Craig Jelinek

Craig Jelinek
Jelinek in 2013.
Born	Walter Craig Jelinek 1952-08-08August 8, 1952 (age 74) Los Angeles, California, United States
Nationality	American
Citizenship	United States
Education	San Diego State University (BS, business administration)
Occupation	Retail executive
Years active	1975–2024
Employer	Costco Wholesale Corporation
Company	Costco
Title	Former president and chief executive officer of Costco (2012–2023)
Term	January 2012 – 31 December 2023
Predecessor	James Sinegal
Successor	Ron Vachris
Known for	Leading Costco through a decade of growth while maintaining its low-margin, high-wage model
Salary	About US$16.8 million (fiscal 2023)

Walter Craig Jelinek (born 8 August 1952) is an American retail executive who served as president and chief executive officer of Costco Wholesale Corporation from January 2012 until his retirement on 31 December 2023. He succeeded the company's co-founder James Sinegal and was succeeded by Ron Vachris.

Jelinek spent his entire working life in warehouse retailing. He began as a part-time food stocker at a FedMart store in Lancaster, California, while at school and junior college, joined Costco in 1984 — the year after the first warehouse opened — and worked through store management, regional operations and merchandising before becoming executive vice president and chief operating officer of merchandising in 2004 and president and chief operating officer in 2010.

His tenure as chief executive is generally assessed as an exercise in continuity rather than transformation. Costco's model — a small number of stock-keeping units, gross margins capped by policy at a low percentage, profit derived substantially from membership fees rather than from merchandise, and wages and benefits well above the retail average — was established by Sinegal, and Jelinek's contribution was to sustain it at increasing scale and against intensifying online competition. Annual revenue exceeded US$230 billion by his retirement, and membership renewal rates remained among the highest in retail.

He is most widely known for a decision he did not make. Asked repeatedly about the US$1.50 price of the hot dog and soda combination sold at Costco food courts, unchanged since 1985, Jelinek said: "Trust me, that is never going to change. If I have to subsidize it personally, it's not going to change." The remark, and Sinegal's earlier response to Jelinek's suggestion that the price be raised, became emblematic of the company's approach to its members.

Background: the warehouse club

The warehouse club format that Jelinek spent his career in was developed by Sol Price, who founded FedMart in 1954 and Price Club in 1976. Its principle is that a retailer can operate at gross margins far below the industry norm if it restricts the number of items carried, sells in bulk, holds inventory on the sales floor in its shipping packaging, spends nothing on advertising or display, and recovers its profit from an annual membership fee rather than from the merchandise margin.

The consequence is a business whose interests are unusually aligned with its customers': since profit comes from renewals, the operator's incentive is to keep prices as low as the model permits, because the membership is only worth buying if the savings exceed its cost.

Costco was founded in 1983 in Seattle by James Sinegal, who had worked for Sol Price, and Jeffrey Brotman. It merged with Price Club in 1993. The company caps gross margin on merchandise at a set percentage — commonly reported as 14 percent for branded goods and 15 percent for its Kirkland Signature private label — and does not exceed it even when the market would bear more.

Early life and career

Jelinek was born in Los Angeles on 8 August 1952. He took a part-time job stocking food at the FedMart store in Lancaster, California, while at high school and junior college, and took a degree in business administration.

He worked in warehouse retailing throughout the 1970s and joined Costco in 1984, a year after the company opened its first warehouse. He managed stores, then regions, and moved into merchandising, becoming executive vice president for merchandising in 2004.

He was appointed president and chief operating officer in February 2010, and succeeded Sinegal as chief executive in January 2012.

Chief executive of Costco

Continuity

Jelinek inherited a company whose operating principles were fixed and whose founder remained on the board, and he did not attempt to alter them. The limited assortment, the margin cap, the membership economics, the absence of an advertising budget and the treatment of employees all continued unchanged.

Under his direction Costco expanded its warehouse count internationally, with particular growth in Asia — the opening of the first warehouse in mainland China at Shanghai in August 2019 attracted crowds large enough that the store closed early on its first day — and continued to expand its Kirkland Signature private label, which grew to account for roughly a quarter of sales and became one of the largest consumer brands in the United States by revenue.

Revenue grew from about US$99 billion in the financial year before his appointment to more than US$230 billion in his final year, and the share price increased several-fold over the period.

Employee pay

Costco's practice of paying substantially above the retail average, and of providing health coverage to a large majority of its workforce including part-time staff, predates Jelinek but was maintained and extended under him.

He raised the company's starting wage repeatedly, to US$16 an hour in March 2021 and to US$17 later the same year, and increased pay at the top of the scale as well. The company's position, stated by both Sinegal and Jelinek, is that the policy is commercially rational rather than philanthropic: employee turnover in warehouse retail is expensive, and Costco's rates are a fraction of the industry norm, which reduces recruitment and training costs and produces a more experienced workforce.

Jelinek publicly supported increases in the federal minimum wage, testifying and writing in favour of them, on the ground that Costco already paid well above the proposed levels and that its competitors' lower wages were subsidized by public assistance programmes.

His own compensation, about US$16.8 million in fiscal 2023, drew criticism when set against the pay of the company's median employee, a ratio reported at several hundred to one — a gap smaller than at most large American retailers but substantial nonetheless.

E-commerce

The principal strategic question of Jelinek's tenure was how a business built on physical warehouses, bulk packaging and membership should respond to online retail.

Costco's answer under Jelinek was partial and deliberate. It developed e-commerce but did not attempt to match the assortment or delivery speed of online competitors, on the reasoning that the economics of shipping bulk goods individually were incompatible with the margin cap. It expanded same-day delivery through partnership rather than by building its own fleet, and concentrated online on categories where the format worked.

The approach was criticized as insufficiently aggressive during the 2010s and was substantially vindicated by the company's performance, though the question of whether the warehouse model can be defended indefinitely against online grocery remains open.

Membership fees

Costco raises its membership fee at intervals of roughly five to six years. Jelinek oversaw an increase in 2017 and left the next to his successor, and the company's renewal rates — above 90 percent in the United States and Canada — did not deteriorate.

Retirement

Costco announced in September 2023 that Jelinek would step down as chief executive on 31 December 2023 and that Ron Vachris, then president and chief operating officer, would succeed him. Vachris had joined Costco in 1982 as a forklift driver and had spent four decades with the company, a succession consistent with its practice of promoting from within; Costco fills the great majority of its management positions internally.

Jelinek remained on the board as an adviser during the transition.

Assessment

Jelinek's record is difficult to separate from the model he inherited, which is the substance of both the case for and the case against him.

The case for holds that maintaining a low-margin, high-wage, limited-assortment model at growing scale, through a period in which online competition destroyed a large part of American physical retail, was a substantial achievement, and that the temptation to raise margins, expand assortment or reduce labour costs is continuous and was resisted.

The case against holds that he was a caretaker of another man's design, that Costco's performance during the period reflects the model rather than its steward, and that the company's e-commerce position remains weaker than its scale would permit.

Both accounts note that Costco under Jelinek was among the small number of large American retailers regarded favourably by both investors and employees simultaneously, a combination that is unusual and that survived his tenure.

See also

• Costco
• James Sinegal
• Doug McMillon

External links

• Costco Wholesale Corporation