It's official – Costco has confirmed it will open a second Melbourne store in the eastern suburb of Ringwood.

Nearly three years after the company opened its first location in Melbourne, the retail giant has expanded into both Sydney and Canberra. As part of a nation-wide plan, Costco has now started doubling up, with Melbourne the first city to get its second location.

The Ringwood move has been rumoured since as early as last year.

This opening will have a lot in common with the Sydney store, located in Auburn. The first Melbourne store is in Docklands, away from other retailers. This time it will be in the middle of suburbia, where plenty of SMEs will feel the effects.

Retail Doctor Group managing director Brian Walker says businesses need to be prepared.

"They really need to focus on their differentiated offer," he says. "Focus on service levels, loyalty programs, and so on. They should work their database, and figure out the value they add to the surrounding area."

"And what they really need to do is study Costco and then figure out what they need to do. Look at what it's designed to do and then think about the response."

For instance, Walker says, Costco isn't designed to be a company focused on customer service. Businesses in the surrounding area should focus more on investing in staff, so they can offer a complementary offering to Costco.

"They need to look at the way customers move through the stores, look at the staffing levels, and then try and identify those points of difference they can cover."

"Costco is not designed to be a very customer service-oriented business."

Last year, the Sydney opening brought a huge amount of foot traffic to the surrounding area. While businesses may complain about the extra traffic, there are plenty of other things they'll have to get used to as well.

Here are the four things you'll have to get used to when Costco comes to your neighbourhood.

Increased foot traffic

There are going to be a lot of people in your area – a lot of people. Not only will people from the surrounding suburbs be flooding into Ringwood every day, but you'll also see more people from further away. After all, Ringwood sits right on a stretch of freeway where southern commuters have access to the city. They'll just choose to stop at Ringwood instead of going into the city.

Of course, this is an opportunity in itself – more marketing opportunities!

Buying

Costco brings some great benefits, and not just for consumers, but businesses as well. If you need supplies or any other sort of product, then a Costco membership is probably a good investment and could save you on some costs.

Traffic

It's going to happen, and you're just going to have to deal with it. The traffic is going to be excessive, especially on weekends, and there isn't much of a solution. The other consequence of this is parking – people will try to avoid the crowded Costco car park if they can.

While this can be a nuisance, it's also another opportunity – having further to walk means more opportunities for advertising.

Price erosion

One of the main reasons Costco customers are so tied up in their memberships is the huge savings they can make. As a result, if you're selling groceries or any other type of food product in the Ringwood area, then you'll need to prepare for some price erosion. Customers are just going to expect lower prices.

This isn't necessarily a bad thing. You just need to adjust your expectations – as Walker says, focus on your customer service offering. If you're being threatened by Costco, then identify its disadvantages and strike back.

 

Big-box retail giant Costco is expanding its footprint yet again, with reports the company will announce a new store within the next few weeks to be located near Ringwood, in the eastern suburbs of Melbourne.

The Ringwood location was rumoured this time last year, when Maroondah City Council mayor Tony Dib made a statement hinting the store would be opening. In February, the company received an injection of cash worth $140 million to help fund its expansion.

Local managing director Patrick Noone told SmartCompany there isn't anything to be announced yet. "Not for a few weeks," he said.

The Australian Financial Review suggests the Ringwood site will be announced within the next few weeks, and that the company is also looking at more locations in both Sydney and Brisbane.

The expansion raises questions over how many stores the country can accommodate. There are currently three stores – one each in Melbourne, Sydney and Canberra.

But with such an aggressive plan, and the company now scouting for second and third locations, can the country sustain such rapid expansion with a population of only 22 million?

'It's a dynamic business model," Noone says. "We do one, and if it does well, then we do a second, and then a third or a fourth, and so on."

"Vancouver has seven buildings for three million people, and they're doing extremely well."

Such a plan could have harsh ramifications for other retailers including the major supermarkets, along with Kmart, Target and Big W.

However, Noone says he imagines the local business will eventually end up with more than two locations in Sydney and Melbourne.

"We're certainly planning on three, hopefully in both cities."

Earlier this year, Noone also hinted Adelaide was being examined, saying the city "is an interesting area for us".

MORE than 5000 shoppers yesterday weathered heavy rain and traffic to snap up bargains when the US bulk-goods retailer Costco opened in the western Sydney suburb of Auburn.

Nurse Marilie Guevarra and her husband Miguel took a day off and spent more than $200 on groceries.

"Prices are cheap. I paid $10 for 12 large muffins when they usually cost $3.50 each at other stores.

I paid $10 for a large tub of strawberries and $10 for a 1kg pack of chicken. Prices are definitely cheaper than Woolworths."

Truck driver Jerry Qura spent $191.47 on groceries, including $32 for a gas cylinder which he said was $20 cheaper than he usually paid.  read more...