WDS in the News

 A Taste of Costco

A little bit of excitement hits shoppers
as they enter the store. Anticipation
builds as the smells in the air
make their stomachs growl and they
realize samples await.
To many people, Costco is more
than just a big-box store. It can also
mean a free lunch. But it’s a free lunch
with a purpose.
Samples have stood as a cornerstone
of Costco Wholesale’s product
advertising for more than 20 years,
and that model is still going strong.
Costco and its vendors pioneered the
marketing strategy. And though it’s
part of Costco’s image, the sampling
operation is run by a separate company,
Warehouse Demo Services.
Warehouse Demo Services CFO
Brent Ellis said his company contracts
with Costco to provide the sampling
service. WDS hires, trains and maintains
employees so Costco doesn’t
have to manage that aspect of the
business.
Ellis said the concept of providing
samples of Costco’s products came
about shortly after Costco’s first store
opened in Seattle in 1983.
As an upstart wholesaler, many of
the products it stocked were not well
known to the public, so the company
began to offer samples in the
store. Originally, individual vendors
handled the product demonstrations
in Costco as a way to show that
their products could match the quality
associated with major brands. As
that trend continued, Costco wanted
a more consistent program so Ken
Chamberlin started Warehouse Demo
Services in 1989. Today WDS employs
more than 7,000 people and works
with Costco in nine western states including
Hawaii and Alaska.
Although WDS works exclusively
with Costco, it has competitors across
the nation that also operate within
Costco. Ellis said competition is fairly
friendly, but WDS continues to try
and differentiate itself from the rest
of the pack through service and its
ability to work well with Costco.
Ellis said WDS and samples are a
mainstay of the Costco culture.
“Our value and ability to move product
are proven,” he said. “We’re not a
barker at a carnival. We provide some
information, demo the product and
provide the price and where a person
can get the product.”
Today the samples range from the
little known brands to the big names
like General Mills.
Ellis said if a company can get a potential
consumer to try a product, the
chances of them buying it increase
dramatically. Same-day sales of products
featured as demos at Costco can
increase four-fold over the previous
day, Ellis said. And the benefits continue
as people continue to purchase the products they like.
Because sales associated with sampling
products are so successful, companies
often book more of them, especially
in a rough economy.
Ellis said the company looks to grow
during this current economy. Based
on past recessions, he said Costco
has always grown as people look to
strengthen their buying power. He
said that trend seems to be holding
true again.
Costco buyers and vendors have the
largest impact on which products are
demonstrated or offered as free samples.
Ellis said a lot of buying is done
on a regional level and companies negotiate
for product placement, quantities
and demo schedules.
While WDS can demonstrate everything
from detergents to shrimp, food
stuffs that are precooked or prepared
work the best. Ellis said the demonstration
stations help create a marketplace
feel that allows people to experience
a product with all their senses.
WDS continues to look for ways to
grow along with Costco. That includes
broadening the demo services beyond
food products to include items such
as bedding, outdoor equipment or
tools.
WDS also is piloting the demo program
for Costco’s brand Kirkland Signature
wine, which will have a little
different set up than sampling cookies.
Special events focused on demos
are are another relatively new feature.
A good example is Super Demo Days.
Scott Elliot, general manager of the
East Wenatchee Costco, said Costco is
gearing up for Super Demo Days the
Thursday, Friday and Saturday before
Memorial Day, where between 30 and
40 demos will be out at once.
It’s going to be a smorgasbord of
samples, and instead of being spread
throughout the store, they’re going to
be grouped together in one spot.
Elliot said the Super Demo Days will
happen throughout the region. He
said Costco tried the mega amount of
demos around Superbowl Sunday. It
was a success so the company is going
to try it again.
“It’s something different and new
that our members really seem to like,”
he said.
Because the company is not publicly
traded, Ellis said the company does
not publish its earnings.
Warehouse Demo Services is cautiously
optimistic, Ellis said. We have
sales goals the same as every other
business. We push hard to have our
business increase 20 percent a year
through new stores and increases in
the current stores.