Article 10/10/05: Costco nearing deal for 1st Columbus Store
The merchant is planning to build its first Central Ohio store at the northwest corner of Gemini Place and Lyra Drive near the Polaris Fashion Place mall, Business First has learned.
The company, known for selling a mix of high-end and everyday merchandise at discounts to club members, has its only Ohio stores - four of them - in the Cleveland area.
Jim Sinegal, Costco's CEO, declined to confirm the company's interest in Columbus.
"We don't put ourselves in a good position from a negotiating standpoint by talking about deals before we close," he said.
Columbus officials, however, confirmed the suburban Seattle-based retailer is seeking zoning permits to sell gasoline on land owned by NP Ltd., the developer of the Polaris Centers of Commerce.
Franz Geiger, NP's managing director, declined to comment.
Costco's arrival in Central Ohio would mean the region's retail competition among discounters would heat up another degree, not just for Wal-Mart Stores Inc.'s Sam's Club operations but also for other drugstore and supermarket chains, said retail analyst Burt Flickinger III, managing director of Strategic Resource Group, a New York consulting firm.
"It will slow Sam's down in Central Ohio," he said, "but it will also be an interesting test for Kroger Marketplace."
Kroger Marketplace is a grocery and home goods store operated by Cincinnati-based Kroger Co. and designed to compete with Wal-Mart and Meijer Inc. superstores.
Kroger opened its first area Marketplace last year at Graceland Shopping Center and plans to have as many as five of them opened by the end of next year.
Wal-Mart operates four Sam's Clubs and multiple supercenter stores in Central Ohio.
An established Columbus Costco could generate sales of $2 million a week, roughly twice that of an average Sam's Club, Flickinger said. About 60 percent of Costco's sales are in groceries.
"It's long overdue in coming to Columbus," Flickinger said. "Cleveland has been one of Costco's best markets in the eastern half of the United States. They should have been smart enough to come into Columbus as soon as Big Bear was buried."
The Big Bear grocery chain was shuttered in early 2004.
Costco's pricing would test "category killer" retail specialists such as Office Max, Flickinger said, and its broad grocery offerings would compete with Columbus supermarket newcomer Whole Foods Market Inc., which focuses on organic and upscale offerings. Costco's pharmacy program is considered one of the most competitively priced in the nation, he said.
An Ohio expansion fits into the company's plans. Costco recently announced it is increasing its capital spending by more than 40 percent in 2006 to more than $1 billion. It plans to open 34 warehouse stores next year.
Furthermore, trade media report Costco executives expect to grow the company from 327 warehouse stores to 600 in the next eight to 10 years, partly by opening warehouse clubs in closer proximity to one another.
A site near Polaris Fashion Place is probably a good location for the retailer because its merchandise is typically of better quality than Sam's Clubs and its consumer electronics and home-entertainment lines include higher-end goods.
"Costco isn't afraid of premium price points," Flickinger said. "It will import diamonds, platinum and precious gems from South Africa and Israel and (give) consumer savings half or more as compared to a jeweler."
Still, the stores typically sell milk and eggs at prices lower than Sam's Club, he said.
Flickinger thinks Kroger, which dominates Central Ohio's grocery sales, will likely maintain its position and Whole Foods will gain market share. But other retailers would be vulnerable to Costco's competition, he said.
http://www.bizjournals.com/bizspace/columbus/local_column/?story_id=1174648
posted by Kathie Bracy at 10:28 AM
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