Costco 2008 Annual Report Download - page 11

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Our merchandising strategy is to provide our members with a broad range of high quality merchandise
at prices consistently lower than they can obtain elsewhere. It is important to carry only those products
on which we can provide our members significant savings. We seek to limit specific items in each
product line to fast-selling models, sizes and colors. Therefore, we carry an average of approximately
4,000 active stock keeping units (SKUs) per warehouse in our core warehouse business, as opposed
to 40,000 to 140,000 SKUs or more at discount retailers, supermarkets, and supercenters. Many
consumable products are offered for sale in case, carton or multiple-pack quantities only.
In keeping with our policy of member satisfaction, we generally accept returns of merchandise. In fiscal
2007, we introduced a 90-day return policy in the United States on certain electronic items. In fiscal
2008, the program was expanded to Canada and the United Kingdom. Additionally, we provide, free of
charge, technical support services, as well as an extended warranty on certain electronic items.
The following table indicates the approximate percentage of net sales accounted for by major category
of items:
2008 2007 2006
Sundries (including candy, snack foods, tobacco, alcoholic
and nonalcoholic beverages and cleaning and institutional
supplies) .......................................... 22% 23% 24%
Hardlines (including major appliances, electronics, health and
beauty aids, hardware, office supplies, garden and patio,
sporting goods, furniture, and automotive supplies) ....... 19% 21% 20%
Food (including dry and institutionally packaged foods) ...... 20% 19% 19%
Softlines (including apparel, domestics, jewelry, housewares,
media, home furnishings, cameras and small appliances) . . 10% 11% 12%
Fresh Food (including meat, bakery, deli and produce) ...... 12% 12% 11%
Ancillary and Other (including gas stations, pharmacy, food
court, optical, one-hour photo, hearing aid and travel) ..... 17% 14% 14%
Ancillary businesses within or next to our warehouses provide expanded products and services and
encourage members to shop more frequently. The following table indicates the number of ancillary
businesses in operation at fiscal year end:
2008 2007 2006
Food Court and Hot Dog Stands ......................... 506 482 452
One-Hour Photo Centers ............................... 504 480 450
Optical Dispensing Centers ............................. 496 472 442
Pharmacies .......................................... 451 429 401
Gas Stations ......................................... 307 279 250
Hearing-Aid Centers ................................... 274 237 196
Print Shops and Copy Centers .......................... 7 8 9
Number of warehouses ................................ 512 488 458
Costco Mexico, our 50%-owned joint venture, operated 31 warehouses, under our oversight, at
August 31, 2008. The Costco Mexico warehouses are not included in the table above as Costco
Mexico is not consolidated and is accounted for using the equity method of accounting for investments.
Our electronic commerce businesses, costco.com in the U.S. and costco.ca in Canada, provide our
members additional products generally not found in our warehouses, in addition to services such as
digital photo processing, pharmacy, travel and membership services.
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