Find Everything at Costco — Except PR Dept

The ubiquitous membership warehouse chain, Costco Wholesale has been recognized as one of the most efficient and successful American corporations by seattlepi.com, Bloomberg Businessweek and The Huffington Post, among others, for its uncommon business model that has built a loyal following and allowed it to become a Top 10 global retailer – all without an advertising or public relations department.

Costco is the place to shop for an array of items, often offered in bulk, at prices close to wholesale. Its policy mandates that markups stay low, never maxing out more than 14 to 15 percent over costs. Members, who pay a yearly fee of $55, have access to the cheapest prices of any other retailer.

Shoppers aren’t the only ones pleased with Costco’s way of doing business. Employees of the corporation benefit from CEO Craig Jelinek’s belief in raising the federal minimum wage and providing health benefits.

The average employee makes nearly $21 an hour, and 88 percent are covered by company-sponsored health insurance.

President Obama praised Costco’s style in his 2014 State of the Union address saying that the federal government ought to learn a few things from the corporation.

“Profitable corporations like Costco see higher wages as the smart way to boost productivity and reduce turnover. We should too,” Obama said.

Costco became the first company ever to grow from zero to $3 billion in sales in less than six years, and it did so without hiring a public relations staff and without advertising. 

Since its first store opened in San Diego under the name Price Club in 1976, Costco has only had a few problems with animal welfare group Mercy for Animals and luxury jewelry retailer Tiffany & Co. Costco and Mercy for animals came to an agreement in 2011, and the lawsuit involving Tiffany & Co. was settled earlier this year.

Despite no PR team to lean on, Costco has done surprisingly well. If other companies tried Costco’s business model by foregoing public relations and advertising, would they be as successful?

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6 Responses to Find Everything at Costco — Except PR Dept

  1. Gian-Franco Demano says:

    Lily, I had no clue that this was the case for Costco and it really is quite interesting to take in. If you think about it, there aren’t really Costco commercials or even radio tidbits. They have a coupon newsletter and I’m sure they sponsor a lot of different organizations. Being such a big and influential corporation though, it seems like they would need one or want one. I think Costco’s accuracy with what it says it does and how it does it makes all the difference. It conveys the personality of a friendly environment and that holds true. It offers lower prices in bulk, and it does that as well. Bad cases publicity can result from employees breaking rules or harming the product, but in this case when employees want to be there and are treated right, you can somewhat eliminate that internal problem. When there are few problems for a company like this, why attempt to fix something that isn’t broken? But that being said, it might just take one bad decision for Costco to really need a PR team. One last note is how employees seem to be treated.

  2. Tayllor Lillestol says:

    I think that if you want to grow your company, you need to look inward first. That’s exactly what Costco has done here and it has paid off immensely. Speaking as someone who worked under Costco’s roof for three years and has had family members in the company for nearly 30, I would strongly argue that employees are what make that business successful. When you’re willing to give more to your employees, you give yourself a built-in word-of-mouth campaign. If companies focused more on their working environment and creating a reputation that way, maybe they wouldn’t have to work as hard to create fantastic campaigns. Actions speak louder than words.

  3. Jessica Zook says:

    Hello! I thought this post was very interesting. I had no idea that Costco does not have a public relations or marketing department. In some ways, I think it is very smart because it probably saves on overhead costs and labor, which also allows them to keep their prices down. However, part of me also feels like it’s kind of silly because even if they don’t have very many lawsuits that need to be handled by a public relations team, there are so many other things that a PR team could do for the company. A PR team could help set up Costco for long term success and develop campaigns to help them become even more successful. One of the most important things they could do also, is to develop a crisis management plan. Right now, if a crisis were to hit Costco, what resources do they have to respond with? It sounds like none.

    I don’t know if other companies would be as successful as Costco has been without a PR or marketing team. I think Costco has taken a very risky move, and I personally would not advise it to any company. While a company without a PR team may be successful for a period of time, I think that success would be short lived.

  4. Emily Nichols says:

    Lily,

    This post instantly caught my attention, largely because I’m a huge Costco fan. Like my colleague Gian mentioned in his comment, I also had no idea Costco did its operations this way. Now that I’m reflecting on its promotional efforts, I’m realizing how Costco barely has any — which is unique and impressive. This may be one of its biggest assets — playing it cool, keeping customers happy and staying away from discrepancies or crises.

    I think Costco has its own version of a PR department. The extremely satisfied employees promote the company, and their happiness overflows into the customer relationship experience. As long as things stay calm and complacent at Costco, why would it change and risk any bad publicity just to be like other companies. Costco’s uniqueness keeps it special. Also, the copious amount of free samples certainly help!

  5. Megan Conner says:

    I really enjoyed reading this article. I had no idea that Costco did not have a PR department. A lot of retailers don’t advertise, like Nordstrom for example, but most companies will have a PR division. I had no idea the success that Costco has had. I knew that it was one of the largest retailers, but I didn’t know how quickly they rose to the top. I think Costco is a unique circumstance when it comes to their lack of a advertising and PR department. Most retailers and companies rely heavily on advertising and PR and I don’t think a lot of companies would be successful without them. Costco has built their reputation on service and excellent employee benefits and it has benefited the company exponentially. However, I don’t think this model would allow other companies the same success. I think it is crucial to have a PR department, at the least, for any company. When a large company is in the public eye there needs to be some type of division that will help maintain a positive image if something negative were to happen. I think Costco has been lucky that they have only had to face minor problems with other companies and hasn’t had to face a PR disaster. Having a safety net of a PR department and advertising is extremely beneficial for any company and can boost sales and a positive image. I admire what Costco has done; however, I don’t think it is a business model that will suit many other large companies.

  6. Brandon SMith says:

    Costco’s success story is pretty remarkable. It really goes to show you how simply treating your employees well and operating under good business practices can be the best PR policy. Corporations that value the employees usually seem to be respected by consumers. Edelman has conducted studies on subjects like this and what was found was employees were considered to be the most reliable source of information about a company in areas such as engagement, integrity and operations for 2014. Costco obviously values its employees and believes in its ability to keep both them and the customers happy while still making money, regardless of their lack of advertising or PR departments. Not every company can be Costco, however, and I would say that most billion-dollar corporations need a PR team in place to assist in communications and consumer engagement, especially in times of crisis. I wonder if Costco executives would seek outside PR counsel if a major crisis involving the company were to occur.

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