Metcash takes on Costco with launch of Value Depot warehouse stores

Metcash is set to compete directly with Costco with the launch of a national network of bulk purchase wholesale warehouses called Value Depot.

The first 7,000 square metre Value Depot will have its formal opening tomorrow at Eagle Farm in Brisbane and the rollout will include new sites as well as the rebranding of many of the 18 existing Campbells Cash and Carry outlets.

Value Depot will stock over 10,000 lines and will offer access to over 35,000 products in dry grocery, fast-moving consumer goods, general merchandise and fresh food. Metcash claims the stores will match or beat the price of the national chains and offer “strong discounts” with bulk purchases.

The outlets will cater for all consumers who hold an Australian Business Number and, unlike Costco, will not charge an annual membership fee.

Campbells Cash and Carry already has 170,000 registered customers across Australia and the launch will include the extension of Campbells’ offering to include consumers who hold an ABN and not just the traditional hospitality reseller businesses.

Metcash chief operating officer Silvestro Morabito told SmartCompany that Value Depot was not just taking on Costco and instead wanted to “redefine” the bulk wholesale warehouse concept in Australia.

“It’s really a new generation Campbells Cash and Carry and really that is what it is all about. The concept was created because we thought the existing Campbells Cash and Carry model was dated,” says Morabito.

“We felt Value Depot was a more modern contemporary offer and more aligned to the type of things our customers are looking at today.”

Morabito acknowledged the launch signals a new approach for Metcash, which closed down 15 Campbells stores in regional areas earlier this year and slashed jobs.

“The rationalisation of the Campbells Cash and Carry business was just a pure commercial decision, we were able to transfer a lot of the customer base into neighbouring outlets and a number of employees as well.

“Really it was just a full strategic review that indicated the intelligent thing to do was to rationalise the number of stores and then reinventing those 18 stores into a model that is sustainable longer term; so, to that end, we have given birth to the Value Depot,” he says.

Costco Australia managing director Patrick Noone told SmartCompany the discount retailer welcomed all competition.

“We are looking forward to competing with Metcash and we have already been competing with Campbells Cash and Carry and have been quite successful at it. But, in the end, it is all good for the consumer and the small business offering,” Noone says.

“We want to stay true to our business and offer high quality goods at the best prices in the country.”

Noone says Costco currently has three stores in Australia – in Sydney, Melbourne and Canberra – and plans to open two more stores next year in Melbourne and Sydney.

This means Metcash will have the Queensland market to itself, with Noone saying Costco will not directly compete with Metcash in the states outside Victoria, NSW and the ACT.

“For us, it is very exciting to see competition coming and we are going to react accordingly,” Noone says.