Source: Costco
When the idea of Costco Wholesale (COST +1.68%) comes to mind, the most frequent images to enter the imagination might be that 40-pack box of 8-oz Great Northern Popcorn you can get for $42.99, or a 48-oz tub of Folgers Coffee Classic Roast for $10.49. While these are two of the many products that Costco sells to its customers, you can get far more interesting goods from the company by going into its stores or shopping online.
To make things even better, some of these incredibly unexpected purchases come from businesses like The Walt Disney Company (DIS +3.30%), or compete with mainstream providers like Groupon (GRPN 0.50%) or Matthews International Corporation (MATW +2.01%). In what follows, we will take a look at the ways Costco is changing the landscape of big-box retail.
Disney fans welcome!
For the price of $149.99, customers at Costco can buy one of any number of limited-edition Disney canvassed images. Currently, the company has eight different Disney depictions for sale, each of which has been hand-signed by artist Noah and is restricted to just 300 copies worldwide. Although management does not disclose how much revenue this arrangement brings in, the company classifies its Disney and other art sales in its softlines category, which made up 11% (or $11.6 billion) of the retailer's $105.2 billion in revenue.
Source: Costco
Three of the more modern-styled prints are of Frozen. One bears the characters Olaf and Sven, another just has Elsa, and the last has Elsa, Anna, and Marshmallow. However, for Disney fans who prefer some of the older works of art by the entertainment giant, it has canvasses bearing Donald and Daisy, Mickey and Pluto, and Mickey and Minnie for the same price, while Sleeping Beauty and Peter Pan renditions round out the list.
Take me to sea!
If art isn't necessarily your cup of tea, another cool service provided by Costco is its vacation packages. While one of its more inexpensive options is a seven-night summer cruise to Alaska which starts at $565, bigger spenders can go all out with a 10-night Seven Seas Navigator cruise to the Caribbean and Bahamas which starts at $4,149 per person.
Source: Costco
While this line of business could turn out to be great for Costco, it pits the company against other travel package operations like Groupon with its Groupon Getaways. In 2013, Groupon Getaways only made up 6% of the company's sales but with a gross profit margin of 83.7% (Costco has a consolidated gross profit margin of 12.6%), it comprised 9% of Groupon's total gross profit.
Unfortunately, the retailer doesn't disclose too much in the way of details about its travel operations, but the company does put travel revenue in its online revenue category, which made up 3% (or almost $3.2 billion) of its total sales in 2013. E-commerce revenue does, however, include other inputs and with the company allocating its $2.3 billion from membership services to its online operation as well, travel must account for under $860 million of this.
Need a casket? Anyone?
Perhaps the most interesting line of products provided by Costco is the retailer's fine assortment of caskets and urns. On its website, the company has 10 caskets available, which range from $1,299.99 to $2,999.99 for its most expensive model, the Edward Casket. For customers who are looking for an alternative to burial, management offers urns (as well as keepsake urns and pet urns) that range in price and, to top off the cake, offers to scatter ashes at sea for $149.99.
Source: Costco
Although most businesses do not offer to scatter ashes at sea, this is one of Costco's efforts to overcome competition from rivals like Matthews. In 2013, Matthews saw its revenue from its funeral home products segment come out to $242.8 million.
Despite the fact that this represented just 25% of its sales, down from 27% in 2011, these operations accounted for 39% of the company's operating income, a jump from 25% two years earlier. Unfortunately, Costco's margins likely won't be this high because of its third-party partner taking a piece of the pie, but with margins on the upswing, the retailer should see some nice benefits.
Foolish takeaway
Certainly, Costco isn't your typical retailer. In an effort to achieve growth, management has found innovative ways to grow the company's business. In part, this comes from unique products like Disney canvasses and funeral products, but it also takes the form of services like its vacation operations. Whether these kinds of offerings will create value for the business is uncertain, but since its sales grew 47% over the past five years while its net income soared 88%, these strategic moves don't appear to be having any negative effect on the company.
