Costco accelerates online push as Amazon arrival nears

Costco is trialling a new online delivery service for business that it hopes will rival the might of Amazon.

Costco CEO Patrick Noone at his Moorabbin warehouse

US discount retailer Costco is ­accelerating its push online in the lead-up to the arrival of Amazon and its potential push into ­Australia’s $90 billion grocery sector, by trialling a new online delivery service for businesses based near the Melbourne CBD.

With a minimum order of $1000 and delivery within a 10km radius of its Docklands store, the service also marks a new and overt push to capture a greater slice of the wholesale grocery market, as Costco hopes to sell bulk goods from meat and seafood, to fruit, vegetables, bakery and office supplies to businesses like restaurants, pubs and cafes.

Quietly launched in its ­Docklands store and accompanied by a new website, www.costcowholesaledelivery.com.au, Costco could roll the online ­business delivery service to its other stores nationally.

It marks a continued departure from the traditional Costco model, which has relied on its bricks and mortar stores and a loyal membership base, which pays an annual membership fee to shop at the big-box warehouse format stores.

Costco Australia chief executive Patrick Noone last month commented that the retailer had plans to launch an online store in the next 12 to 18 months, just in time — perhaps — to cope with the disruptive impact of Amazon’s local landing, with what many expect to be a full suite of online offers, products and ­services.

But the new business-to-­business strategy, distinct from a direct to consumer model, is ­expected to be highly attractive to local restaurants seeking more competitive pricing for fresh food, meat and fish orders.

Costco has carved out a strong niche for itself in bulk meat and seafood products, selling a range of grain-fed beef steaks, New York strip loin and brisket, as well as whole baby barramundi, smoked salmon and bulk prawns and mussels.

With Costco’s full range of beer, wine and spirits, the specialised online platform could also elbow out other wholesalers in the beverage sector.

The new wholesale online ­delivery service is only a few weeks old and is still in the trial phase, but signals Costco’s long-term intentions to grow its market share in the grocery sector by using online to complement its spreading network of stores.

Since first arriving in Australia in 2009 with its maiden warehouse store in Melbourne’s Docklands, Costco has racked up more than $5 billion in sales, ­grabbing market share from a range of rival retail formats ­including supermarkets, general merchandise stores, clothing and consumer electronics.

Documents lodged with the corporate regulator show ­Costco’s annual revenue rose to $1.52bn for the 52 weeks to ­August 2016, up 15 per cent on $1.32bn booked in 2015.

It is estimated to have about 1.7 per cent market share of the ­nation’s grocery sector.