Sol Price had and idea that he was not going to let go of. No matter how many times others tried to take it away.
Dave Young:
Welcome to The Empire Builders podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector and storyteller. I'm Stephen's sidekick and business partner Dave Young. Before we get into today's episode, a word from our sponsor, which is, well, it's us, but we're highlighting ads we've written and produced for our clients. So here's one of those.
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Dave Young:
Welcome to The Empire Builders podcast. Dave Young here with Stephen Semple. And Stephen, shoot, just as you hit the button, I was compiling a list because Julie and I, we've got to go pick some stuff up and you reminded me about it.
Stephen Semple:
Glad I can help.
Dave Young:
Right? We have a Google Keep list. I don't know if you use Google Keep. It's just sort of a list software that you can share with other people. And so that's where we keep our Costco list.
Stephen Semple:
Right.
Dave Young:
And it's actually a Costco/Sam's list, but we hardly ever pick up anything from Sam's. Sam's has some things that Costco doesn't and vice versa. Anyway, we're going to talk about Costco, to try to make a short story long.
Stephen Semple:
I hope we still have some listeners at this point.
Dave Young:
Right? Come on, we're only a minute in, so I think we're okay.
Stephen Semple:
Here's the thing I find it's really interesting about Costco. Today, they have basically almost 900 locations. They do like 243 billion in revenue. They have over 130 million members, and they have over 300,000 employees. They have a reputation of paying and treating employees very, very well, especially for a discount outlet. But to put in perspective, they do a little bit more than half the revenue of Walmart. But Walmart has like 10,000 locations. Costco is like 900.
Dave Young:
Yeah.
Stephen Semple:
Think about that volume that they do.
Dave Young:
Do. The product turn has to be amazing. Yeah.
Stephen Semple:
Unbelievable. It's just mind-boggling. It's just mind-boggling. And it's really interesting to stand outside of Costco and just look at carts full of stuff. Nobody goes to Costco and buys two things, right? It's just incredible. There's some legal things that we need to talk about to really understand the history of Costco, because back in 1936, there was this Robinson-Patman Act that was passed and it prevented the discounting of goods below the manufactured list price. So when we see manufacturers list price, it used to mean something. And what it used to mean is you could not go below that price. And this was to protect manufacturers and small retailers, and you could not do large purchases at discounts. It didn't matter how much you were buying, couldn't go below that price. And in the 1960s, these laws started to change, but large retailers still resisted this idea of lowering prices, because they'd sort of gotten very used to that.
Along comes Sol Price, and it's the early 1950s and he's working as a lawyer in San Diego, and he has a client in a jewelry business that's selling watches to non-profit member owned retail operation in LA called Fedco. And Fedco was a non-profit, like basically it was founded by 800 postal workers in LA, and they were leveraging the buying power to negotiate with distributors and eliminate store markups. And there was a membership fee. It was $5 for a lifetime membership for federal employees. And Sol visited Fedco and he noticed that the property was really similar to one that his mother-in-law had inherited in San Diego that sat empty. So he suggested the location to the client of his and his mother-in-law, and they agreed, and they opened under a different name instead of Fedco.
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