How Costco changes us - chiefs predict reactions: 'people will get caught up in the moment'

Costco is forecast to get millions of annual shopper visits. Photo/George Novak

Will it be an Ikea 'meatballs moment' when Costco throws open the doors to its giant store, just announced for Auckland's Westgate? How many people will visit the American-style bulk discount retailer, which in Australia sells everything from giant teddy bears to coffins? How will its goods and prices differ from what we already have? And isn't this just all empty consumerism, blighted by plastic and more stuff we don't need? Anne Gibson delves into expert opinion about how Costco could bring big change.

Costco Westgate will get millions of annually shopper visits, customers drawn to its 25 to 30 per cent discounts, and its arrival will have a big effect on New Zealand which has a sameness to its retail offerings - that's what industry chiefs say.

Chris Wilkinson, First Retail Group managing director, Greg Harford, Retail NZ chief executive, and Clive Mackenzie, chief executive of Kiwi Property, all welcomed the giant US bulk discounter, indicating it would have a significant effect.

Wilkinson: "This is a retailer of epic proportions. Because of the 25 to 30 per cent savings and because they will enjoy the experience of shopping there, people will travel distances, buying less frequently, but coming from Auckland, the Waikato and Bay of Plenty. They will sell things different and unique and is a challenge in New Zealand where we have a sameness to retail."

Although exact shopper numbers were difficult to predict, Wilkinson said there would be "millions", marked by a strong opening and an initial rush.

Westgate, where the new Costco store will rise. Photo/supplied

"There will be a honeymoon period, at least 12 months but typically longer. People will get caught up in the moment, getting access to goods they don't have now. People will be fascinated by the unique products and the promise of special pricing," he said shopper activity inside the 14,000sq m warehouse the size of two rugby fields.

Costco's inability to sell alcohol due to trading in the trust-controlled west could be a drawback, he said: "Liquor is a good category for any business in this area. It will be frustrating for them not to be able to sell it," he said, although he noted challenges to the existing regime.

Chris Wilkinson of First Retail Group. Photo/Mark Mitchell

Predominantly, Costco would sell overseas brands which it had exclusive rights to but it would also its own brands, he predicted.

"We will start seeing communities coming together to buy in bulk, for example, mother's groups or churches," Wilkinson said, adding that having to buy a membership would be little barrier because other retailers were moving in that direction.

In Australia, a "gold" or individual membership costs A$60 a year, and a business membership A$55 a year.

In terms of the west's growth, he cited the development of Nido Living's new 27,000sq m Henderson store, bigger than three rugby fields. That and Costco were a firm confidence vote in the wider western area of Auckland, he said, citing greenfields sites as well as upgraded motorway network links.

"It's saying 'this area has the scale for these types of businesses'. It shows how the west has evolved," Wilkinson said, predicting Costco might then open in the Waikato, perhaps in Waipa area, then Porirua.

"This is a very exciting time for consumers and business because Costco is not just a consumer proposition but a strong player in the business-to-business field," he said predicting the mass sale of goods to the office and hospitality, sectors.

Costco offering in one part of its big Auburn, Sydney store. Photo/Anne Gibson

Harford of Retail NZ said: "This will mean a good deal for consumers. Costco's significant size and ability to negotiate through their supply chain gives them scale. Costco's arrival is a vote of confidence in retail. We've been performing well, especially compared to most Australian states."

Harford was unsurprised by Costco picking Westgate, citing extensive development there beside the North Western Motorway and pointing to its ideal location.

Kiwi Property chief executive Clive Mackenzie. Photo/Dean Purcell

Kiwi Property's Mackenzie knew of Costco's arrival before today's announcement, saying the business he heads would be a neighbour.

"They'll be adjacent to our Westgate Lifestyle," he said, referring to 28 large format stores anchored by Harvey Norman, Briscoes, Rebel Sport and Freedom Furniture.

"Costco will be great for Westgate which reinforces the location's strength," Mackenzie said. "It's good news for us and for New Zealand Retail Property Group. They've done a great job."

Kiwi Property says of its western play: "Westgate Lifestyle forms part of the Westgate Town Centre development off the north-western motorway in Auckland. The centre provides 28 large format retail stores featuring a range of home and living retailers, and is located in a high residential growth area."

Wilkinson said Costco's opening would benefit businesses nearby as well as in the wider vicinity: "They could have chosen anywhere," he said citing Kiwi's big plans for Drury where is will build a mixed-use community.

"A rising tide floats all boats," Wilkinson said of Costco's wider retail spending effects. "Businesses around them will get more customers."

Costco says it will open new stores this month in the US cities of Mooresville, Evansville and St Cloud. Next month, it will open at Dallas and Cypress, both in Texas as well as Stevenage, England. In August, it plans to open new stores in Florida, Georgia and Illinois.

Costco by the numbers

• US$138b net sales September, 2018 year
• employs 245,000+ people
• 768 locations internationally
• 94m+ member customers worldwide
Source: Costco 2018 annual report

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