Costco 2014 Annual Report Download - page 13

All Gold Star and Business paid cardholders are eligible to upgrade to an Executive membership in the
U.S., Canada, Mexico, and U.K., for an annual fee of approximately $110. Our Executive members qualify
for a 2% reward on qualified purchases (up to a maximum of approximately $750 per year), which can be
redeemed only at Costco warehouses. This program also offers (except in Mexico) additional savings and
benefits on various business and consumer services, such as auto and home insurance, the Costco auto
purchase program and check printing services. The services are generally provided by third-parties and
vary by country and state. At the end of 2014, Executive members represented 39% of eligible
cardholders while they represented 38% at the end of both 2013 and 2012. Executive members generally
spend more than other members, and the percentage of our net sales attributable to these members
continues to increase.
Labor
Our employee count was as follows:
2014 2013 2012
Full-time em
p
lo
y
ees .................................................................................. 112,000 103,000
96,000
Part-time employees ................................................................................. 83,000 81,000
78,000
Total em
p
lo
y
ees .................................................................................. 195,000 184,000
174,000
Approximately 14,000 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,
location and customer service. We compete with warehouse club operations across the U.S. and Mexico
(primarily Wal-Mart’s Sam’s Club and BJ’s Wholesale Club), and nearly every major metropolitan area
has multiple club operations. In addition, we compete on a worldwide basis with global, national and
regional wholesalers and retailers, including supermarkets, supercenters, department and specialty
stores, gasoline stations, and internet retailers. Competitors such as Wal-Mart, Target, Kohl’s and
Amazon.com are among our significant general merchandise retail competitors. We also compete with
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.
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 similar national brand
products and that they help lower costs, differentiate our merchandise offerings from other retailers, and
generally earn higher margins. We expect to continue to increase the sales penetration of our private
label items.
We rely on trademark and copyright laws, trade secret protection, and confidentiality and license
agreements with our suppliers, employees and others to protect our proprietary rights. The availability and
duration of trademark registrations vary from country to country; however, trademarks are generally valid
and may be renewed indefinitely as long as they are in use and their registrations are properly
maintained.
11