goods in a no-frills setting could be a new and pro;table
niche in the retail world. ;ey called the store Fed-Mart, and
over the next two decades the company grew to a successful
regional chain in the Southwest.
A German retailer purchased Fed-Mart with plans to
make it into a leading national retailer, but the plan failed.
Its top managers, including Price and his son, Robert, found
themselves out of work and mulling new ideas. ;ey came
up with a membership-based warehouse club operation
they called Price Club. ;e ;rst store opened in 1976 on
Morena Boulevard in San Diego in an old manufacturing
building built by Howard Hughes. Several former Fed-Mart
managers went to work for the new Price Club, including
Jim Sinegal, who had started at Fed-Mart as an 18-year-old
student, unloading mattresses o; trucks.
;is bit of history is relevant, because at Fed-Mart key
relationships were formed and concepts developed that
would build today’s Costco. Many Costco executives
started as box boys or cart pushers at Fed-Mart in the 1950s
and 1960s, then went on to management roles at Price
Club in the 1970s, before starting Costco in the early 1980s.
Costco history
Jim Sinegal and
Jeff Brotman
at the first
Costco, 1983.
COURTESY OF COSTCO WHOLESALE
1976
Price Club opens
in San Diego;
introduces hot
dog and a soda
for $1.50
From those earliest days, Fed-Mart had a set of operating principles for employees, spelled out by president Sol
for Costco came a;er Seattleite Je; Brotman, whose family
had deep roots in the retail business in that area, was urged
by his father to check out the bustling Price Club stores in
California. Je; immediately ;ew down and quickly was in
1983
First Costco
Wholesale, Seattle
“We learned that you must have high standards of ethics and that there is no room for shortcuts.
And to do the right thing, even if it’s hard or painful.”
—Franz Lazarus, Senior Vice President, Global Operations
1986
agreement: ;ere was nothing like it in the Paci;c Northwest.
Pharmacy
Looking for somebody with experience to help start
and run the new business, he asked around among his contacts and was told there was really only one guy for the job:
Jim Sinegal.
The pair reached an agreement, scraped together
$7.5 million from investors to back the start-up and
in 1983 nervously opened the ;rst Costco, in an industrial
area in south Seattle. According to a popular story among
company long-timers, the store’s ;rst employees were told
to park their cars in the parking lot to make the place
look busy.
Sol and his young
team carried these
principles on to Price
Club and they were
taken north to Seattle
by some of the team
members when they
le; to create Costco
in 1983. The idea
taken north to Seattle
e
c
COURTESY OF COSTCO WHOLESALE
1987
Optical, Bakery,
Produce, Meat
But the business survived, grew to 10 warehouses
within a couple of years and, in an ambitious and complex
move, merged with its competitor, Price Club, in 1993,
creating a company with almost 200 warehouses and
43,000 employees. Along the way it helped drive revolutions in the way products are manufactured,
distributed, marketed and sold.
1988
1-Hour Photo
A fair deal
Costco’s story is best told by those who
founded it. Young as they were, they were still
forming their approaches to things when they
met one another on the loading docks or while
sweeping ;oors.
1993
Price Club and
Costco merge
Sol and Robert Price,
in the original San
Diego Price Club,
late 1970s.
Franz Lazarus,
Jeff Brotman, Jim
Sinegal and Dick
DiCerchio, 1993.
“;e things we learned as we grew up
were the same things we did in our business.
;e things Mom taught you were the same
things that Costco does,” recalls Fed-Mart and
Price Club alum Dick DiCerchio, who retired
last January as Senior Executive Vice President
of Costco. “We didn’t lie. We didn’t cheat. We
didn’t take advantage of our suppliers. We
always respected our people. ;is wasn’t just a
statement on the wall.”
1993
CONTINUED ON PAGE 26
First Costco
in the U.K.
PHOTOS: COURTESY OF COSTCO WHOLESALE/MEDIA BAKERY/PHOTODISC
JANUARY 2012 ;e Costco Connection 25
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