Costco opens eighth warehouse

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A mobile phone kiosk and a special-order system are the latest initiatives as the warehouse-club operator expands into Moorabbin.

David Burton reports from Melbourne.

The latest Costco warehouse opened at Moorabbin in south-east Melbourne on November 19. This is the eighth Costco warehouse in Australia with at least two more slated to open in 2016.

The Moorabbin warehouse has a fuel offer and is built in the traditional Costco model with surrounding level-ground parking. On the opening day, ULP 91 was selling at $109.7¢ per litre.

The warehouse is built on land owned by Moorabbin Airport Corporation, whose CEO, Paul Ferguson, made mention in the official opening speeches of the fact that Costco and Moorabbin Airport had been working together for the past two years to achieve this latest addition to the airport’s growing retail-tenant list.

Costco Managing Director/ Country Manager Patrick Noone said he was pleased to have a third site in the Melbourne metropolitan area, commenting that the next Melbourne opening, at Epping in the city’s north, would give Costco a good geographical spread.

The opening-day crowd was a little less frenetic than at interstate openings where Costco has come to town for the first time. That said, John and Rose Mitchell, at the head of the trolley queue, had lined up at 6.30am. The Mitchells are loyal Costco members and usually frequent the Ringwood warehouse, but will now make this their ‘local Costco’.

The first shoppers came through the registers at around 8.20am, shortly after opening.

These were people on a mission without the need to browse the entire warehouse range. By 10am, crowds began to build up at the registers, many with full trolleys, some to the point of overflowing.

This frenzy continued all morning and when Retail World left the warehouse just before midday, the place as they say, was pumping.

Several checks on the patronage of the Costco fuel canopy during the morning noted a steady stream of customers, rather than queues of vehicles, waiting to fill up with low-priced fuel. The site has 18 pumps, including two dedicated hi-flow diesel units.

Growing Melbourne footprint

Costco now has Melbourne warehouses at Docklands, Ringwood and Moorabbin and its presence must be taking sales from somewhere.

Retail World caught up with Mr Noone, who was in his usual upbeat mood, at the opening. He said the past six to eight months had been strong for Costco.

“People are a bit tentative about spending too much money, but they need to see the value, and I think we’re able to provide that, and we’ll be able to drive some pretty good sales, so we’re in pretty good shape, I think,” he said.

“We’re showing good improvement in our renewal rates. Obviously, when you first open up, there are a lot of people who just come and check us out and then decide not to renew [membership], but I think now the renewal rates are increasing, which means that the core business is getting better as well and people are using us more often.

“We’ve had a lot of members who are renewing here [Moorabbin], because of our existing members at Docklands and Ringwood. So membership has been brisk, and I think we’ll see it continue to grow. It’s a great location for us.”

Mr Noone says Costco works on a typical half-hour or 45 minutes’ drive time as the catchment zone for its locations and each warehouse now is situated with about one million people in its trade areas.

“There’s obviously some crossover between Ringwood and this one,” he said. “Princes Highway is probably the demarcation line, but we’ve situated the warehouses strategically, and the next warehouse, in Epping in the north, will have its own trade area as well.”

From a single warehouse location with rented head-office space in 2009, Costco now employs close to 2,800 people in Australia, with another 700 or so to come on board next year when Epping and Marsden Park [Sydney] come on line.

Something new

Costco always puts on something special for its openings and sampling of produce, meat and a range of frozen foods and cheese keeps the customers and tyre kickers smiling on day one.

In relation to merchandise, a plush, 142cm giant-kangaroo toy is the latest attraction, although it is new departments and services that should attract business in the long term.

Moorabbin has a mobile phone kiosk where members can buy new handsets or mobile SIM plans, which is a new department for Costco. It also has a special-order kiosk, which for the opening was staffed by representatives from the companies with product on offer, but the plan is to roll this facility out to other Costco sites and have Costco team members take care of inquiries.

The special-order kiosk is the click-and-collect equivalent of a service for bulky items, say, a spa, which is always on sale at Costco. Members can order and pay in-store and the product will be delivered.

The warehouse manager at Moorabbin is Ben Hanson, who joined Costco in 2009 as an area manager on the floor and has a background with Coles and Bakers Delight.