Costco to open in Australia.

US giant Costco takes on Coles, Woolies with first Australian store at Docklands

By Kellee Nolan
News.com.au
March 13, 2009 01:36pm

SUPERMARKET giants Coles and Woolworths will have have a new kid on the block to go up against later this year with cut-price international grocery warehouse Costco set to open in Melbourne.

Costco will open its first Australian outlet at Melbourne's central Docklands precinct in July, offering everything from greenhouses to diamond rings and fresh strawberries to toilet paper, at discount prices to both wholesale and retail customers.

The store will create 225 new full-time and part-time jobs which Victorian Industry and Trade Minister Martin Pakula said was a "statement of confidence" in Victoria's economy.

The US-based Costco also planned to open a store in Sydney, and was looking "all over" the city for a suitable site, Costco Australian manager Patrick Noone said today.

The $60 million Melbourne store will be Australia's first, joining a stable of 535 Costco outlets across the US, UK, Canada, Mexico, South Korea, Taiwan and Japan.

Following the inroads made by no-frills grocery chain Aldi in Australia, Costco warehouses will offer wholesale prices to small and medium enterprises and also allow retail consumers to buy goods at wholesale prices, for an annual $60 membership fee.

Commenting on the new central Melbourne Costco site, Mr Noone said he hoped people would travel "a long way" to shop there.

"We think they will take to it like ducks to water," he said.

Australian Retailers Association executive director Richard Evans said consumers would take some time to come around to the Costco way of shopping, but the wholesaler was a welcome addition to the retailing mix.

"Australian consumers are very set in the their ways, it's very difficult to get them to change their style of shopping," Mr Evans said.

"Retailing is very competitive but the more competition, the better it is for consumers."

Last year the Australian Competition and Consumer Commission (ACCC) ran an inquiry into the competitiveness of grocery prices in Australia, amid public concern over a perceived stranglehold on the market between Coles and Woolworths.

In its July 2008 report, it found price competition between Coles and Woolworths was limited by high barriers to entry for new competitors combined with limited incentive for Coles and Woolworths to compete aggressively.

But it found Aldi had been a "vigorous price competitor", forcing Coles and Woolworths to lower prices on many products.

Docklands retail and restaurant owners, still reeling from the closure of the heat-buckled Southern Star Observation Wheel, welcomed the announcement, saying it would attract people and bring good flow-on business.
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