Founded in 1850 and headquartered in Manhattan’s Three World Financial Centre in New York City, American Express Company is an American multinational financial services corporation best known for its credit card, traveler’s cheque and credit card businesses. On the other hand, the American membership-only warehouse Costco Wholesale Corporation headquartered in Issaquah Washington United States was founded as Price club in 1976 with its first warehouse under the Costco name in Seattle Washington seven years later. It deals with a wide selection of merchandise.
The two companies Costco and Amex have had a decade and half merchant acceptance but recently with the unpredictable dynamics in the business world, Amex has declared that its merchant agreement with Costco Wholesale Corporation will end on March 31ST 2016. However, before the expiry of the contract, the two companies will abide by the existing terms of the agreement.
Reasons for ending the contract
- Amex has experienced sky-rocketing cost for contract renewal with Costco over the last two decades. It has therefore been analyzing its co-branded arrangements and has decided to hasten the contract renewal evaluation before the time to renew the contract. This provides a filter that would enhance value for card members and have best growth potential and economics for its shareholders.
2. Its relationship with Costco has been less rewarding as it can purchase cards from other companies with attractive value propositions and effective card member acquisition engine.
- Amex’s termination of its contract with Costco will help reduce its billings and other overhead costs and expenditure.
- Amex wants to launch SimplyCash and SimplyCash Preferred cards to attract customers who are doing their transaction outside the Costco warehouses. This is an opportunity for Amex to generate its value propositions.
*Editorial Note: Any opinions, analysis, reviews, or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.