Costco set to shake-up retail sector

Posted by Daniel Palmer on 29th April 2008

Multinational wholesaler Costco is set to enter the Australian market by opening stores in Melbourne and Sydney within the next two years. Melbourne’s Docklands area is considered to be the most likely site of their first store although nothing has been finalised yet due to difficulties in finding sites and gaining council approval.

Costco is America’s largest wholesaler and offers a one-stop shop where everything from electrical goods to bedding to groceries can be purchased. They are known for keeping prices low and selling products that their competitors don’t offer. They provide greater discounts for bulk purchases and their revenue primarily comes from membership fees, which must be paid yearly if a customer wishes to shop at the store.

According to Costco are still seeking to open their first store within twelve months with Costco’s country manager for Australia, Patrick Noone, indicating that purchasing suitable sites has been a major difficulty for companies looking to expand in Australia. “It’s an issue for everyone because the big guys are buying up the sites,” Noone was quoted as saying by Connected.

The Federal Government last week proposed changes to legislation to counter concern that international retailers trying to enter the Australian marketplace were not presented with a level playing field. The changes increased the amount of time an international retailer has to develop a site from one year to five years. Costco’s expansion, however, is still unlikely to be swift due to the lack of suitable land to develop.