Costco competition not likely to impact NZ prices – expert

Source: 1News

Hundreds of customers have been browsing the aisles of Costco in Auckland during the mega store’s New Zealand-first opening today, eager to snatch a bargain.

But while the bulk buys might undercut the competition by 20-30%, experts say our newest retailer is unlikely to drive down overall prices.

Coffins, giant doughnuts, car tyres and fresh flowers - you name it, Costco probably sells it.

The point of difference though, most products are jumbo-sized or sold in bulk.

The shoppers came early this morning, settling in at the front door while dreaming up their wish lists.

Camped overnight at the front of the queue, Costco superfan, Poppy Keane, says it’s the new items on offer exciting her.

“We're excited about the range, especially for the snacks, there's a lot of things they sell here that you can't get in New Zealand.”

The crowd rushed through at 7am, grabbing up snacks, toys and toilet paper.

Keane says she wasn’t disappointed.

“It definitely impressed me, we got a little haul.”

That excitement is why First Retail Group managing director Chris Wilkinson says, at first, people will flock to Costco for a new experience and a fun day out.

“It's a huge novelty. The key thing with Costco is the scale and the products it has, many of the products we haven't seen in New Zealand before.”

He says Costco’s West Auckland competitors, Pak'nSave, The Warehouse and other big box retailers will likely feel the pressure to reduce prices.

“We will see some of those supermarkets will do exciting deals and offers some doorbuster offers to keep people engaged in the brands.”

Costco's opening comes on the same day as The Warehouse Group posted a drop in profits this year of $87 million, down 19.3% on last year's $107.8m.

The reason, according to a spokesperson, was store closures during lockdowns and rising inflation.

The US retailer on the other hand has made big profits overseas, selling roughly NZ$344 million worth of goods annually at its 828 stores.

But monopoly-buster and 2Degrees founder Tex Edwards says the new player is unlikely to impact Aotearoa's overall retail landscape.

"Eventually if you want to drive competition policymakers will have to split up the incumbent supermarkets."

Rather than threatening the major grocery retailers, says Edwards, Costco's lone store is a "dream come true", amid the Commerce Commission-prompted crackdown on the duopoly giants.

"Because they can pretend competition is coming."

"Costco is interesting, it's noteworthy - but it is just one development, a pocket of competition."

“Fabulous for West Auckland consumers, but if you're in Te Awamutu, Westport, Wellington, the Costco discussion means nothing.”

But Costco’s Australasian managing director Patrick Noone says more stores might be on the way to help with that.

“The two larger population centres Wellington and Christchurch are interesting, we are searching them right now.

“Competition makes us all work harder and strive better if we all do that it'll be good for all New Zealanders.”