused them of having bad governance.”

“Costco is so big that its house brand, Kirkland Signature, if that was a standalone company, it would be bigger than United Airlines, Procter & Gamble, or Coca-Cola.”

“Costco came under attack in the early 2000 for having these non-standard governance practices. In fact, Costco routinely gets the worst possible governance rating from governance rating people.”

“People used to tell me Costco was an example that wasn't protected so much so that like, I was surprised to learn that it was embodied in a governance fortress.”

“AI is going to become a lot like Costco where you pay for the membership, right? And that gets you in the store. And that's actually the part of Costco's business that is, you know, the highest margin. And then you have, you know, everything you're buying in t…”

“Starbucks too, by the way.”

“Jim was one of the best executives I've ever met. Maybe, maybe the best.”

“When you find a couple of executives and back them before there's a company, before there's a, Dollar of revenue. Before there's an order. You feel as much as they do that you're a founder.”

“So the more value we give, so whatever, if Costco can go find a new source for batteries and save a nickel, a hundred percent of that nickel gets lower prices. None of it goes into higher margin.”

“In US, the median sort of income is around, say, 50, 60 K US dollars. That's what Walmart is catering to. Costco is catering to 80,000 to 90,000 sort of USD per capita income.”

“So retail, Walmart, and everybody will be charging 21, 22% gross margin. Costco operates at 11, 12% gross margin.”

“Costco likes to find the newest best thing and be the first to market with it. They will bring you in and then want the customer to miss you and then be excited when you're back.”

“We have a little bit of co-packing, but mostly we do all of our own baking. And when things get very busy, when we're heavy with Costco, we use our co-packer.”

“Don't try to compete with Walmart, Amazon, and Costco. That's, or if you're going to do that, you need to put Two billion dollars on the balance sheet and you need to make that like a 10 year journey.”

“If you're a large retailer, be it a Walmart and Amazon or Costco. If you own the relationship with your customers, you have this ability to disintermediate the company selling to you.”

“Pretty much any CPG company in the US is going to have a third of the business or so, sometimes more with Walmart or another big chunk with Costco or, and it's short in other countries as well, where between one and three retailers, you're going to have the bu…”

“Things like Costco and Walmart are the two largest sellers of organic products in the country.”

“What is interesting is now there are more and more Chinese brands that are playing a game that might have been The preserve of Americans and Europeans and other first world nations in that they are trying to build sustainable brands. When they come to North Am…”

“You've got Amazon now, which is 25 times next year's street EPS, which, that's GAAP EPS, cheaper than Walmart, cheaper than Costco.”

“And since they basically, you know, got on the same curve, 62% of all retail has gone to those three.”

“On average, it takes them 27 days to sell through their entire inventory, which means that's on net 30 terms, three days of grace where the inventory is actually financed by the vendors and then some.”

“If you're only going to sell very few things, you're only going to make very few episodes, it puts a lot of onus on making Exceptional choices on the things that you do choose to carry. So it's like a very high leveraged strategy.”

“The P.E. On NVIDIA, to give that sound bite that I love, it's lower than the P.E. On Costco, right?”

“We'd been through this ten-plus year period heading into the COVID bull market where backward and forward-looking quality and growth were highly correlated. Effectively, you could just keep owning the same thing and do well. Names like Louis Vuitton, they just…”

“I mean, you're selling names like Louis Vuitton and Costco and buying names like Rolls Royce and Siemens Energy.”

“There are a set of laws called fair trade laws that impact Everything that retailers sell in this era. It's actually kind of crazy. It's a holdover from the depression. We talked about it on the Costco episode where it was illegal for retailers to sell goods b…”

“Trader Joe's and Costco both only stock about 4000 items at a time.”

“Trader Joe's probably trades at north of one X, but probably not all the way at Costco 1.6 X. I don't know, maybe around there. So on that 23, twenty four billion in revenue that we estimated, call it a 32 to thirty four billion dollar company, maybe a thirty …”

“They famously only mark up 11 to 14%.”

“The biggest mistakes are selling the Costco's too early, because you know, the IRR is totally dependent upon what you assume the exit multiple is, like, and that is difficult to be precise about, you know, what the right exit multiple is for a business.”

