Today, we will be diving into Costco. Costco is a favorite business story and model for many operators and investors. It was founded in 1983 in Seattle, and it has grown into a juggernaut with over $169 billion in sales and almost 60 million members globally. To me, Costco is the best example of doing one thing for customers and getting better at it constantly for decades.

To help me break down Costco, I talked to both Zack Fuss and Chris Bloomstran. Zack is an investor at Continental Grain, a 200-year old family-owned business that is focused on investing and operating businesses throughout the food and agriculture ecosystem with assets across the US, Latin America, and Asia. Chris is President and Chief Investment Officer of Semper Augustus Investments Group and a long-time shareholder in Costco.

In this Breakdown, we'll start with Zack by diving into the Costco business model, examining the relentless focus on efficiency that separates Costco from its peers, and exploring the secrets behind its private label brand, Kirkland. I'll then talk to Chris about Costco's growing international opportunities and the lessons that operators and investors can take away from studying the business and founder Jim Sinegal. I hope you enjoy this Breakdown of Costco.

For the full show notes, transcript, and links to mentioned content, check out the episode page here.

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Show Notes

[00:03:03] - [first question] - The fundamental equation that makes Costco work

[00:04:02] - Dynamics of a shared scale economy business

[00:06:45] - Jim Senegal’s devotion to perfecting one model for decades

[00:10:10] - Examples of how far Costco is willing to go to provide value for its members

[00:12:27] - Analysis of a private label strategy, and why Kirkland is such a success

[00:15:35] - Key differences that separate Costco from their competitors

[00:18:19] - An open-source retailing relationship with suppliers

[00:21:10] - How they maximize sales per square foot over time

[00:25:45] - Thoughts on leverage in unit-concept stores and why Costco doesn’t use leverage to accelerate growth 

[00:28:02] - Lessons that can be learned and applied to other businesses   

[00:30:47] - How Costco approaches international expansion

[00:33:54] - Why Jim Sinegal is such an exemplary CEO