Costco’s business model is to retain prices low, which will then increase sales measurements and to lower lost profits via marketing membership. In this business model, customer must pay a membership fee to gain access to low-cost products accessible only at Costco stores, these limited offers preserve Costco customers.
Costco’s strategy is offering low-cost to its consumers. This strategy involves maintaining the lowest prices possible which is called Cost leadership strategy. Costco’s strategy correspondingly requires membership subscriptions to create a low cost of operation within their position. The use of this strategy is primarily to gain an advantage over competitors; keeping operating costs and overhead low, supplying items that sell rapidly, and charging low prices that kept customers coming back to shop. Generic strategy of cost leadership is essential to strengthen Costco’s business model.