The California Wholesale Store That Paved The Way For Costco

We might think of creative "borrowing" when it comes to pop culture like films and music, but businesses get just as inspired to run with new ideas as artists do. Few companies have inspired as many people as the store that opened the door for Costco. The massive discount retailer is a giant of the Seattle business world, having opened up its first location in the Pacific Northwest in 1983 before growing to over 800 locations worldwide as of 2024, with over 600 Costco warehouses in 47 states in the United States alone. But the story of Costco actually starts over a thousand miles to the south, a far cry from rainy Seattle, in sunny San Diego, where a business pioneer started a discount retailer named Price Club.

The man who founded Price Club was named Sol Price (yes, that was his real name), and the first location was opened in 1976 in Southern California, seven years before Costco. Price had been the founder of another discount retailer named FedMart back in 1954, which pioneered the membership model for discount shops but curiously limited its membership to federal employees and their families. FedMart was very successful, to the point that Walmart founder Sam Walton admits he essentially stole many of his first ideas from Price. However, Price was driven out of the company by a new owner in the 1970s and took his membership concept to found Price Club, with the original store opening in a converted airplane hangar.

Price Club pioneered the bulk discount retail model used by Costco

Price Club further refined what would become some of Costco's signatures, including cutting down on costs with a sparse experience and no advertising. Price Club carried a wide variety of products, including auto parts, clothing, 10-pound sacks of rice, and Rolex watches, but also maintained a limited stock of options in each category to keep things simple for shoppers and keep down prices like Costco now does.

Just as important as Price's stores was who worked for him. Costco co-founder Jim Sinegal, the famous protector of hot dog prices, worked at both FedMart and Price Club, helping to refine the merchandising strategy before he left to start Costco. Sinegal started at FedMart all the way back in 1955 as a grocery bagger and worked his way up through the company, eventually working as an executive at Price Company, Price Club's parent company. Sinegal says he considered Price to be a mentor for his business strategy.

This all eventually came full circle. Costco grew in the Northwest and beyond, while Price Club grew in the Southwest, but the original store was criticized for not expanding rapidly enough given its success. Price Club and Costco eventually merged in 1993, becoming PriceCostco, but the Costco brand dropped "Price" from the name in 1997, becoming the behemoth we know today. So not only was Price Club the originator of much of Costco's unique experience, it's quite literally part of the lasting DNA of the company.