Small Retailers Likely to Suffer as Competition Between Costco and Wal-Mart Heats Up

Costco is a warehouse store. Individual Costco locations offer membership services to businesses and individuals, and if you are not opposed to buying your goods in bulk, you can get some stunning deals. Case in point: at the Costco location near California's Rossmoor a pack of 12 kiwis may be purchased for about $5. In comparison, one kiwi at the local Ralph's costs about $1. Need I say more?

Costco Shows Profits in Slowing Economy

The Seattle Times reports that it is Costco that is posting profits as other stores are realizing significant losses. Revenues are up by 12.8%, fourth quarter profits look great with a growth of 6.8% and an increase of $0.90 per stock share; Costco stock is one of the few that is actually reporting a gain in the fourth quarter.

As stock market experts suggest that investors should hold on to their Costco stock, those tracking the numbers in the retail field are confident that - even as sales are bound to go down in the floundering economy - Costco is likely to be the one that is going to receive a lot of newly bargain conscious consumers' dollars.

The Secret of Costco's Success

Unlike grocery stores and even Wal-Mart, Costco greatly limited its price increases. Rather than passing on the rising cost to its customers, the corporation tried something different and heavily banked on consumer loyalty. The gamble paid off and store sales rose. Forbes is a bit more optimistic and quotes a Goldman Sachs (consider the source!) analyst as urging stock market players to buy Costco stock.

Small Retailers on the Losing End Of Costco > Wal-Mart Equation

The implications for the American economy - and perhaps your very own hole in the wall retail outlet - do not hit home until you look across the pond and get an outsider's perspective. Leave it to the Aussies to set us straight.

The Age muses over the sudden end to what they refer to as the "longest period of US economic expansion" that began in 1992. It reports on the virtually empty shopping malls, and accurately points a finger at the skyrocketing costs of living expenses that have done away with the discretionary spending dollar.

Wal-Mart and Costco are the only stores which are now bringing in the clientele while others are losing them, to the point of having to close down. A sign of the times are the closings of Bennigan's and a number of Starbucks locales.

The odds are good that while Wal-Mart and Costco will continue to bring in customers with great prices on food and everyday necessities, they will also stand a good chance of earning the consumer dollar when it comes to holiday spending. Electronics, toys, books, and clothes are all there for the taking at discounted rates.

Unfortunately, this will leave out in the cold the small retailers, individually owned stores, and also specialty shops that do not have the cheap grocery hook to bring in consumers. Further unemployment and associated financial hardships are to be expected.

Thank you Wall Street!

Find a Costco near You

If you have room to store 48 rolls of toilet paper, and do not mind buying pitted black olives by the drum, then you can save substantially by making your purchases at Costco. You may find Costco locations near you by using the Costco.com warehouse locator.

Sources:
http://seattletimes.nwsource.com/html/businesstechnology/2008242601_costco09.html
http://www.forbes.com/feeds/ap/2008/10/09/ap5532094.html
http://www.theage.com.au/world/twentyyear-spending-spree-over-as-us-shoppers-lose-the-urge-to-splurge-20081010-4ybc.html
http://www.costco.com/Warehouse/locator.aspx