Costco 2010 Annual Report Download - page 11

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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, thereby reducing labor
required for handling and stocking.
Our 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 3,900 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 only 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:
2010 2009 2008
Sundries (including candy, snack foods, tobacco, alcoholic
and nonalcoholic beverages and cleaning and institutional
supplies) ......................................... 23% 23% 22%
Hardlines (including major appliances, electronics, health
and beauty aids, hardware, office supplies, garden and
patio, sporting goods, toys, seasonal items and
automotive supplies) ............................... 18% 19% 19%
Food (including dry and institutionally packaged foods) ..... 21% 21% 20%
Softlines (including apparel, domestics, jewelry,
housewares, media, home furnishings, cameras and small
appliances) ....................................... 10% 10% 10%
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) .... 16% 15% 17%
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:
Ancillary Business 2010 2009 2008
Food Court ........................................ 534 521 506
One-Hour Photo Centers ............................ 530 518 504
Optical Dispensing Centers .......................... 523 509 496
Pharmacies ....................................... 480 464 451
Gas Stations ...................................... 343 323 307
Hearing-Aid Centers ................................ 357 303 274
Print Shops and Copy Centers ........................ 10 10 7
Car Washes ....................................... 7 2 2
Number of warehouses .............................. 540 527 512
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