To do right by shareholders, Costco grows at a manageable rate. It upped its store count by 2% over the past year, and it's planning for as much as 6% store count growth in 2011. Its membership is slowly but surely expanding, with very low turnover and an 88% renewal rate. Its total membership revenue for the year is $1.7 billion, up 42% in four years.
That 88% renewal rate allows the company to keep prices low, holding markups to just 14%, according to consumer advocate Clark Howard. Inexpensive goods help its customers keep their carts and their wallets full, a particular boon in a tough economy. Costco's no less generous toward its employees, whose wages start at $11.50 per hour and reach $19.50 an hour after four and a half years.
In this virtuous circle, happy employees serve customers well, driving business and rewarding shareholders. While this formula may not be the norm in American business, it's hardly unique to Costco.
Consider the online shoe retailer Zappos, which has gained a reputation for top-notch customer service. It grew so successful that Amazon.com
Even less consumer-centric companies can fit the mold. Storage specialist Brocade
Consulting and outsourcing specialist Accenture
When you're studying a company, consider how it treats each of the three groups on which it depends. Companies that address all three well, like the examples above, can not only be great businesses, but also great investments.
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Longtime Fool contributor Selena Maranjian owns shares of Costco and Google. Accenture, Costco, and Google are Motley Fool Inside Value picks. Google and Rackspace Hosting are Motley Fool Rule Breakers selections. Amazon.com and Costco are Motley Fool Stock Advisor recommendations. The Fool owns shares of Costco and Google.Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.
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