Link: http://www.canada.com/theprovince/news/story.html?id=93a45c97-122e-4917-9c38-1a0df3b2bed6
Summary:
As of today, common wholesalers, such as Costco, released a marketing technique of high discount rates. Realizing that customers will visit places where they could purchase goods for a cheap price, they initiate this technique to create more revenues, despite the high discount percentage. Because all, if not most, wholesales receive their goods from manufacturers, their price of their goods when purchased must be significantly lower than the regular prices they sell to us and other retailers. Through calculations, they choose to decrease their price to increase the number of sales, maximizing their profit, indeed. "Every time a wealthy person goes into Costco, there's something there that attracts their attention" - Taylor said.
Connections:
Relating to Chapter 12 of our textbook, the concept of cash discount has an entire section introducing two new accounts called “Discounts Allowed and Discounts Earned”. Due to the recent economical decline, Costco should increase their terms of sale. To put it differently, they should allow their customers, especially retailers to receive a greater discount within an extended period of time. With some common sense and critical thinking, their accounting department should increase their ‘Discounts Allowed’ account to further maximize its prosperity as a wholesaler. Understanding this concept, this is the reason why so many people choose to purchase their goods in large supplies from different wholesalers.
Personal Reflection:
Being a long-term fan of Costco, we visit there at least once a month to stock up and purchase anything that is “cheap.” In my opinion, the idea of discounts surely favours both customers and the company itself. In other words, the company receives its popularity from the public and retailers, while customers could get any desired goods for a low price, conveniently. On the down side, I extremely detest the idea of membership in Costco. Since we need to be a member to receive those amazing discounts, we must purchase its membership card on a yearly basis. In the company’s point of view, this can be an awesome marketing idea to keep their customers from leaving because this regulation indirectly forces customers to visit Costco often. But in my eyes, the cost of the membership card is a “rip-off” and the price we pay for those awesome discounts.
- A. Tao
Block A
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5 comments:
Right after reading this, it reminded me of Junior Achievement and how we had to attack the market with a good strategy. The different strategies were high price, low volume; low price, high volume; and medium volume, medium price. The best strategies were high price, low volume; and low price, high volume. This article shows that Costco plans to go deeper into the low price, high volume method. This could be very successful for them since everyone loves to buy things at the lowest price available. If price is low, then people will buy more and more, so merchandises will sell faster. As for the issue with the membership card, though I think it is a bit pricey, but I believe it is a good way to earn revenue for Costco.
I agree that discounts are beneficial to both the company as well as the consumers. Knowing there are discounts, the consumer would more likely buy more products, allowing the company to earn more revenue. Wholesalers like Costco earn a lot of revenue, since they sell a large variety of merchandise at low prices. I agree that in the customers' eyes, the membership could be a "rip-off", but for the company, it is another great way to gain revenue. If the customers buy a lot at Costco, then they would save more than what they paid for the membership card. Some people do not mind the membership cost because they believe they still save more in the long run.
Costco is seen to be a big wholesale company that makes a great sum of money each year, but there is a trick behind this success. Costco does not make a lot of profit on each sale but their amount of sales added together makes their net profit sky high. Everyday consumers always look for the best offer to save the most money. Our economy is based on money and not only do the consumers want money in their pockets, the companies do too. This is why Costco only accepts cash. In addition, they want a heavy cash flow that aids their company in making for profit. The discount is a huge attraction to consumers because even thought their membership fee is out rageous, the more the fee the more the people want to get their money's worth back.
Betty sung
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