Editorial: Costco arrival is a taste of what's to come

COMMENT:

A company with net annual sales equivalent to New Zealand's total gross domestic product announced this week it planned to open its first store in this country.

United States-headquartered Costco Wholesale declared net annual sales of $293 billion (US$138b) in the year to September 2, 2018 - precisely, as it happens, the same as New Zealand's total national GDP of $293b in the December, 2018 year.

On Tuesday at 2pm, Patrick Noone, Costco Wholesale Australia and New Zealand managing director, stood on a gravel path at Westgate Town Centre. There, he announced the world's second-largest retailer, behind Walmart, would open its first store in about two years on what is now a patch of lush, green grass beside the motorway, to the north of Harvey Norman Westgate.

Noone stood alongside Auckland mayor Phil Goff and Campbell Barbour of land owner NZ Retail Property Group. On a slight rise behind, stood Mark Gunton, the low-profile Kiwi farmer who owns NZ Retail Property Group and on whose land New Zealand's first Costco will be built.

Few at the announcement would have known Gunton or the huge role he and Barbour played. Not a word was mentioned of Brent McGregor, CBRE NZ executive chairman, who worked for five years to broker the deal.

Westgate was chosen due to its location within a maximum 45-minute drive from the boundaries of Auckland, its excellent motorway connections, demographics and readily available land supply. The existing mix of retailers and population growth also attracted the US giant.

Westgate is not the end of it by any means. Noone hinted the company would open in other parts of New Zealand: "We're certainly very optimistic about the New Zealand market so we are looking at other main cities as well," he said.

Overseas, Costco heavily discounts petrol by many cents a gallon or litre to pull customers to its 700-plus warehouse sites. It sells shopping membership cards starting from about A$55/year. It offers free hearing tests and sells hearing aids in Australia for just A$1899/pair. Discounts of 25-30 per cent are offered.

New Zealand has long subsisted with high petrol prices and a supermarket duopoly, dominated by Australian-owned Countdown and the Kiwi co-operative Foodstuffs. Our expensive petrol, supermarket and even audiology businesses will get a new challenge when Costco opens around 2021.

Will the existing businesses cut their prices and margins? Or are those already too thin as it is? The Warehouse, Foodstuffs and Countdown all welcomed Costco this week, saying competition is good. But some also played the nationalism, history and community cards, with Foodstuffs calling Costco the "new kid on the block", and referring to it trying its luck.

The existing three are big contributors to our society, they pointed out. A nationwide store network with free parking on most sites, convenient and online service, local fresh produce, good store experience, warm and friendly staff and a commitment to local communities and our environment are part and parcel of the supermarkets and The Warehouse.

Acknowledgement should be made of the thousands of jobs in our existing outlets and the role those businesses play. But consumer choice should also be lauded, particularly in our isolated country where we can't just duck over the border to get a better deal.