Costco says Australian expansion being held back by Coles and Woolworths

The chief financial officer and executive vice-president of US retail giant Costco has taken a swipe at Australia’s major supermarket chains, accusing Coles and Woolworths of trying to slow down Costco’s Australian expansion.

Costco, which has a store in Melbourne’s Docklands precinct and is building a store in the Sydney suburb of Auburn, appears keen to push on with a more rapid expansion in Australia.

On an analyst conference call last week, top Costco executive Richard Galanti said Costco would like to open up to 10 stores in Australia in quick succession, but claimed the company’s expansion was being held back by local competition.

“Our competitors, the two biggest retailers down there, we feel are fighting us at every juncture to slow down the process… Certainly we’ll open more there.”

But commercial property expert David Green-Morgan from DTZ research, says Costco’s biggest problem is that the sites it needs for its warehouse style stores – typically around 13,000 square metres in good locations – are much sought after.

Not only are Coles and Woolworths constantly looking for new supermarket sites, but Woolworths is also scouring the country for new sites for its hardware venture, Bunnings is looking to lock up good sites, Aldi is seeking to expand and IKEA also wants to grow.

“For every good site, there is probably going to be a dozen potential bidders. That’s good if you are selling the site, but not so good if you trying to buy it,” Green-Morgan says.

He says bulky-good style sites have become increasingly popular for Australian retailers in recent years, as they are generally cheap and have been more plentiful.

However, expansion of big box retailers means there is now intense competition for available sites, particularly those closer the CBD.

“Maybe Costco thought it would be easier to expand in Australia, but it’s just market competition for these sites.”

“Hopefully the people who gain out of all this are the consumers. The more competition there is, the more prices are driven down.”

Costco, the third-biggest retailer in the US reported an 8% rise in revenue in the three months to June 30 to $US24 billion.