Costco history: How a wholesale warehouse in Seattle grew into the third-largest retailer in the world and redefined retail

Dominick ReuterAug 22, 2023, 16:14 IST

Sales at Costco rocketed from zero to $3 billion in less than six years.STR New / Reuters

Costco is a wholesale club that sells a wide range of products and services to fee-paying members.
Founded in 1983 in Seattle, Washington, the company built off a concept pioneered by earlier stores.

Costco is a members-only wholesale club that offers a variety of products and services at extremely competitive prices.

The company was founded in 1983 by Jim Sinegal and Jeff Brotman, who opened the first Costco warehouse in Seattle, Washington.

Now, 40 years later, Costco is the third largest retailer in the world with 852 locations, over 124 million cardholders, and more than $227 billion in annual revenue.

Here's how the wholesale club redefined retail.

The story of Costco begins decades before the first store launched in 1983 with FedMart, a discount department store for government employees.

Jim Sinegal got his start at FedMart.Costaricky/Wikimedia Commons

Sam Walton liked what Price and Sinegal were doing with FedMart in California so much that he opened the first Walmart in Arkansas 1962.

Sam Walton was inspired by FedMart.Associated Press

After an investor forced Price out of FedMart, he leaned more heavily into the membership model in 1976 with Price Club.

Merchandise at a Price Club warehouseKeith Beaty/Toronto Star via Getty Images

In 1983, Sinegal and Walton each launched members-only warehouse clubs — Costco and Sam’s Club — that bore striking resemblance to Price Club.

The first Sam's ClubWalmart Museum

Company sales in that first year reached $101 million, plus $1.3 million in membership fees, according to SEC filings.

A Costco opening flyer.Courtesy of Costco Wholesale

Sales at Costco rocketed from zero to $3 billion in less than six years — a first for any company in history, according to the company.

Costco became a publicly traded company in 1985.Courtesy of Costco Wholesale

Despite their similarities, Costco, Price Club, and Sam's Club weren't direct competitors, as each had a sizable geographic territory in which to expand.

A map comparing locations of Costco, Price Club, and Sam's Club.Walmart

One way Costco found to keep prices low was to sharply limit the number of different products in its inventory.

Costco only carries around 4,000 unique products.Courtesy of Costco Wholesale

In 1993, Price Club and Costco joined forces and began operating as PriceCostco with 206 locations and $16 billion in annual sales.

Price Club and Costco joined forces in 1993.Courtesy of Costco Wholesale

The company dropped the awkward PriceCostco branding in 1997 and reverted to Costco.

Larry Downing/Reuters

In its 20th anniversary year, Costco had 430 warehouses in North America, Asia, and the UK, over 40 million membership cardholders, and generated $42.5 billion in revenue.

VCG/VCG via Getty Images

In its 20th anniversary year, Costco had 430 warehouses in North America, Asia, and the UK, over 40 million membership cardholders, and generated $42.5 billion in revenue.

US warehouses that year generated an average of $112 million in annual sales, while 11 locations exceeded $200 million.

A Costco warehouse in 2004.Jeff Zelevansky/Reuters

Sinegal retired as CEO on January 1, 2012, handing the leadership to the company's head of merchandising, Craig Jelinek.

Jim Sinegal retired in 2012.SAUL LOEB/AFP via Getty Images

Jelinek had also previously worked for FedMart, and was one of Costco's early hires in the 1980s, rising to vice president in 2004 and currently CEO.

Current CEO Craig Jelinek also began his career at FedMart.Nati Harnik/AP

Costco became the third largest retailer in the world in 2014, a ranking it still holds today behind Walmart and Amazon.

Costco brought in $217 billion in sales in 2022.Scott Olson/Getty Images

Costco turns 40 this year with 852 locations around the world and more than 124 million membership cardholders.

Costco has gained a loyal following byGene J. Puskar/AP

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Costco history: How a wholesale warehouse in Seattle grew into the third-largest retailer in the world and redefined retail

The story of Costco begins decades before the first store launched in 1983 with FedMart, a discount department store for government employees.

Sam Walton liked what Price and Sinegal were doing with FedMart in California so much that he opened the first Walmart in Arkansas 1962.

After an investor forced Price out of FedMart, he leaned more heavily into the membership model in 1976 with Price Club.

In 1983, Sinegal and Walton each launched members-only warehouse clubs — Costco and Sam’s Club — that bore striking resemblance to Price Club.

Company sales in that first year reached $101 million, plus $1.3 million in membership fees, according to SEC filings.

Sales at Costco rocketed from zero to $3 billion in less than six years — a first for any company in history, according to the company.

Despite their similarities, Costco, Price Club, and Sam's Club weren't direct competitors, as each had a sizable geographic territory in which to expand.

One way Costco found to keep prices low was to sharply limit the number of different products in its inventory.

In 1993, Price Club and Costco joined forces and began operating as PriceCostco with 206 locations and $16 billion in annual sales.

The company dropped the awkward PriceCostco branding in 1997 and reverted to Costco.

In its 20th anniversary year, Costco had 430 warehouses in North America, Asia, and the UK, over 40 million membership cardholders, and generated $42.5 billion in revenue.

US warehouses that year generated an average of $112 million in annual sales, while 11 locations exceeded $200 million.

Sinegal retired as CEO on January 1, 2012, handing the leadership to the company's head of merchandising, Craig Jelinek.

Jelinek had also previously worked for FedMart, and was one of Costco's early hires in the 1980s, rising to vice president in 2004 and currently CEO.

Costco became the third largest retailer in the world in 2014, a ranking it still holds today behind Walmart and Amazon.

Costco turns 40 this year with 852 locations around the world and more than 124 million membership cardholders.