April 25 2009: Costco In Melbourne
According to rumours, Costco is going to be opening up a branch in the Docklands in Melbourne. I first became acquainted with the store on my trawls of frugality-related blogs online – Costco would always be touted on North American blogs as the best place to go to buy certain items in bulk to save a few extra dollars. From Wikipedia:
Costco focuses on selling products at low prices, often at very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses. Furthermore, Costco does not carry multiple brands or varieties where the item is essentially the same except when it has a house brand to sell, typically under the Kirkland Signature label. This results in high volume of sales from single vendor, allowing further reduction in price, and reducing marketing costs. Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must bring their own bags or use the merchandise shipping boxes from the company’s outside vendors.
Will this concept work in Melbourne? I think under certain circumstances, it could have worked, but they made a fatal mistake in locating their Melbourne store in the Docklands. For those unfamiliar with the geography of Melbourne, there are two main points to keep in mind for the rest of this entry:
- The Docklands is relatively close to the heart of the city. The resident demographic of the area is relatively young, and the purpose of the area is primarily as a tourist and business centre.
- The majority of Melbourne’s population is located in the southern, eastern, and south-eastern suburbs. People travel into the city for work, but they live in the suburbs.
The Docklands is primarily somewhere one goes for business purposes, fine dining, and recently, tourist purposes for the quirky sidewalk artwork and the Southern Star. It isn’t somewhere that working families (the demographic most likely to be interested in the savings offered by buying in bulk at Costco) are likely to drive to just for the purposes of saving a few dollars. Using my own family as an example (we’re pretty much the textbook example of a working family interested in saving money), we live in a suburb approximately 25 kilometres from the center of Melbourne – or 30 kilometres from the Docklands where Costco would be located. Any savings that we could possibly gain by shopping in bulk at Costco would be negated by the cost of petrol in driving there – and this is a situation that most Melbournians would find themselves in.
My suggestion is that they should have located the Melbourne site of Costco in a south-eastern suburb like Oakleigh, Clayton, or even Dandenong – three suburbs that are relatively central to most Melbournians (based on suburban sprawl). All three suburbs have quite developed industrial districts that would have been ideal for a large warehouse to house the Costco brand. They’re all are located near entrances of a major highway, and are within easy travelling distance of the large majority of Melbourne’s “working family” demographic – thus increasing their customer base and increasing their profits.
Alternatively, they should do what Aldi did when they first came to Melbourne, and situate their various stores within shopping centres (or near shopping centres) in residential areas – thus, ensuring a local customer base. Did Costco not do consumer and local research before deciding to set up in Melbourne? The points above have been based on simple common sense, but they’ve gone with a simple “centre of the city = centre of the population” theory without considering the effects of uneven suburban sprawl.
13 Responses to “Costco In Melbourne”
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I agree with this! Preferably they would move it to Clayton so it would be the closest to me :P.
Melinda on April 25 2009 #
I guess if companies are newbies to selling to a place not all of them are going to use their heads and do research. Maybe they thought in the simple terms of lots of people without really thinking it through that tourists aren’t going to spend money in bulk.
Charlie on April 25 2009 #
Yeah, suburbs are definitely best. But you’d be surprised how far people will travel for Costco. We have one in this little shopping centre surrounded by communities where nobody lives yet (they’re new) and that place is always PACKED. It’s THAT GOOD. :P
Aisling on April 25 2009 #
I freakin’ love Costco. There’s one not too far from my house.
Arwen on April 26 2009 #
They sell designer jeans for dirt. You’ll love it :P
Stephanie on April 26 2009 #
Costco is awesome because you can go there and get a full (free) meal. You just walk around and take all the free samples, and believe me, there are TONS. :P
Clem on April 26 2009 #
Weird that businesses don’t think about that sort of thing when they want to open up a shop, especially in this time if financial crisis. Of course everyone wants to save money and buying bulk is a good way to do it, but not when you have to pay a shitload of money for petrol to get to the store.
Funny how Aldi stores seem to pop up around the globe these days.
Chans on April 26 2009 #
Costco is awesome! One of my favourite things about them is the food-sampling they have :P
I don’t know how they couldn’t have hired you to help them with their location choice!
Kaylee on April 26 2009 #
You seem to be forgetting all the people who live in the west and north, who would also be the perfect target for them. And barring the people in the suburbs around them, how are Oakleigh, Clayton or Dandenong more central? From Ringwood it still takes 30-40 minutes to get there without using Eastlink (which would defeat the purpose of saving money).
I agree that it’s not a great location, and ideally they need to be looking at suburban centres, but if they’re only going to put in one store, city is still going to be much more central for more people. With only one store, wherever they put it people will miss out. Whether that’s the people in the outer south-east and eastern suburbs or the west makes no difference to the company, they’ll still get business.
Reply: It makes more sense to have the initial flagship store in a south-eastern suburb, considering that the new “baby belt” in Melbourne is increasingly situated in new developments around Dandenong, Narre Warren, etc. I imagine that they’re trying to do something like Aldi, and starting off with one store before branching out with more – starting in Clayton, then adding Ringwood, Footscray, Northcote, etc., would make more sense as you start off with the largest number of possible customers (the baby belt) before adding stores in suburbs that don’t have the kind of demographic that the principles of Costco would appeal to.
Rebekah on April 26 2009 #
Ugh. I hate Costco. They use so much plastic and packaging it is not funny. For a place that’s essentially a warehouse, I get amazingly claustrophobic in there. And even though I’m not one of those tree-hugging, let’s save the planet! and kill all plastics type of people, the fact that they having things tripple-wrapped is still sorta…creepy.
And honestly, it’s not that much cheaper. Example: Smuckers uncrustables are 6 for $12. It’s just that you’re buying so much that you kinda lose sight of the actual price.
Cy on April 26 2009 #
[...] weekend, the first Costco finally opened in Melbourne. Amongst the various newsletter articles and blog entries in Melbourne blogosphere that have [...]
Jingwen » Blog Archive » Costco Diamonds on August 20 2009 #
Living here in Tasmania formerly in the US I truly miss Costco. As a single person I found the best way to buy in bulk was to have friends and family members who also wanted to take advantage of the savings. We would have one cart for things to share and another cart for personal purchases. Then split the things to share cart by however many people want to share. It may shopping much less expensive. I too love the samples they give and in the North Cal stores they even let you sample wines from the region. Wow wouldn’t Aussies love that. I wish they would come to Hobart.
Diane on August 25 2009 #
Word is they are looking to take up the vacant land in Narre Warren South next to Casey Central.
Reply: That would be awesome, I’m in Cranbourne all the time anyway.
Cam on September 18 2009 #