Costco threatens wholesalers, not retailers: Lake

Before Tesco opened in the US with its Fresh & Easy brand of supermarkets, it did extensive market research to see what Americans bought and liked. They looked in pantries, but made a fundamental mistake by not looking in garages and basements.

If it had, Tesco would have discovered freezers full of meat and bulk purchases. Many Americans love buying in bulk and hoarding.

Fresh & Easy got it wrong. It assumed that the British trend to smaller, fresh focused, more frequent food shopping was what the market was crying out for.

An American retailer is making an assumption about Australian shopping habits. In mid-year, Costco is to open a retail outlet in Melbourne. Shoppers will need to pay an annual fee, rumoured to be around $50. Everything offered will be aimed at maximising average sales. Big ticket items and very bulk packs. Costco is hoping Australians will also love buying in bulk. Have they got it right?

We are not big hoarders. Urban Australians are following the British trend to smaller, more frequent grocery and food purchases, spread out over the week. Rather than the once popular weekly shop, filling a trolley to the gunwales, Australians are visiting supermarkets pretty much daily.

Rather, Costco is perhaps a bigger threat to wholesalers supplying convenience stores and tiny grocers.

Rob Lake has been in and around retail for 30 years, initially as a merchant and for 20 years as a director of Orex Recruiters.

This article first appeared on Business Spectator