Costco 2012 Annual Report Download - page 14

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increased from $500 to $750. We account for membership fee revenue on a deferred basis, whereby
revenue is recognized ratably over the one-year membership period.
Labor
Our employee count approximated:
2012 2011 20102
Full-time employees ..................... 96,000 92,000 82,000
Part-time employees .................... 78,000 72,000 65,000
Total employees .................... 174,000 164,000 147,000
2Excludes approximately 9,000 individuals employed in Mexico.
Approximately 13,700 hourly employees in certain of our 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. We compete with over 800 warehouse club locations across
the U.S. and Canada (primarily Wal-Mart’s Sam’s Club and BJ’s Wholesale Club), and every major
metropolitan area has multiple club operations. In addition, we compete with a wide range of global,
national and regional wholesalers and retailers, including supermarkets, supercenter stores,
department and specialty stores, gasoline stations, and internet-based retailers. Competitors such as
Wal-Mart, Target, Kohl’s and Amazon.com are among our 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, Kroger, Trader Joe’s,
Whole Foods, CVS, Walgreens and Best Buy. Our international operations face similar types of
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 currently in effect do not have a material adverse effect on our
operations.
Intellectual Property
We believe that, to varying degrees, our trademarks, trade names, copyrights, proprietary processes,
trade secrets, patents, trade dress, domain names 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 the Costco Wholesale®series of
trademarks and our private label brand, Kirkland Signature®. We believe that Kirkland Signature
products are premium products offered to our members at prices that are generally lower than those
for national brand products and that they help lower costs, differentiate our merchandise offerings from
other retailers, and generally earn higher margins. We expect to increase the sales penetration of our
private label items in the future.
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