Costco 2009 Annual Report Download - page 14

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 483 North American warehouses, and every major metropolitan area has
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, such as Amazon. 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 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.
Certain states, counties, and municipalities have enacted or proposed laws and regulations that would
prevent or restrict the operations or expansion plans of certain large retailers and warehouse clubs,
including us, within their jurisdictions. We believe that, if enacted, such laws and regulations could
have a material adverse affect on our operations.
Intellectual Property
We believe that our trademarks, trade names, copyrights, proprietary processes, trade secrets,
patents, trade dress and similar intellectual property add significant value to our business and are
important factors in our success. We have invested significantly in the development and protection of
our well-recognized brands including Costco Wholesale and our premium private label brand, Kirkland
Signature®. Kirkland Signature products are premium products offered to our members at prices that
are generally lower than those for national brand products. Kirkland Signature products allow us to
ensure our quality standards are met, while minimizing costs and differentiating our merchandise
offerings from other retailers, and we generally earn higher margins on sales of Kirkland products. We
expect that our private label items will increase their share of our sales in the future. We rely on
trademark and copyright law, trade secret protection, and confidentiality and/or license agreements
with our employees and others to protect our proprietary rights. Effective intellectual property protection
may not be available in every country in which we operate.
Available Information
Our internet website is www.costco.com. We make available through the Investor Relations section of
that site, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, Proxy Statements and Forms 3, 4 and 5, and any amendments to those reports,
as soon as reasonably practicable after filing such materials with, or furnishing such documents to, the
Securities and Exchange Commission (SEC). The information found on our website is not part of this
or any other report filed with or furnished to the SEC.
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