Costco Founder Jim Sinegal on the Company's Most Important Customer

Is Costco (Nasdaq: COST  ) a retail company or a membership company? It does both, selling goods at wholesale prices while also charging its patrons an annual membership fee.

But Jim Sinegal, founder, chairman, and former longtime CEO of Costco, says there's no question that at its core, it’s a retailer. Last month, The Motley Fool’s own founder and CEO, Tom Gardner, ventured to a Costco warehouse in Florida for a conversation with Sinegal on business, leadership, and company culture. In the clip below, Sinegal explains its retailing roots, and who its most important customers are. (A transcript is provided below; running time: 1:15.)

Tom Gardner: I’m going to force you to choose between these two. Again, another unfair question, my favorite sort of question. Is Costco to you a retailer or a membership company?

Jim Sinegal: We’re a retailer. I don’t think there’s any question that we’re a retailer, although we refer to ourselves as a wholesaler because we do an enormous amount of wholesale business. That’s where our roots are. Our DNA is in with a lot of those large products in that type of customer, taking care of that type of customer.

Our business customer is still our most important customer that we have, and so that was the type of thing that helped the evolution of the products that we carry. Because when we determined that we had an upper-scale customer, people that own businesses generally are at the top end of the demographic scale, we knew that if anybody could sell Waterford crystal, Costco could. And so it kind of became a stimulus for us going out and trying to upgrade the quality of every product that we carry.

For more of Tom's conversation with Jim Sinegal:

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