Most large retailers in the United States merge with other stores to establish their presence in the market and reach more customers.
In fact, as one of the largest retailers globally, Costco merged with Price Club years back. But when exactly did Price Club become Costco? Here’s all you need to know!
When Did Price Club Become Costco In 2022?
Price Club and Costco merged operations in 1993 since they had a similar business model and were of the same size. Thanks to this merger, Costco became the world’s most successful warehouse club. Once the Price brothers left the merger, Costco Wholesale Corporation renamed all the Price Club locations to Costco in 1997 and remains so in 2022.
To learn more about Price Club and its connection with Costco, including the history of the merger, and other related facts, read on!
What’s the History of Price Club?
Price Club traces its history back to 1976 when the pioneer warehouse club opened its doors in San Diego, California.
Sol Price and his son started Price Club after being pushed out of another membership-only retail chain he had started known as FedMart.
Following his exit from FedMart, Sol used $800,000 of money and contributions of over $1 million from California businesses and former FedMart staff to open the first Price Club store.
During the earlier years, the first Price Club store was opened at Morena Boulevard in old airplane hangars before expanding.
However, by 1980, Price Club had opened four stores in Phoenix, Arizona, and California.
Before its merger with Costco, Price Club had expanded across the U.S. and opened other stores in Canada in 1986 and Mexico in 1992.
What Was the Business Model of Price Club?
Famously known as the “buyers club,” Price Club operated on a membership policy for small businesses.
At this time, wholesalers who bought products from Price Club were required to become members and pay an annual fee.
The Price Club membership was initially only available for business customers, but it later opened up for the government and local business employees.
Small business owners who sell items in bulk could get things at discounted prices as long as they paid a fee.
Price Club charged shoppers a $25 annual fee for this warehouse club system.
Fortunately, because of this system, Price Club had high sales volume that enabled Sol Price to pay his employees a higher wage and employee benefits.
Why Did Price Club and Costco Merge?
As Price Club was expanding, the first Costco store was opened in 1983 by Jim Sinegal and Jeffrey H. Brotman in Seattle, Washington.
One of the founders, Sinegal, had started working in the retail business at Sol Price’s company FedMart.
According to Costco’s website, Sinegal worked as the executive vice-president of merchandising, marketing, and distribution at FedMart.
In fact, he played a key role in revolutionizing the company’s strategies.
So, because of this background, the Costco founders understood how to operate a membership-only warehouse club.
Additionally, the two merged because they had similar business models and were of the same size.
When Did Price Club and Costco Merge?
Price Club and Costco merged in 1993 and started operating under the name PriceCostco.
This merge with Costco happened after Sol Price turned down an offer from Walmart to merge with their warehouse store chain, Sam’s Club.
Because of the merger, PriceCostco generated $16 billion in annual stores and had 206 locations.
After the merge, PriceCostco was governed by executives from both retail chains. However, the Price brothers eventually left to start another company.
Additionally, membership became universal after the merge; therefore, Costco customers could use their membership at Price Club and vice versa.
What Happened to Price Club?
In 1994, the Price brothers left PriceCostco to form Price Enterprises.
This warehouse club chain is based in Central America and in the Caribbean region and did not have any relationship with Costco.
Following the exit, Costco changed its name to Costco Wholesale Corporation and rebranded all the Price Club locations.
What Were the Benefits of the Price Club-Costco Merger?
Since the two warehouse club retail chains have a similar business model, it was easier to integrate operations. In fact, this merge made them the biggest warehouse club in the world.
Because of the merger, Costco’s revenue increased significantly and has remained up until today.
For example, in the fiscal year ended February 2022, Costco’s net sales for the quarter went up by 16.1% to $50.94 billion from $43.89 billion in 2021.
In addition, the net sales for the initial 24 weeks also improved by 16.4%, from $86.23 billion to $100.35 billion.
Overall, based on this growth rate, Costco’s company earnings are expected to reach about $200 billion by 2025.
How Many Warehouses Does Costco Now Have?
Currently, Costco operates 828 warehouses. This includes the following:
- 572 stores in the U.S. and Puerto Rico
- 40 stores in Mexico
- 105 stores in Canada
- 30 stores in Japan
- 16 stores in Korea
- 29 stores in the UK
- 14 stores in Taiwan
- 4 stores in Spain
- 13 stores in Australia
- 2 stores in China and France
- 1 store in Iceland
During the merger with Price Club, Costco’s headquarters was in Kirkland. However, in 1996, the company moved its headquarters to Issaquah, Washington.
Out of all the warehouses in the U.S., California state has the most locations, with 131 stores. Texas, New Jersey, Washington, Florida, and Illinois also have many stores.
Who Owns Costco Now?
Costco Wholesale Corporation was formed as a merger between Price Club and Costco.
As a publicly-traded company, Costco is listed on NASDAQ. Therefore, the future of Costco is usually decided by the shareholders and the executives.
Currently, the CEO is W. Craig Jelinek, and the board chairman is Hamilton E. James.
Price Club and Costco merged operations in 1993 since they had a similar business model and were of the same size. Costco became the world’s most successful warehouse club thanks to this merger.
However, once the Price brothers left the merger to start another company in Central America and the Caribbean, Costco renamed all the Price Club locations to Costco in 1997. Regardless, this merger increased the number of stores under Costco and boosted company revenue.