How Costco plan to use Ipswich shoppers to dominate market

It means their hold on the state is strengthened with only two stores.

IPSWICH shoppers who join the Costco cult will form part of the company's cunning business model that uses members as part of its strategic plan.

Members are used to the company's benefit which relies on shoppers becoming hooked on the cheap novelty products and dragging their friends and family into the Costco membership web.

An Ipswich site, the second in Queensland after North Lakes, was all part of the plan, with existing and planned infrastructure links to other parts of the state encouraging shoppers to flock to the city.

It means Costco's hold on the state is strengthened with only two stores.

University of Southern Queensland marketing and consumer behaviour researcher Dr Rumman Hassan said the model allowed Costco to depend on its members to spread the good word, as opposed to buying ads, further reducing overhead costs and keeping prices low.

"One interesting fact about Costco's strategy is that Costco have mastered the 'pull strategy' which means their spending on advertising is insignificant," he said.

"They get people through their doors via word-of-mouth referrals from existing customers and by strategically locating their warehouses.

>> EXPLAINED: What the Coscto effect means for Ipswich

"The location at Ipswich is testament to this as it will draw customers not just from Ipswich, but nearby towns."

It's a strategy which led to Costco becoming the first company to grow from zero to $3 billion in sales in less than six years from when it began in the United States in 1976.

Dr Hassan said Ipswich was a strategic location for Costco to call home, with convenient complimentary businesses like transport, freight and packaging services in line for a boost.

"What we also might see is more traffic into Ipswich, people driving from Toowoomba, Esk, Brisbane and Logan and that may also have an effect on other complimentary business, for example pubs and restaurants," he said.

"We might see those types of business having the benefits of Costco in their town."

Dr Hassan said there was still plenty of room for Costco development and Ipswich was potentially just the beginning.

"Ipswich is a very strategic location, Queensland is still fairly untapped by Costco and I would perhaps even think Toowoomba would be a great location, I think it's here to stay," he said.

Humble beginnings for retail superpower

COSTCO is a membership warehouse club and uses customer membership fees to cover overheads and increase buying power.

The company has hundreds of locations worldwide, including nine in Australia, and provides a wide selection of merchandise including everything from groceries and electronics to clothing and cleaning supplies.

The company's first location opened in 1976 under the Price Club name, and was in a converted aircraft hangar on Morena Boulevard in San Diego.

The company found it could achieve far greater buying power by serving small businesses and a select audience of non-business members.

With that, the growth of the warehouse club industry was off and running.

When Costco and Price Club merged in 1993 to become PriceCostco, it had 206 locations generating $16 billion in annual sales.

Since resuming the Costco name in 1997, the company has grown worldwide.

Australian membership ranges from $55 to $60 for a year.