Costco 2008 Annual Report Download - page 13

Executive membership is available to all members in the U.S. and Canada for an annual fee of $100.
The Executive Membership program offers members additional savings and benefits on various
business and consumer services offered by Costco, such as merchant credit-card processing, auto
and home insurance, business telephone service, check printing, and real estate and mortgage
services. The services are generally provided by third-parties and vary by state. In addition, Executive
members qualify for a 2% annual reward (which can be redeemed at Costco warehouses), up to a
maximum of $500 per year, on all qualified purchases made at Costco. At the end of 2008, 2007 and
2006, Executive members represented 26%, 23% and 20%, respectively of our primary membership
base, and the percentage of our net sales attributable to these members continues to increase. In
2008, Costco Mexico launched an Executive Membership program similar to the program in the U.S.
and Canada.
Labor
Our employee count approximated:
2008 2007 2006
Full-time employees ..................... 75,000 70,000 66,000
Part-time employees .................... 62,000 57,000 53,000
Total employees .................... 137,000 127,000 119,000
These numbers exclude approximately 9,000 individuals who were employed by Costco Mexico at the
end of 2008 and 2007 and approximately 8,000 at the end of 2006. Approximately 14,000 hourly
employees in certain of our locations (all former Price Company locations) in five states are
represented by the International Brotherhood of Teamsters. All remaining employees are non-union.
We consider our employee relations to be very good.
Competition
Our industry is highly competitive, based on factors such as price, merchandise quality and selection,
warehouse location and member service. Over 1,200 warehouse club locations exist across the U.S.
and Canada, including our 473 North American warehouses, and every major metropolitan area has
one, if not several, club operations. In addition to other membership warehouse operators such as
Wal-Mart’s Sam’s Club and BJ’s Wholesale Club, we compete with a wide range of national and
regional retailers and wholesalers, including supermarkets, supercenters, general merchandise chains,
specialty chains, gasoline stations, as well as electronic commerce businesses. Wal-Mart, Target and
Kohl’s are significant general merchandise retail competitors. We also compete with low-cost operators
selling a single category or narrow range of merchandise, such as Lowe’s, Home Depot, Office Depot,
PetSmart, Staples, Trader Joe’s, Whole Foods, Best Buy and Barnes & Noble. Our international
operations face similar competitors.
Regulation
Certain state laws require that we apply minimum markups to our selling prices for specific goods, such
as tobacco products, alcoholic beverages and gasoline. While compliance with such laws may cause
us to charge somewhat higher prices, other retailers are also typically governed by the same
restrictions, and we believe that compliance with such laws does not have a material adverse effect on
our operations.
It is our policy to sell at lower than manufacturers’ suggested retail prices. Some manufacturers
attempt to maintain the resale price of their products by refusing to sell to us or to other purchasers
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