Costco Wholesale Corporation is a retail chain wholesale and warehouse American multinational company. Jeffrey Brotman and James Sinegal founded the retail chain wholesale brand in 1983. Today, we’ll discuss the PESTLE analysis of Costco; it focuses on external environmental factors like; political, economic, social, technological, legal, and environmental factors.
Political Factors Impacting Costco
Some of the main political factors in the Costco PESTLE analysis are as follows;
I-Forced Labor in China
Costco is facing a controversy where the company’s suppliers and manufacturers are engaging in forced labor practices in China. Ever since the news broke out in Speculation 2019; it attracted significant attention from customers and negatively impacted the brand’s reputation. However, the negative media publicity is jeopardizing the brand image; and pushing away many new potential customers.
II-My Pillow Republican Controversy
Costco used to offer a lot of products and goods of the brand “My Pillow” and the Pillow Company started openly endorsing the Republican political campaign and Donald Trump. It brought a lot of criticism to the company and pushed away many Democrat customers. As soon as the public outrage came up on the surface, the wholesale brand removed all the Pillow products from its shelves; but it was too late.
III-Freight and Shipment
Costco is operating its retail and wholesale business in various countries across the globe. The retail chain brand deals with a wide variety of product shipments and freight from different countries. Various political and geographical factors impact the timely delivery of product shipments to its stores.
Economical Factors Affecting Costco
Some of the main economic factors in the Costco PESTLE analysis are as follows;
I-Increasing Sales
The retail sales of grocery and food items have been increasing significantly for the past few years. It presents a great opportunity for the retail chain brand Costco to amplify its network and sales. However, it allows the company to take advantage of the growing opportunity and offer new products in the selling categories.
II-Currency Fluctuation
Costco earns a significant amount of revenue and sales from the international market and foreign countries. The currency exchange rate of different countries keeps on fluctuating relevant to the USD. A small change in price would have a great impact on the sales and profitability of the company. For instance, the value of USD is lower as compared to British Pounds and Denar, and it is much higher as compared to Japanese Yen.
III-Fuel and Transportation Cost
Just like the currency exchange rate difference, the fuel and oil prices are highly uncertain and they keep on fluctuating daily. A small change and increase in fuel price would increase the cost and transportation expense of the retail brand Costco; hence, it decreases the company’s profitability.
Social Factors Impacting Costco
Some of the main social factors in the Costco PESTEL analysis are as follows;
I-Bulky Buying Trends
The consumer market has shifted its attention towards bulky shopping because it offers them a lot of discounts and packages. Since Costco is already operating its business in the wholesale and membership category. The retail chain brand should keep in mind the growing shopping trends of the customers and offer a similar type of package to whatever customers are looking for.
II-Organic Products Sale
The consumer market has become highly cautious about organic food items and they’re shopping for organic food products. According to an estimate, the sale of organic products has increased by approximately 13%. Costco should take advantage of the organic product sale and offer a great variety of organic products in its stores, and it allows the company to increase its sales.
III-Cultural Diversity
Costco is operating its business in various countries across the world. The retail chain wholesale brand should in keep in mind the cultural factor while offering and serving products in different markets. For instance, the company needs to serve Halal food in Muslim countries and Chinese and Asian food in Asian countries.
Technological Factors Affecting Costco
Some of the main technological factors in the Costco PESTEL analysis are as follows;
I-E-commerce Platform
Costco has developed an e-commerce platform in order to keep up with the growing customer shopping trends. The online store has allowed the retail chain brand to target online and digital users; it amplified the company’s sales by 50%. In order to attract the attention of customers and provide a user-friendly experience, Costco is offering virtual membership cards, discounts, easy reordering, and other exclusive offers.
II-Integrated Supply Chain
Costco has invested a significant amount of capital resources of approximately 4 billion USD in the integrated supply chain and logistics system. It allowed the company to find the best shipping routes, avoid delays in shipping, efficient warehouse management with automation technology, and timely delivery of products and goods.
III-Data Analytics
Costco is also investing in the data analytical technology. It helped the company to provide a personalized user experience to the customers; efficient management of warehouses and inventory, and streamlining consumer demand. Most importantly, the data analytical technology allows the retail chain company to accurately predict various customer patterns.
Legal Factors Impacting Costco
Some of the main legal factors in the Costco PESTEL analysis are as follows;
I-Compliance with Laws
Costco should comply with the health and safety laws of different countries. The government regulations of food safety and product quality are very strict to protect the health and safety of individual consumers. The retail chain brand has had issues with copyrights and patent infringement; the company should comply with the IPR and avoid any type of infringement.
Environmental Factors Affecting Costco
Some of the main environmental factors in the Costco PESTEL analysis are as follows;
I-Environmental Sustainability
Costco has made a strong commitment to environmental sustainability and decreasing the carbon emission rate. Government regulations and the consumer market have become highly cautious about environmental sustainability. They don’t shop from brands and retailers that have a limited impact on the environment.
Conclusion: Costco PESTLE Analysis |PESTEL Analysis of Costco |External Environmental Analysis of Costco | Strategic Analysis of Costco
After an in-depth study of the pestle analysis of Costco; we have realized that Costco is the world’s leading retail chain brand. If you are learning about the Costco PESTLE analysis; then you should keep in mind the abovementioned external environmental factors like; political, economic, social, technological, legal, and environmental.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.
