Feasibility of Non Bulk Items at Costco

Costco is the greatest wholesale mega store in today’s market opening its first store in 1983 in Seattle, Washington. Its mission statement is “Costco’s mission is to continually provide our members with quality goods and services at the lowest possible prices. In order to achieve our mission we will conduct our business with the following Code of Ethics in mind: Obey the law, Take care of our members, Take care of our employees, and Respect our vendors.

If we do these four things throughout our organization, then we will realize our ultimate goal, which is to reward our shareholders. ” Today Costco has 622 stores worldwide with stores in Europe, Australia, Canada, Mexico, Taiwan, Japan, South Korea, and of course the United States. Costco’s trademark brand of sales of its product is in bulk. So it has only one or two choices of each item in each category because research has shown too many items in each category can confuse customers and they may not make a purchase.

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Feedback from customers has shown their chief complaint is not being able to buy more items individually. The problem facing Costco these days is complaints by customers that they want some items sold individually because some customers don’t want to buy four bottles of ketchup at once. The research questions for Costco are will it provide items individually to customers, Is it profitable for Costco to sell some items individually, and how much business will not providing items individually to customers affect Costco’s revenues.

This research is critical to Costco’s future and how it will change in the future to increase profits and maintain its current customers and also gain more customers that don’t shop at Costco because they are seeking a store that meets their needs of buying items individually. Hypotheses An opportunity for Costco to continue to buy in bulk, but sell products individually instead of only having packaged deals is the hypotheses that will be tested. The idea can be further researched to examine if profits of Costco will rise when products can be bought individually packaged.

Costco should continue to have great deals when a customer’s buy products in bulk, but should also have products individually packaged to help increase profits over time. After rigorously being tested, Costco will eventually see what type of impact the change may make. New customers will noticed the benefits of signing on and becoming a member of Costco. Increased sales and memberships will allow Costco to be more competitive in the market and could potentially be more lucrative then Wal-Mart. Variables

For a hypothesis to be researched and tested there has to be different variables that make up the hypotheses. The independent variable would be for Costco decided to start selling items individually. The independent variable could cause many different dependent variables for Costco. Some may be higher profits, more members, and the ability to expand Costco throughout the United States. Ethical Considerations From the costumers point of view providing individual packaged items while maintaining the 14-15% mark-up Costco is know to provide may not be possible anymore.

In solution of that problem Costco has developed there own brand, Kirkland Products. An ethical consideration would be, does Costco offer only Kirkland products as non-bulk items or does Costco silicate other companies to sell non-bulk items to Costco at a price to maintain the low mark-up? Business ethics would tell management that select products may be available to the public with the normal mark-up but Kirkland product will be available to the public as well and most likely be the cheaper of the groups.

Although Kirkland will have the price advantage and will be beneficial to Costco to promote business ethics are still on good terms. If Costco were to only sell non-bulk items in the Kirkland brand with a higher mark-up than similar products then would be very close to an un-ethical business tactic. (“Is Costco Really The ‘Anti-Walmart’? “, 2013). The purpose of researching this or any problem is simple, if you have a problem a good solution will generate more income. Companies can often take a problem, for example Costco’s problem of not providing non-bulk items and turn them into money making avenues. With good research from the customers Costco was able to make a good decision that will further grow there company.

Descriptive research will be helpful to Costco in deciding to provide items to customers in individual sales. Surveys that are filled out by Costco customers can answer many of the questions as far as which items are in the most demand to be sold individually. Development of a new test instrument can be created to address these new concerns that face Costco on changing its currents sales floor to increase revenues.

Through various interviews and questionnaires Costco researchers could produce a long and short list of items preferred by customers for individual sale. Then the company could start planning the implementation of all or just the short list of items as a trial to see if the venture will produce enough revenue to cover the costs of set up. Data Collection Instruments Decriptive research will allow the company to take the research and understand the methodologies and procedures the company would have to take to sell items individually.

Considering the research is more analytic, the company can determine the different factors and variable that the change would create. A hypotheses can be generated and test to find out how the different factors and variables will play out. The date collective research of a survey will allow Costco to determine if the company will benefit by obtaining more members and earning more profits. Existing or new instrument Costco is a business, a business that makes good decisions. Using an existing instrument like survey will do the job and be less cost in comparison to interview research.

A new data instrument is not out of the question; however it should be a hybrid of survey and customer interview. Costco could provide a quick question or two in person during the customer checkout. The survey could be data based on the items bought at the register or a quick check box on the payment screen.

For Costco the best sampling method would be in house surveys. Costco will set up booths in each of the stores for one week, at the booths Costco will have multiple test products selected to market against the bulk competitors.

To bring the customers in Costco will offer a free taste test of the product, (foods or drinks), while the consumer is testing the product they will be asked to fill out a short survey about the product they tested, if they fill out the survey they will receive a take home sample of the product. Costco will need to have a large sample size that covers at least two or three states because it has a vast amount of stores in many states and will want analysis of results from the different states to make an informed decision.

