US bulk retail ‘warehouse’ store Costco to open five Australian outlets

By Martin Vedris

SYDNEY: Similar to the Aldi pallet stacking and no shopping bags concept, Costco stores offer products in bulk, stacked on pallets to customers who pay an annual membership to receive discounts for bulk purchases and a two per cent annual rebate on all purchases.

Costco has announced plans that it intends to open up to five stores in Australia from 2008. In the other countries where Costco operates its 520 stores, including the USA, Canada Britain and parts of Asia, the stores tend to attract an affluent demographic because the more the consumer spends, the bigger the saving.

Costco applies a relatively low margin of between eight and 15 per cent, which is where the savings begin. Costco stores sell everything from food and groceries to furniture to branded electrical appliances and electronic products including flat panel TV’s, camcorders and computers.

The move into Australia is set to stir up the retail landscape and retail analyst Credit Suisse stated that 2008 could be the year of the discounter.

“Costco has announced its plans to expand its global footprint onto Australian shores, with three to five stores to be opened over the next 12 months,” stated Credit Suisse retail sector analyst, Andrew McLennan.

“This announcement comes weeks after Aldi announced the opening of its 150th store and expectations of another 350 across the eastern seaboard over the long term. We have estimated the impact of Costco and Aldi expanding into the Australian supermarket sector, and while acknowledge that the short-term market share implications are muted at best, the medium-term impact on net market growth is more of a concern.

“If Costco and Aldi undertake their announced expansion plans, we estimate that up to 20 per cent of supermarket growth in the next four years may be absorbed by the new entrants, introducing the risk that the incumbents may be left with lower growth and therefore lower comparable sales for an extended period.”

Costco’s net sales for the 52 weeks ended September 2, 2007, were $63.09 billion, an increase of per cent from $58.96 billion during the prior 53-week fiscal year ended September 3, 2006.

Net income for the 16-week fourth quarter was $372.4 million, compared to $355.6 million, during the corresponding 17-week fourth quarter of 2006.

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