Merry Christmas, Happy Holidays and Happy New Year
Costco A Customer Service Role Model Hit by Slow US Economy
As of December 2009 Costco Warehouses has 566 warehouses across the US, Canada, UK, Korea, Taiwan, Japan and Australia. Average sales per store is $131 million. Most retailers would be dead and gone to heaven to have sales like this per store.
In the December 11, 2009 report to Costco Shareholders they said:
“Since we opened our doors twenty-six years ago, our Company mission has been “to continually provide our members with quality goods and services at the lowest possible prices.” This commitment has never been more relevant than today, and nearly 60 million card-carrying members have benefited from this promise every time they shop at any of Costco’s 566 warehouses around the globe or at our Ecommerce web sites. Costco’s unique approach to merchandising, operations, and employee engagement has proven successful again and again, ever since we opened our first warehouse in downtown Seattle. Fiscal 2009 provided an opportunity to test our mettle in an unusually challenging economy. We’re sure many of you would agree that the current global recession is the worst financial crisis since the Great Depression of the 1930s. While our sales and profits were less than in fiscal 2008, Costco remained solidly profitable in fiscal 2009. During the past fiscal year we opened twenty new warehouses; we increased our membership cardholder base by 2.3 million members, with membership renewals remaining strong at over 87%; and our employees continued to have job security along with one of the best wage and benefits packages in the retail industry.
Fiscal 2009 was the first time in our history when sales did not achieve record highs. Sales were $69.9 billion, a 1.5% decrease from 2008’s results, and for the first time we reported a year of negative comparable sales in warehouses open more than a year: – 4% in 2009. Net earnings again exceeded $1 billion, but were down from the previous fiscal year by 15%. We have always maintained that truly great companies should build market share in tough times.
During the fiscal year, Costco rose from the fifth-largest U.S. retailer in 2008 to the third-largest in 2009; and we remained the ninth-largest retailer in the world. We also moved from the 29th spot in the Fortune 500 to number 24. In addition, in 2009 we were named the 22nd most admired company in the world by Fortune magazine, and we remained at the top of the University of Michigan’s American Consumer Satisfaction Index, a reflection of how well we keep our promise to Costco shoppers.
Our potential for expansion remains as strong as ever. The demand for quality goods and services in Costco’s treasure-hunt atmosphere continues to grow, both in the U.S. and around the world, even in times of economic stress. From Texas to Taiwan, people are clamoring for a Costco warehouse in their community. The success of our operations is world-wide; in fact, of our top 20 warehouses for sales in fiscal 2009, half of them were outside the United States.”
Fiscal 2009 was the first time in our history when sales did not achieve record highs. Sales were $69.9 billion, a 1.5% decrease from 2008’s results, and for the first time we reported a year of negative comparable sales in warehouses open more than a year: – 4% in 2009. Net earnings again exceeded $1 billion, but were down from the previous fiscal year by 15%. We have always maintained that truly great companies should build market share in tough times.
During the fiscal year, Costco rose from the fifth-largest U.S. retailer in 2008 to the third-largest in 2009; and we remained the ninth-largest retailer in the world. We also moved from the 29th spot in the Fortune 500 to number 24. In addition, in 2009 we were named the 22nd most admired company in the world by Fortune magazine, and we remained at the top of the University of Michigan’s American Consumer Satisfaction Index, a reflection of how well we keep our promise to Costco shoppers.
Our potential for expansion remains as strong as ever. The demand for quality goods and services in Costco’s treasure-hunt atmosphere continues to grow, both in the U.S. and around the world, even in times of economic stress. From Texas to Taiwan, people are clamoring for a Costco warehouse in their community. The success of our operations is world-wide; in fact, of our top 20 warehouses for sales in fiscal 2009, half of them were outside the United States.”
I encourage you to review the entire Annual Report
https://materials.proxyvote.com/Approved/22160K/20091123/AR_49545/default.htm
Benchmark yourself against service leaders. Costco is an excellent customer service role model. You will learn a lot more about the firm by reviewing the entire report.
Safeway Lost Its Focus On Service
I am writing this newsletter from Vail Colorado where I am snow skiing. I always go to Safeway because the supermarket has always been awesome at service. I have featured them in previous newsletters because of the incredible focus on outstanding customer driven employees.
They must have new management and new employees. Service has gone down hill. There is no empowerment. Very rule driven. Its the little things that matter. It is easy for a firm to forget the basics. To build a business around customer service is very difficult. In the supermarket business competition is very tough. The average US customer spends $5000 a year with their local supermarket. My purchase on Saturday was around $166. I was going there to pick up additional items almost each day. Each day the service got worse. Today I switched to City Market which is only 100 yards from the Safeway.
While price, quality of products and store layout and design is critical, superior service gets a customer to come back. That’s why for the last 7 years I was a fan of Safeway.
Lessons to Be Learned:
1. Always make sure management walks the talk and understands the service strategy. No longer the case at the Vail Safeway. My son told me tonight I have always been off base on my love for Safeway. I guess he was right.
2. Train all employees on customer service every 4-6 months. It only takes seconds to turn a customer on or off. The present employees at Safeway are really weak on service.
3. Perceptions are reality. My previous perceptions were really high. Today my perceptions are negative so I switched.
4. Make sure your employees are empowered. Most of the decisions are for much less than $50. An over happy customer comes back. I come to Vail several times a year. Over the next 10 years I suspect Safeway will have lost $5000 in revenue from just me. The present Safeway employees and management are rule driven and no longer make empowered decisions.
5. Build a business on word of mouth advertising. Negative word of mouth is very expensive. Good word of mouth is how Amazon and Costco built their business. Over happy customers through awesome customer experiences will tell their friends and it is 100 times cheaper than advertising. Also more believable.
Remember Me - The Power of Remembering and Using a Customers’ Name
The most powerful thing in life to anyone is their name. It is so simple to use a customers’ name but SO RARE. In Vail when I pass through the staff that checks my pass, they have my name in front of them. About 25% of the time the employee will use my name. It comes up on their hand held scanner. What would happen if they did this 100% of the time.
There are 3 reasons employees do not use the customers’ names.
1. Indifference. They really don’t care
2. Fear I might pronounce the name wrong
3. Lack of Training Very few employees have ever been trained to remember a customer and use their name. The few firms that do this use the name only a small percentage of the time.
In September we released Remember Me. A 2 session program of 2-3 hours each spaced one week apart. SQI channel partners or staff can facilitate the program for you or we can conduct train-the-trainer seminars in-house for you. If you want to save money you can implement the program yourself. The leaders guide is user friendly and goof proof.
It also has 2 videos on DVD and a participant workbook for each employee, Remember Me technique card, performance standard to measure employee performance and a Certificate of Accomplishment.
You can view each component on our web site and watch a part of the video. http://www.customer-service.com/t-remember-me.aspx Pricing is also available on the web site.
We have a special of $100 off on all orders over $249.00 on our web site. If you call SQI or a channel partner by January 31 we will also offer this discount. The code for the discount is SQI100
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