Costco’s Australian pioneer Patrick Noone ready to retire after 33 years with the US retail giant

Costco’s first boss in Australia Patrick Noone was told the quirky US chain would never work here, but after 14 years and with annual sales at $4bn, he’s proved the doubters wrong.

Costco Australia boss Patrick Noone, who opened its first warehouse store in Australia in 2009 and led it to become a major force in Australian retailing with annual sales of almost $4bn, will retire at the end of the year.

A 33-year veteran of the US-based Costco empire, Mr Noone has opened 15 stores in Australia, as well as a maiden store in New Zealand. He helped grow the business to the point where it is now believed each of the Australian sites has 100,000 paid-up members, to give it more than 1.5 million members in Australia.

Under his watch Australians have fallen in love with the quirky US retail chain that charges $65 a year membership fees for the privilege of entering its giant warehouse stores, which sell food and groceries in bulk – as well as everything from coffins, diamond rings and Penfolds Grange wine to 1kg tubs of Vegemite, petrol, tyres and hearing aids.

Speaking to The Australian on his decision to retire, Noone reflects on the early days of Costco, when he began to plan for the maiden store in Melbourne’s Docklands and was lectured by countless local retail executives that the Costco model would never work in Australia.

“Because I was Australian, I never had any doubt that we would be able to offer the value and the imported goods and the different merchandise that we have at Costco,” he says.

“The year before we opened the first store in 2009 I got the project signed off by Costco founder Jim Sinegal, and I came back to announce we were opening, and we had every sales rep from the big companies say it wouldn’t work here.

“On TV and radio you had all the retail experts saying no, no, it wouldn’t work here, Australians wouldn’t pay for memberships, they like to shop more often and wouldn’t go to a Costco.

“I did have some thoughts at the back of my mind, maybe they are all right. In the end, opening day at Docklands we had a massive event, it dispelled all doubts straight away and I thought how many more Costco stores can we build in Australia and how quickly can we build them.”

From that day Costco’s decision to invest in Australia has been proven correct, with the bulk retailer’s cumulative sales now more than $20bn and Australia emerging as a jewel in the crown of it global operations, with more than a million paid-up members.

Australians have fallen in love with the quirky US retail chain that charges $65 a year membership fees for the privilege of entering its giant warehouse stores that sell pretty much everything.

“Areas like the apparel business has done very well for us,” he says. “When we opened the two leaders in apparel were Myer and David Jones and you could only buy international brands there. So when we opened we started bringing in Calvin Klein, Tommy Hilfiger and those types of US brands, and it just took off.

“Diamond rings remain popular. Last week we sold five diamond rings between $7000 and $12,000. There is so much value in that business. We sell a lot of diamonds, and we also sell a lot of gold bars now, from $3000 to $20,000.

“We sell a couple of coffins a month, and there is huge value there.”

Noone got his start in retail as a clerk at Woolworths and remembers becoming a trainee manager at the supermarket, earning an extra $5 a week.

He later ran a Woolworths in the Victorian regional town of Shepparton.

Moving to Canada, he got his start at Costco in 1991 and quickly climbed the corporate ladder before being entrusted to take the chain to Australia.

While consumers took up the Costco model with enthusiasm, the retailer faced some resistance from suppliers who were worried it would upset their two biggest and most important customers – Woolworths and Coles.

This meant in the early days Costco had difficulty sourcing products, with some suppliers saying they weren’t able to produce products in bulk sizes to meet Costco’s needs – although privately it was thought that was an excuse to not engage with the chain and maintain friendly relationships with the major supermarkets.

“That happens all the time when Costco enters a new market, and we had a similar problem in New Zealand, but not as bad as it was in the early days in Australia,” Noone says.

“People have established relationships and when you have a disrupter come into the market it takes a while to get used to. It calms down very quickly and people want to sell lots of goods and we do lots of ­volume.”

Other suppliers embraced Costco from the start. Noone recalls Kraft got on board with 1kg tubs of Vegemite, which remains a hugely popular item at its stores. “Those vendors that got on board have reaped the rewards,” he says.

Looking back, he believes consumers behave similarly no matter what country they are from.

“In Australia, New Zealand, Canada or the US, people are pretty much the same, they want to buy the same things whether they are here, Vancouver or Seattle, it doesn‘t make much difference,” he says.

“What we have found at Costco is that we have established this technique of selling branded goods, great quality at great prices, and it translates right around the world.”

Noone will be replaced as the local boss of Costco by Chris Tingman from Seattle.