Costco 2009 Annual Report Download - page 11

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offerings distributed through employee associations and other entities. After a membership base is
established in an area, most new memberships result from word-of-mouth advertising, follow-up
messages distributed through employee groups and ongoing direct solicitations to prospective
members.
Our warehouses generally operate on a seven-day, 69-hour week, open weekdays between
10:00 a.m. and 8:30 p.m., with earlier closing hours on the weekend. Gasoline operations generally
have extended hours. Because the hours of operation are shorter than those of traditional retailers,
discount retailers and supermarkets, and due to other efficiencies inherent in a warehouse-type
operation, labor costs are lower relative to the volume of sales. Merchandise is generally stored on
racks above the sales floor and displayed on pallets containing large quantities of each item, thereby
reducing labor required for handling and stocking.
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. We seek to limit specific items in each
product line to fast-selling models, sizes and colors. Therefore, we carry an average of approximately
3,800 active stock keeping units (SKUs) per warehouse in our core warehouse business, as opposed
to 45,000 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. On
certain electronic items, we have a 90-day return policy in the United States, Canada and the United
Kingdom and provide, free of charge, technical support services, as well as an extended warranty.
The following table indicates the approximate percentage of net sales accounted for by major category
of items:
2009 2008 2007
Sundries (including candy, snack foods, tobacco, alcoholic
and nonalcoholic beverages and cleaning and institutional
supplies) .......................................... 23% 22% 23%
Hardlines (including major appliances, electronics, health and
beauty aids, hardware, office supplies, garden and patio,
sporting goods, furniture, and automotive supplies) ........ 19% 19% 21%
Food (including dry and institutionally packaged foods) ...... 21% 20% 19%
Softlines (including apparel, domestics, jewelry, housewares,
media,homefurnishings,camerasandsmallappliances)....
10% 10% 11%
Fresh Food (including meat, bakery, deli and produce) ...... 12% 12% 12%
Ancillary and Other (including gas stations, pharmacy, food
court, optical, one-hour photo, hearing aid and travel) ..... 15% 17% 14%
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