How Costco Keeps an Eye on Competitors

Join The Motley Fool for a video conversation with retired Costco CEO Jim Sinegal. In love with retail since his first job as a bagger in 1954, Sinegal co-founded Costco and served as president and CEO of the retail giant from 1983 until his retirement in January 2012.

Sinegal is no stranger at Costco competitors such as Sam's Club and Target. He explains his approach to visiting other stores.

To watch the full interview, click here.

Brendan Byrnes: You're famous for spending a lot of time out in Costcos, walking around, seeing the stores, getting really boots on the ground. Do you ever spend time walking through competitors, checking out the landscape to see what they're doing?

Sinegal: Sure. We do it all the time. That's part of the business. There is hardly a week that goes by when [current Costco CEO Craig Jelinek] and I aren't in a Sam's. It would be unusual. If we're on the East Coast, we're going to be in a BJ's.

Byrnes: I'd love to be a fly on the wall when you two are walking through.

Sinegal: We do that with a lot of the competitors that we admire. We're going to be making a trip to Canada here, week after next, and I will guarantee a major portion of the trip Craig and I and Joe Portera [executive vice president and chief operating officer of Costco's eastern and Canadian divisions] are going to spend -- and our Canadian team -- will spend in the new Targets that are up there. We're going to be looking at everything that they're doing.

When we opened up in Wheaton, in Maryland here a couple weeks back, the first thing we did that day was go into the Target. That was easy, because it's only about 50 yards away. You have to be in the competitors. We're in the Trader Joe's all the time. They're a neighbor of ours over here. We admire them a lot.

You've got to be checking the competition, and not just to satisfy yourself that you're better than the competition, but what is it that they're doing that really makes a hell of a lot of sense that we should be incorporating into our business? We tell our people, "When you go into a competitor, be looking for the really good stuff."

Byrnes: Right. How much of it is, "Oh, they're actually doing this pretty well," versus, "Oh, they could do this so much better. They're doing this all wrong"? Is it 50/50?

Sinegal: You know, we have to guard against that. It's very easy to take the attitude, "Oh, we're great. We can do anything, and the competition's not close to us." That's not the attitude you want to have. You want to look at the competition that they're out to get you.

As I've often said, you're not paranoid if they're really out to get you. We have the attitude that every single competitor out there is trying to kick our brains in, and we're trying to do likewise.