Costco reports success of first Australian store

Posted by Nicole Eckersley on 30th September 2010

As Costco prepares to open its Sydney store in 2011, the retailer, famous for its bulk products, has reported some initial success with its first Australian warehouse in Melbourne, opened in August 2009.

The American members-only warehouse chain Costco generated sales of $9 million in its first two weeks, and Costco has reportedly now amassed over 75,000 members in Australia. Costco provides business and private members with bulk-packaged, low-priced goods from a range of product categories including groceries, clothing and homewares.

The retailer sells branded products, as well as private label range Kirkland Signature, and operates a strict rule that prices cannot be more than 14% above wholesale costs.

“The Melburnian store, which requires private customers to pay an annual membership fee of A$55-60, represents the first paid-membership retailer of this type to open in the country” says Anne Marie Davis, Verdict’s Practice Leader.

Metcash-owned bulk discount chain Campbell’s Cash and Carry operates under a similar principle, but membership is free, and only available to businesses and non-profit organisations such as schools, sporting and social clubs.

Costco has also recently entered Taiwan, Japan and Korea, and intends to expand its Australian portfolio by opening a 13,700 sq m store in Sydney in 2011.

Research conducted by Datamonitor between 2009 and 2010 found that 33% of Australian consumers were frequently buying grocery items in bulk and that 40% were purchasing private label grocery products. Datamonitor reported that this phenomenon is driven in part by the fact that Australian consumers have large vehicles in which they can transport items, and large homes in which they can store groceries.

“The high number of consumers buying larger packs, compared to countries in Europe for example, supports the potential for Costco’s successful expansion across Australia, and may also necessitate a response from existing retailers in the grocery sector,” said Davis.