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To: Amy J who wrote (130538)	3/21/2001 5:16:15 AM
From: JDN	Read Replies (1) \| Respond to of 186894

Dear Amy J: I think your impressions are incorrect regarding COSTCO. I of course am an outsider but I am a long time costco shopper and mid term costco stockholder. My understanding of how they purchase is FIRST the product must be equal or superior to that on the open market and SECOND the price must be SUBSTANTIALLY lower to Costco. In return COSTCO purchases large supplies passing the discount on to their customers. In addition COSTCO has their own brands called KIRKLAND SIGNATURE where in Brand name companies IMPROVE their products SOLELY to COSTCO specifications. I have purchased many Signature items and been very happy with them. Examples, Batteries, Refridgerator and some clothes. CPQ signed some kind of deal with COSTCO but the product is not obsolete by any stretch, its just they use the AMD product but they have HUGE harddrives (often 80gb)and all the bells and whistles included. JDN

To: Amy J who wrote (130538)	3/21/2001 7:32:38 AM
From: Road Walker	Read Replies (1) \| Respond to of 186894

Amy, re: "I've developed the impression that Costco is a good place to get rid of extra inventory when obsoleting products or when there's excess." I can understand how you got that impression, but it's inaccurate. Costco (and for that matter Sam's Club) sell for about 10% gross margin; other retailers 25% to 40%. As a manufacturer, it's in your best interest to have retail prices for your products fairly flat accross the marketplace, so that you don't upset many of your retailers. So what many manufacturer's will do is produce a product exclusively for the warehouse clubs. It will usually have additional features or specifications slightly higher than their normal retail products, to bring up the price a bit. And the manufacturer may actually charge Costco slightly more for the product than would be normal, knowing that it will get marked up less on the retail. Keeps everybody happy. Standard retailers can compete, Costco can offer better products at great prices, the manufacturer get's a better gross margin than normal, and the consumer gets a good value because of the added features or benefits. John