Clark Howard

Clark talks legacy of Costco co-founder, now retiring after 35 years

An important chapter in Costco history officially came to a close late last month when Costco co-founder Jim Sinegal stepped down from the warehouse club’s board of directors.

Sinegal founded one of my favorite retailers in 1983 when he and Jeff Brotman first opened the doors of their store in an unassuming Seattle warehouse.

Now 35 years later, the 82-year-old Sinegal is signing off for good.

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Retail hero Sinegal was a modest man: ‘There’s no gatekeeper’

"It was just time," Sinegal told the Puget Sound Business Journal of his retirement. "I decided a year ago and was going to consider it then, but I decided to wait for my term to go out."

And while Sinegal is far from a household name, together he and Brotman changed what goes on in so many households through their visionary leadership of Costco Wholesale. (Heck, I even named one of my family’s dogs after their company!)

I have fond memories of Sinegal. When I visited the company’s Issaquah, Wash., headquarters once, I found him sitting in an open cubicle furnished with used furniture.

You'd have no idea he wasn't working in the mail room; he was just that completely unassuming. He's the kind of guy who answers his own phone, there's no gatekeeper.

The spirit of Sinegal’s leadership of the company has remained intact with current CEO Craig Jelinek. Jelinek took over the reins of the company in 2012. But you see the spirit of Sinegal’s leadership in the continued emphasis on keeping low prices and keeping the focus on the customer.

The neat thing about Costco is that markups on name brand products are capped at no more than 14%. Meanwhile, private label goods sold under the Kirkland Signature label are marked up by only 15%.

In the world of retail, those are very modest margins.

It’s those kind of tight controls on price that have led Wall Street to hate Costco. Analysts derisively call it “the world’s largest co-op,” and they don’t believe that offering the lowest possible prices to customers at all times makes any sense.

What Wall Street doesn't understand is that by treating employees well and providing value to members, you actually make more money over time. As of March 2017, Costco had 88.1 million members!

Another thing I’ve admired about Sinegal’s career and Costco is the emphasis on ethical capitalism. When you walk into the company’s headquarters, the Costco code of ethics is displayed. It famously starts with “Obey the law.”

That’s very important because it’s a big problem in retail with buyers taking bribes. If you go to one of their store locations, you’ll also see their core philosophy on the wall.

I believe it’s so important with capitalism, considering all the times we hear about scandals, to know people do it differently and the results show proof of that.

On the Costco homepage, you can also find a confidential ethics hotline for suppliers. If anybody at any time tries to ask for money, the company won't stand for that. Ditto for gifts or favors. And if they ever did, it would not be the same company.

I think people who do it right deserve our credit and praise. Isn’t it great when capitalism has a hero instead of a goat?

So I’m going to miss you, Jim Sinegal, now that you’re moving on from Costco for the final time. But your legacy lives on whenever I and one of my 88 million plus fellow members visit one of your warehouses!

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