Would you pay €36 a year to be able to shop at a hypermarket?
This approach has been Costco’s strategy for years in the United States, and now around the world, and it has seen the warehouse retailer become the world’s second-biggest distribution company.
Costco spent three years preparing for its expansion into Europe, and in 2014 it selected Seville as the site of its first store on the continent. Last month, Costco opened its second store, located in the Madrid satellite city of Getafe.
In five years, Costco hopes to open in six more locations in Spain, including Valencia and Barcelona
There are some 65,000 customers in Spain who have now paid the annual fee needed before you can enter one of this large US retail chain’s stores.
“We have surpassed our initial expectations,” says Diane Tucci, general manager of Costco in Spain, adding that the Seville store is thriving after more than a year in operation.
In five years, Costco hopes to open in six more locations in Spain, including Valencia and Barcelona.
With more than €100 billion in annual revenues, Costco is the second-largest retailer in the world after Wal-Mart, and is larger than the France-based Carrefour chain. It currently counts on 687 stores around the world.
Nearly 50% of the store products in Getafe are packaged food while about 10% are fresh-food products. The rest are home products and accessories, including appliances, rugs, mattresses and children’s toys.
Not too long ago, Costco made the social networks when it was rumored that the retailer was even selling coffins to its customers in the United States.
“That was just a rumor,” Tucci clarifies.
Maybe coffins are not for sale in the Getafe store, but a customer can find a wide range of producst on offer – even diamond jewelry, which is located right near the detergent and prepared food sections. More than 40% of the products come from Spanish vendors, Tucci explains.
Costco sells most everything in bulk. Shopping carts are double in size while products can be found stacked on industrial stands.
Attractive low-cost gas
The US chain Costco uses a number of deals to attract its customers, such as imported Levi jeans that sell for less than €40, table wine for less than €1 a bottle, or Vega Sicilia Único, a 2007 vintage, that comes in at €189.
But the location of the Madrid store – in a large, mostly empty out-of-town industrial park, with no public transport links – means that anyone coming to shop there needs to go by car.
To attract nearby residents and potential new customers, Costco has set up a gasoline station at the Getafe site, where motorists can fill their vehicles for rock-bottom prices. Last week, gasoline was on sale for €1 per liter for members or €1.03 for non-members, while diesel was prices at €0.88 for members and €0.93 for other members of the public.
While many products come in family-sizes, the store’s strategy is to shift high volumes at close to break-even prices. Food jars come in packages of 12, while liquid detergents are good for 126 washes. Tomato sauce, meanwhile, is sold in five-liter bottles.
Nevertheless, Costco has introduced special packaging to adapt to the preferences of the individual customer.
“Maybe a five-liter jar of mayonnaise is just too big to keep in the refrigerator. That is why we have asked the manufacturer to supply us with packages that contain the equivalent amount but in smaller sizes,” explains Ángel Mesas, manager of the Getafe store.
The difference between Costco and regular supermarkets is that you have to pay a membership fee before you can shop. Annual dues are €36 for private consumers and €30 for professionals.
In exchange, Costco claims to offer better prices than its competitors.
The Getafe store opened its doors on Saturday October 24, and by Monday 12,000 people had signed up for membership.
But some shoppers are wondering whether this warehouse club retailer will work well in Spain.
“Yes, the prices are good and it’s worth it,” says Jocelyne, who, along with her sister, just became members. “But you end up buying a lot of stuff you don’t need. You come out with a long receipt,” she says, indicating her shopping cart stacked with beers, diapers, fruit juice and family size products.
“Yes, the prices are good and it’s worth it. But you end up buying a lot of stuff you don’t need”
Some 260 people work at the Getafe store – a similar number of employees as the Seville store has. Mesas said that the company received some 15,000 job applications before it opened.
Entering the store is like going inside an airline jet hanger or an industrial warehouse: under the high ceilings are metal stands on cement floors, where products are stacked in bulk along wide aisles.
“Costco means efficiency, above all,” says the manger, who acknowledges that some first-time customers are surprised by the format. “But they soon get used to it and begin to value how organized and clean the store is.”
English version by Martin Delfín.