Beyond the show — Costco · Jim Sinegal · 1983

You can price this item at what the market will bear and still be the cheapest in the city. Do you take the margin, or write a rule that says you cannot?

You have just opened the first Costco in a converted hangar in Seattle. You spent thirty years working for Sol Price, who invented the warehouse club, and you know the model: a few thousand items, bulk packs, a membership fee, no advertising. Sam Walton has opened the first Sam's Club this year with Walmart's balance sheet behind him, and Kmart is about to launch one too. Your margins are thin, you are losing money, and a supplier has just offered you a branded item at a cost that would let you sell it at a 25% markup and still undercut every department store in town. Members would pay it happily. You need the cash.

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