Costco faces a fight to win approval for planned Sydney store

American grocery giant Costco is facing a wave of opposition to its planned development in Sydney after business groups, including Westfield and the Shopping Centre Council of Australia, have opposed the company’s proposals.

But the retailer says it is confident of emerging from the process with a proposal all parties will approve, and still hopes to have the Sydney location opened by late 2011.

Costco is planning a $60 million development on Parramatta Road in the city’s western region, hoping to follow in the success of the company’s Melbourne location which opened last year.

Local managing director Patrick Noone says the company’s proposal does not fit into existing planning laws, but that it hopes to get through that process by redefining itself as a “bulk goods retailer”.

“We are a new kind of retailer in the marketplace and we aren’t defined. We sell bulky goods, diamonds and toilet paper, and no one else in the market really does what we do and we’ve addressed that in our submission.”

“The Costco business model… is that of a ‘retail warehouse’ which is not recognised as an individual form of development under the Standard Instrument definitions,” the company says in a submission to the NSW Planning Department.

“While Costco cannot be properly characterised as ‘Bulky Goods Retailing’ the Costco wholesale and retail warehouse shares many structural and operational characteristics with bulky goods retailing but equally cannot be considered to solely be a traditional retail centre development.”

Those opposing the move include Westfield, the Shopping Centre Council of Australia and AMP. In its submission, Westfield said the proposed land for use is categorised as “shop” or “retail premises” land, and not bulky goods retailing.

“It is therefore a prohibited use under the current planning legislation and associated policies,” its submission read. “The proposal is for a major out-of-centre retail outlet and is contrary to the NSW Retail Centres Policy and Sydney Metropolitan Strategy.”

Westfield also said the plan-making process has been flawed, the proposed use for the land is inappropriate, the major retail destination will create significant traffic problems and that the assessment of a net community benefit undertaken by planning consultants is “completely deficient”.

It is understood local Westfield shopping centres could lose sales as a result of the Costco development. It believes classifying Costco as a “bulk good retailer” would be an anti-competitive move.

The Shopping Centre Council of Australia wrote the proposed Costco development fails to demonstrate a clear need for “big box retailing”, and instead merely identifies a marketing opportunity.

It also criticised the proposed building design, saying it “fails to achieve any of the place making or urban design techniques that would help to create a new and sustainable emerging activity centre”.

“The risk in permitting big box retailing in out of centre locations, combined with liberalisation of bulky goods retailing controls, could run counter to the NSW Government’s stated objective of encouraging ‘activity centres’ and would lead to the dispersal of key retail activities that should be located in such centres, which has major adverse implications for the centres hierarchy.”

AMP noted potential impacts on traffic within the proposal, and said a full cost-benefit analysis of the proposed development must be considered. The Parramatta Council also noted problems, saying the location of parking spaces was not supported and more designs should be considered.

But Noone says all proposals are being considered, and the company is working to develop a proposal that would see all parties satisfied.

“Basically we’re going through the planning process and all of those comments from interested parties, and we’re working with the authorities to make sure we are giving out a robust planning application.”

“I hope we come to a satisfying conclusion… there is a 12 month build time from whenever the proposal is approved, so an opening in Sydney late next year would be a best guess.”

Costco opened its first Australian location in Melbourne last year to significant demand. Within four months over 50,000 people had paid up to $60 for a membership, a move which allows the company to sell bulk goods at cheap prices.