According to (Cooper & Schindler, 2010) “Before we compute the desired sample size for the study, we will need:

  1. The precision desired and how to quantify it:  The confidence level we want with our estimate. The size of the interval estimate.
  2. The expected dispersion in the population for the investigative questions used.
  3. Whether a finite population adjustment is needed. ” Another factor in determining the sample size will be determined by the percentage of Costco memberships and what percent of the members will be surveyed.

Because not all Costco members want more items available for sale individually an initial survey to determine which members do and do not want more items for sale individually will facilitate if that number is enough to even continue the investigation. Once the percentages of members who want the change are analyzed a secondary survey can be constructed. The variables in the survey can clarify which items are wanted individually and a host of other data that can be a questionnaire with a checklist. Explanatory research will help greatly answer the why questions regarding customers wanting more items individually.

According to NYU (2013) “The way in which researchers develop research designs is fundamentally affected by whether the research question is descriptive or explanatory. It affects what information is collected. ” Costco needs to answer the questions of why customers want more items individually versus bulk items before it can determine the hypothesis and design the instrument to gain the appropriate information.

According to Rutgers (2013), “Here the researcher begins with ideas about the possible causes of a social phenomenon, i. e. the researcher develops hypotheses before collecting any data. The researcher then plans a study that can provide systematic evidence supporting (or not supporting) these initial ideas about cause. The data collected also provide systematic description. ” Costco can do the exploratory research to gain the information to develop its hypothesis and research questions like what items will be available individually, and if it is a smart decision to change the format which the company sells items, and what store locations will implement the changes.

Then other types of research designs can be constructed like descriptive research in the forms of surveys, experimental research that will have a store try some of the new sale proposals. After the data is gathered and analyzed Costco can make a final decision on whether changes are feasible and profitable. Data can also be analyzed from the research to determine if any how many members it may lose because of the dilemma. Statistical Test Statistical testing is put in place by taking a set of data and testing that data to reach an educated conclusion.

Each data set should go through extensive experiments due to the different types of variables that could cause the hypothesis not to be tested correctly. “There are a wide range of statistical tests. The decision of which statistical test to use depends on the research design, the distribution of the data, and the type of variable. In general, if the data is normally distributed you will choose from parametric tests. If the data is non-normal you choose from the set of non-parametric tests” (University of Arizona, 2013).

The type of statistical test that should be used to determine whether Costco hould sell certain items individually would be the T test. The T test is the most common statistical test used. It’s used to determine how one population is different from the other when calculating the mean value. For every statistical test there is a p value. The p value will allow the testing to determine if the null hypothesis is correct. The two types of populations that will be used in the T test are: the determination on whether Costco should take certain items and sell them in bulk or to continue to keep the store as a bulk distribution store.

The testing will determine whether Costco will be able to generate more revenue, as well as signing on new members that are influenced by Costco selling items individually. “The T test formula is calculated by: Where is the sample mean,  is a specified value to be tested, s is the sample standard deviation, and n is the size of the sample. Look up the significance level of the z-value in the standard normal table. When the standard deviation of the sample is substituted for the standard deviation of the population, the statistic does not have a normal distribution; it has what is called the t-distribution.

Because there is a different t-distribution for each sample size, it is not practical to list a separate area-of -the-curve table for each one. Instead, critical t-values for common alpha levels (0. 10, 0. 05, 0. 01, and so forth) are usually given in a single table for a range of sample sizes. For very large samples, the t-distribution approximates the standard normal ( z) distribution. In practice, it is best to use t-distributions any time the population standard deviation is not known” (CliffNotes, 2011).


  1. Is Costco Really the ‘Anti-Walmart’?. (2013). Retrieved from http://www. ethicalshopping. com/
  2. CliffsNotes. (2011). One-Sample t-test. Retrieved from http://www. cliffsnotes. com/study_guide/One-Sample-t-test. topicArticleId- 267532,articleId-267511. html cyfernetsearch. org/ilm_6_7
  3. Cooper, D. R. , & Schindler, P. S. (2010). Business Research Methods 11e. McGraw-Hill/Irwin Series in Operations and Decision Sciences. P. 394
  4. Cornell University. (2013). What to report?. Retrieved from http://What to report?. (2013). Retrieved from http://www. csic. cornell. edu/Elrod/t-test/reporting-t-test. html
  5. NYU (2013). What is Research Design? Retrieved from: http://www. nyu. edu/classes/bkg/methods/005847ch1. pdf
  6. Rutgers (2013). Types of research projects. Retrieved from: http://www. rci. rutgers. edu/~judithjf/kinds%20of%20research. htm

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Feasibility of Non Bulk Items at Costco. (2016, Nov 20). Retrieved from https://graduateway.com/res351-conduct-business-research-part-3/