1 Jeremy Currie

April 27, 2010

To: Writing Team Members of WR 214, Group 4

From: Jeremy Currie

Subject: Proposal to re-evaluate and apply adjustment to the membership

associated with Costco Wholesale

With the average family size in the United States hovering at about four and more, many
families have seen the option of buying their clothes, food, and everyday necessities in
bulk, to be a good money saving technique. Not only do large families buy in bulk, but
so do many businesses and corporations throughout the nation who must allocate for
many employees. As a result for the demand in bulk shopping, few corporations such as
Sam’s Club (associated with Wal-Mart), Costco, and BJ’s have developed warehouse
club shopping for those that feel inclined to shop in bulk. These warehouse club
shopping centers have been built all throughout the United States, and some corporations
have even gone global, serving their costumers in several different countries.

Buying in bulk is nice and very convenient when you are holding large get-togethers, so
having warehouse club shopping available is a great option but there is always a catch.
Associated with all of these warehouse club shopping centers are membership fees. In
order to purchase items or sometimes just walk in to these stores you must present an up
to date membership card.

The purpose of this report is to suggest to the Costco Wholesale company to not only
lower the membership fee associated with shopping at their locations, but to also propose
the idea of creating more types of membership so that each individual can choose the
membership that suits them best.

Background:

Opened in 1976 under the name Price Club, the warehouse operated only to small private
businesses. Seeing that there would be much more revenue created if they incorporated
the everyday man, Price Club and Jim Sinegal (founder of Costco) expanded ever so
slowly and created the branch known as Costco in 1983, opening it’s very first location in
Seattle, Washington. In 1993 the two combined to form PriceCostco creating together
206 locations throughout the nation and generating $16 billion in yearly sales. As the
customers came pouring in and the sales generated began to skyrocket, the corporation
expanded to 563 locations as of 2009. Now, Costco Wholesale is still run and operated
by Jim Sinegal the president and chief executive and the corporation is generating 64
billion dollars in revenue.
 2 Jeremy Currie

Problem:

Although Costco is still the leader in the wholesale revenues competing with companies
like Sam’s Club and BJ’s, there is still room for improvement. Like all warehouse club
stores, Costco requires membership to not only enter their building, but also to purchase
items from the location. A high complaint from customers all over the nation is the
membership.

Each and every year, those choosing to be a member of the Costco Wholesale must
purchase a membership card that costs at a minimum price of $50. On this membership
card they have their id so that no one can use that card except the true holder. Each
person wishing to become a member must also choose the option that is right for him or
her.

Costco currently has only three options to choose from when it comes to membership.
Either you are a Business Member, a Gold Star Member, or an Executive Member. This
is where a lot of debate comes into play.

Many people find that they can’t qualify to be a Business Member. As a resolution to
this problem, Costco created the Gold Star Membership. This membership entitles those
who are not business members to shop at Costco locations at the same time as Business
members and Executive members, but only receive a 1% annual reward for their
shopping unlike the Executive members who receive a 2% annual reward.

This type of membership is great for those large families or the families that hold regular
large gatherings, but what about the single men and women, or the couples, or even the
college students who like to buy in bulk. These people can’t afford to spend $50 every
year to shop at a bulk store when they have to go only every few month’s. Half of the
food they purchased will have gone bad. The overall return they would see from being a
member would be negative.

Corporations such as Sam’s Club whose parent company is Wal-Mart, have tried to avoid
this problem by creating several different types of memberships. Sam’s Club offers
membership for the business shoppers, the executive shoppers, the everyday shoppers,
and the college student shopper. Each has its own variability of price and annual reward
but the idea here is that there are more options available.

College Students could pay, say, $35 dollars instead of $50 dollars per year. Instead,
Costco chooses to completely forget the population of college students and expects them
to pay the full $50. This results in Costco losing its potential customers, and in a
business realm, customers equal money, and money equals expansion.
 3 Jeremy Currie

If our research shows that more people would like the option of having several more
Costco membership options to choose from, then we will recommend to Costco
Wholesale the idea of specifying their memberships in order to appeal to a higher
population. If our research suggests that the way in which Costco is operating currently
is the best for management and the best for generating the most customers then we will
recommend to the company to continue the manner in which it is operating.