“So for example, if you're selling HR software, I think it's Costco and Home Depot and a few others are great at adopting new benefits, new HR software, et cetera, which you wouldn't expect, right? These are big you know, impressive enterprises, but they often …”

“In our case, you know, we had product problems that ended up coming out shortly after We passed this up. Had I not passed it up for that reason, there would have never been a T-Rex.”

“So the other website that does this is bstock, bstock.com. They have like a contract with Costco to sell all of their returns.”

“And if you look at their net income, It's basically the number of memberships that, like, they have, like, 50 plus million members, it's some huge number, times the price of the membership. That's their net income. And then everything else just kind of is a wa…”

“They're getting sued by Lululemon right now because they made pants that were better than Lulu's pants that are much, much cheaper, but they're actually much better.”

“It's funny, we, we've met with the one of my partners met with the Costco board and like pitched them on financial services.”

“It is a very, very unique business model that is somewhat of a, it will stand the test of time and I think it's AI proof.”

“We'll do twenty-five million this year, but that's not the important number. Because we don't spend money on advertising or anything, makes 12 to fourteen million a year, and we just added Whole Foods, we just added Costco, we're adding more and more, you know…”

“He used to say, if you're not spending 90% of your time teaching, you're not doing your job.”

“They cap their markup at 14 to 15% when they could charge more.”

“Price Club sold a hot dog and soda for a dollar 50 in 1976. Today, nearly 50 years later, Costco still charges a dollar 50. They lose money on every single one.”

“Every great company has like a stored potential energy of value maximization that it doesn't fully maximize. Like Costco is the extreme example of this, but Google has this too.”

“Costco would have a unique packaging configuration, which was not really comparable to anything out there in the marketplace, and why that was important for Costco.”

“Where a Costco, you could walk in, and we would commit to a four-day road show Thursday through Sunday, and you'd set up your 10 by 10 booth, And we could move anywhere from a really slow moving Costco, you know, 12,000 dollars in revenue in those four days to…”

“Did any retailer in America believe that trampolines were dangerous, and so dangerous that they wouldn't sell them? The answer was yes, and that was Costco. The CEO of Costco was a man named Jim Senegal, and Jim said, I will not sell trampolines.”

“He explained how Costco maintained extremely low markups standardized around a 14% markup across the board.”

“And in the road shows, your schedule, they're 10 day events. So I think when we finished, we were flirting with Around 40,000 U.S. Dollars in that 10 day period.”

“Around, I think, 2004, 2005, I used to sell computer monitor at Costco, so I know the people a little bit. I had a connection there, so at the time, Costco had no market share for TVs.”

“People like Sony and Panasonic, and they don't want to deal with Costco. They give Costco the leftovers because it's, ah, they want to protect their existing dealership with Circuit City and Best Buy.”

“At that time their break even is around nine and a half percent. And they don't want to make money on merchandising anyway. They just want to make money on membership fee, right?”

“They were, they would buy like 2400, sell it for 2500 dollars.”

“The kind of research we're doing is looking at, like, China products you can buy at Target and Walmart and Costco today, and then seeing what the price is gonna be next week, later this week, and see, like, how quickly, if at all, do the prices come up, right?”

“I've been a part of e-commerce brands. I wasn't the founder, but I was a VP where we had a deal with like Walmart and Costco and they almost killed us. Like they just send back the product, you know, type thing.”

“This year we should do almost four because we're actually getting into Costco, which is exciting.”

“Costco over the last week has really doubled down on their DI initiatives, continue to have supplier quotas in terms of how they're going to get products.”

“Jim Senegal, the Costco guy, and I had a running debate for years. We had 10,000 products. He said, you should have 1500 products.”

“And actually, I happen to know, the founders of Costco made a special trip up to one of the Canadian Ikeas, even before the founding of Costco, because they had so much respect for IKEA as a brand they admired. They, like, wanted to go and see it and experienc…”

“Costco is 1800 dollars a foot. They are trying to maximize their dollar per foot. Walmart is about 600. Target is about 450 dollars. And then these, like, crazy businesses, just to compare it to the all-time greatest, Tiffany is 3000 dollars a foot for jewelry…”