Costco poised to open more UK clubs

Costco UK is to embark on an ambitious warehouse opening programme and is also breaking into the fuel market with its first UK petrol filling station, writes Andrew Don.

In an exclusive interview, Steve Pappas, vice-president and UK managing director, confirmed to Wholesale News this month that Costco would be opening a  petrol outlet in Liverpool and “in a couple of locations here in the UK” within two months.

He added that Costco was a “major player” in the fuel business in the US and it would be keen to replicate this success in the UK. A move into the fuel business was first mooted last September, when Costco trading director Steve Barnett used the Institute of Grocery Distribution’s annual wholesaling conference to reveal it would open Costco petrol stations in the UK “within 12 months”.

The US-based warehouse club chain currently has has 25 depots or “clubs”, with a 26th, at Western International Park, in Hayes, just outside London, due to open in August. And councils have granted planning permission for new locations in Sunbury and Wembley, both of which Pappas expects to open next year, taking the company’s total UK locations to 28.

Pappas hesitated to commit to any specific targets for the total number of clubs planned for the UK “due to the variables involved in site development, and the potential for being quoted in a magazine 15 years down the road”.

“But we have certainly not downgraded our commitment to the UK market,” he said. “Over the next five years we will continue to add one or two new clubs annually with a primary focus on the Greater London market.”

Future growth plans were “predicated on the availability of suitable properties and the continued positive performance of the existing UK business”, he added. “[But] We have outgrown our Lutterworth distribution centre and will be relocating to a new purpose-built facility in Crick, Northamptonshire, sometime next year.”  

The UK is Costco’s largest market outside of North America, contributing about 2.5% of total company turnover. Costco UK increased turnover in the fiscal year ending September 1 2013 by 3.6% from £1.59bn to £1.65bn.

About two-thirds of this growth came from three new warehouses – Leicester, Southampton (pictured) and Farnborough – which opened during the period. Excluding an extra week’s trading the previous year, the total growth in turnover for the period was 5.5%.

Globally, the company had 657 clubs in nine countries as of 1 June, including 464 in the US and Puerto Rico, 87 in Canada, and 33 in Mexico. It also opened its first outlet in Spain last month and is rumoured to  planning a move into France.

A move into Northern Ireland has long been the subject of speculation and Pappas said that Costco  “would consider entering the market if the right opportunity presented itself.”

He also added that the firm was considering business insurance, web design and business telephone and utility services; and that e-commerce would grow in significance. “Connecting with members via new and emerging channels will become more important,” he said.

Don’t miss our Costco feature in the July issue of Wholesale News

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