Topics to Investigate:

In our report, we will briefly discuss the idea of membership changes. We will focus on
the following questions:
o What is the reason behind the membership fees?
o Why do you need a membership to shop?
o What are the different types of membership available?
o Are there options for more types of membership?
o Why has Costco chosen to even create memberships when more customers
can be attained without one?

Audiences:

There are several audiences that will be involved in this research. Our primary audience
is Costco itself. The company in it’s entirety and it’s CEO and President Jim Sinegal.
Jim Sinegal has been with the Costco Wholesale company right from the beginning as we
know, having created the company, and has had the utmost say in every action that
occurs in the company.

You are our initial audience. Your concern is that we produce research and generate this
report in a timely manner but in a manner that is not lacking in quality. The report must
be well written, without grammatical errors, and must be as thorough as possible.

The secondary audience for this proposal will include all the people that shop at Costco
Wholesale. Not only will they be involved, but so will the many college students who
may want to buy in bulk, but because of high membership fees, choose not to.

Methods:

We will use the library for research. Not only books, but the online catalogue with the
many databases that are available. The following materials on the Web appear to be
useful in generating useful information.
 4 Jeremy Currie

Adams, Mike. "Natural News". 4/21/2010

<http://www.naturalnews.com/019332.html>.

"Costco". Costco. 4/21/2010 <http://www.costco.com/Browse/ProductSet.aspx?

Prodid=24743&Ne=4000000&eCat=BC|502|503&N=4001215&Mo=4&cm_re=1_en-_-
Top_Right_Nav2-_-
Top_membership&No=2&Nr=P_CatalogName:BC&cat=503&Ns=P_Price|1||
P_SignDesc1〈=en-US&Sp=C>.

"Costco". Costco. 4/21/2010

<http://content.costco.com/Images/Content/Misc/PDF/CostcoServicesDirectory.pdf>.

Lindhol, Jason. "Life Style". Ten Reasons Why You Should Not Buy A Sam's
Club Membership. 4/21/2010
<http://www.associatedcontent.com/article/54937/ten_reasons_why_you_should_not_bu
y_pg3.html?cat=46>.

We should also conduct a survey around campus and possibly outside of Costco store
locations to generate consumer feedback.

Qualifications of Resources:

o Our group ( Sophia Grimm, Kirsti Clapsadle, Dominique Sabedra, Rosalyn Mayo,
Connie Chan, and Jeremy Currie) all have taken WR 121 or an equivalent course.
As a result of having taken this course, we are all are very familiar will
conducting and completing research as well as having the necessary skills and
knowledge to incorporate that information into a research document.

Work Schedule:

The following schedule, if kept to, will have the assignment completed by the due date.

Total Completion
Activity Responsibility Time Date
Gathering
Information Sophia 4hrs May 12th
Analyze Information Kirsti 3hrs May 13th
Organize
Information Dominique 4hrs May 15th
Visuals Rosalyn 2hrs May 16th
Revisions Connie 6hrs May 18th
Editing Jeremy 6hrs May 20th
Proofreading final
draft All 6hrs June 1st
 5 Jeremy Currie

Costs:

Description Cost Sub Total

Stamps 0.49 196
Binding 3.5 3.5
Copies 0.05 120

Total $319.50

Costs calculated with 400 copies being sent out

Call to Action:

With college students lacking money for books, let alone food, I urge you to accept this
proposal. Let me know if you have any suggestions as to improve this proposed project.
With your final approval, our team can get to work.

Works Cited
 6 Jeremy Currie

Adams, Mike. "Natural News". 4/21/2010 <http://www.naturalnews.com/019332.html>.

"Costco". Costco. 4/21/2010 <http://www.costco.com/Browse/ProductSet.aspx?

Prodid=24743&Ne=4000000&eCat=BC|502|503&N=4001215&Mo=4&cm_re=1_en-_-
Top_Right_Nav2-_-
Top_membership&No=2&Nr=P_CatalogName:BC&cat=503&Ns=P_Price|1||
P_SignDesc1〈=en-US&Sp=C>.

"Costco". Costco. 4/21/2010

<http://content.costco.com/Images/Content/Misc/PDF/CostcoServicesDirectory.pdf>.

Lindhol, Jason. "Life Style". Ten Reasons Why You Should Not Buy A Sam's
Club Membership. 4/21/2010
<http://www.associatedcontent.com/article/54937/ten_reasons_why_you_should_not_bu
y_pg3.html?cat=46>.