Costco annual sales race to $5bn as bulk buys chip away at supermarkets

From its first Australian store in 2009, US giant Costco has built a retail champion ringing up almost $5bn a year in sales from 15 warehouses and 1.5 million Australian members, at the expense of Woolworths and Coles.

Australian shoppers warm to Costco’s bulk purchases, opting for a monthly shop. Picture: Dan Himbrechts

Costco, the US retailer known for selling groceries in bulk, hit annualised sales of around $5bn a year in Australia as local shoppers sign up to its membership model.

Emerging as a major force in the nation’s $120bn supermarket industry behind leading players Woolworths, Coles, Aldi and the Metcash-backed independent stores, Costco now operates from 15 local stores, which it calls warehouses, and is believed to have attracted 100,000 paid-up members per store to give it a membership base of 1.5 million.

One analyst said its true reach is significantly higher than that.

Costco, which arrived in Australia in 2009, is putting increasing pressure on the supermarket heavyweights with cheaper groceries – sold in bulk – convincing consumers to visit one of its stores once a month. This reduces the frequency of visits to the supermarkets.

At last year’s Australian Competition & Consumer Commission inquiry into the supermarket sector, Metcash told the inquiry Costco’s subscription model targeted what it called the “monthly pantry load” which the ACCC understood to mean a large, infrequent main shop for non-perishable groceries.

US retailer Costco is known for its bulky grocery offers and cheap prices.

New accounts lodged with the corporate regulator for the 12 months to September 2024 report sales of $11.366bn for Costco’s Australian arm, however this includes the operations of Costco Taiwan, which have been embedded into the local Costco arm’s accounts.

The pure Australian sales have not been broken out, however, Costco insiders have told The Australian that Costco Australia is now on annualised sales of $5bn and continuing to book sales growth at a double-digit pace.

The last available accounts for Costco Australia showed sales of $4.4bn in 2023, up 19.8 per cent from $3.67bn in 2022, which itself represented a 30 per cent increase.

Costco Australia and New Zealand chief executive Chris Tingman declined to comment when approached by The Australian.

Jarden analyst Ben Gilbert said Costco was outpacing the more muted growth in the Australian supermarket sector as it attracted shoppers prepared to pay the $65 a year membership fee.

“It’s just another major, very well backed player that’s continuing to drive and outpace the broader market, that’s increasing ‘value awareness’ and providing another alternative to consumers.

“So if you look at the growth that they’ve been providing, they’ve taken out a material portion of market growth annually, which has had a significant impact on incumbents,” Mr Gilbert said.

Analysts believe the penetration of Costco memberships in Australia is very high.

The rise of Costco was accelerating the trend of consumers splitting their buying between stores, known as cross-shopping.

This can have a negative impact on ‘impulse’ buys that leaders Woolworths and Coles rely on for extra profits and which is especially reliant on foot traffic.

“It just encourages consumers to split their shop, or have more ways to shop. The challenge from someone like Costco is that it drives big, main shops, which reduces frequency of shopping to the traditional supermarkets.

“And if you look at one of the big strengths of Coles and Woolworths over the years it has been their ability through the work on the planograms (merchandise installations in store) to drive additional items into the basket from the impulse standpoint, and the less times you go to a store, the less impulse items you are buying.”

Costco has never released its membership size in Australia but insiders have told The Australian each of its warehouse stores had around 100,000 subscribers.

Mr Gilbert believes it goes deeper than that.

“There’s a lot of instances, I believe, where people are using the cards over multiple households. So there are stories where you might see some streets or families will go and do a big shop together, if you think about the household reach of Costco I think it is quite high.”

Originally published as Costco annual sales race to $5bn as bulk buys chip away at supermarkets