The Success of the Costco Value Chain for Farmers

By Jason Stroeve

It’s a running joke that while it costs you $55 to $100 dollars a year to get into Costco, it usually costs you at least $200 dollars every time you leave. I like shopping at Costco and apparently so does the rest of the world. If you’re successful at navigating the parking lot on a Saturday, you still have to run the gauntlet of shopping carts and long lineups at the till. As frustrating as that can be, people still go and still like to go because there is value in it for them. What’s stunning is the fact that they don’t advertise. ┬áThere’s a formula in place at Costco that keeps people coming over and over again. That formula is a good value chain. In a good value chain the consumer drives the process. Businesses and producers along that chain establish trust relationships implementing effective communication and fair profit models to achieve sustainability by meeting consumer needs. This is a model that Costco employs very well and to great effect across their over 500 locations worldwide.

IS THE POWER OF THE FOOD RETAILER TRUMPING ALL?

Janet Shanks and Claude Gravel of Costco Canada spoke at the March series of the Tiffin Conference in Lethbridge, Alberta. As I spoke to some of the people at the conference, most were surprised to see them there at an Agricultural conference. Here is where we see the uniqueness of the Costco model in action. Most producers exist in a supply chain where goods are pushed by businesses and producers. When I asked Claude and Janet about why they were at an Ag conference they said that they saw it as a great platform to improve their model at a producer level. I talked to them about the success of the business and the relationships they have with their suppliers.

SEE MORE TIFFIN CONFERENCE 2011 COVERAGE

If you cannot see the embedded video below click here.

 

Shaun Haney

Shaun grew up on a family seed farm in Southern Alberta. Haney Farms produces, conditions and retails wheat, barley, canola and corn seed. Shaun Haney is the founder of RealAgriculture.com. @shaunhaney

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