Costco Hawai'i sales booming
Advertiser Staff and News Services
Aileen Morita and her friends Miracle Akau and Mary Ulii visited the Salt Lake Costco yesterday afternoon to get fixings for a chili party for their church.
Deborah Booker • The Honolulu Advertiser
In the parking lot after their shopping expedition, they loaded their car with the necessary ingredients for the gathering — including two 6-pound tins of crushed tomatoes, a gallon-size jar of mayonnaise for the macaroni salad, and 200 styrofoam plates.
Aileen Morita, left, and Miracle Akau both said they bought more than they came for at Costco in Salt Lake.
They laughed as they admitted they had also fallen prey to the lure of Costco's eclectic product mix, floor-to-ceiling displays and deep discounts.
"I came to buy something to make chili and then we're going home with all the stuff for the children," said Morita, of Kane'ohe, as she stowed away yogurt, chocolate, grape juice and chips for her 12 grandchildren. "We're going home with goodies."
Shoppers like Morita, Akau and Ulii have catapulted sales of Costco Wholesale Corp., a warehouse club with 17.1 million memberships nationwide. As of September, Costco had 385 stores nationally and annual sales of $34.14 billion.
Costco's biggest competition, Sam's Club, had more stores, 475, but lower annual sales, $26.8 billion, at the end of its last fiscal year.
Costco's five Hawai'i stores are "substantial locations" for the company, according to Richard Galanti, chief financial officer of the Issaquah, Wash.-based firm.
The company's Hawai'i warehouses — in Salt Lake, Waipi'o and Hawai'i Kai on O'ahu; Kahului on Maui; and Kona on Hawai'i — are each expected to average $132 million in sales per location this year, well above the company's per-store average of about $100 million, he said.
Costco is replacing the Salt Lake store — its first in the Islands — with a new warehouse outlet in Iwilei, scheduled for a June 13 opening.
"Actually, they've seen some strong growth of late, notwithstanding the little bit of a downturn that we saw in the Hawai'i economy right after Sept. 11," Galanti said of the Hawai'i stores. "All of our locations (in Hawai'i) as a group are up more than the company average."
James D. Sinegal, Costco's president and chief executive officer, credits Costco's success, in part, to its merchandising strategy. Sinegal says he views merchandising as a type of theater.
"You're walking through there and there's the tire display right next to the mayonnaise. There is that element of surprise that seems to suggest that Costco has everything," said Sinegal, who co-founded the company in 1983.
Laurie J. Breidenbach, a retail analyst with Wells Fargo Securities LLC in Seattle, said Costco has a "treasure hunt" feel.
"You can go from the extremes, from buying canned goods to diamonds," she said.
"I think they've really done a great job with the balance between the basics and high-end items. It makes it a very fun shopping experience."
At the Salt Lake store, a 6-pound, 12-ounce can of Dole pineapple chunks is currently going for $3.69; on the other side of the warehouse, golf umbrellas are selling for under $12 each.
The dizzying variety of items can make for a certain amount of creative tension during family shopping expeditions.
"You end up buying things that maybe you don't need," admitted Manning Dugay of Kane'ohe, who had dropped by the Salt Lake Costco yesterday for a few groceries. When he visits the store with his wife, he said, "I think I need my stuff and I don't think my wife needs all the stuff she gets."
Asked if they ever compromise on purchases, Dugay said, "Oh, no. We just go for it."
Of course, Costco does not have everything. A shopper looking for a specific product, such as shred-resistant dental floss or tomato sauce with porcini mushrooms and onions, might be out of luck. It all depends on what Costco decides to stock.
Costco stores often sell the most popular brand of a product, such as Tide detergent or Reynolds Wrap aluminum foil.
Galanti said many of the items in Costco's Hawai'i stores are the same as those sold on the Mainland — with the addition of Hawaiian and Asian specialty foods and beach items such as boogie boards and flippers, available year-round.
Costco purchases most of its merchandise directly from manufacturers for shipment right to Costco's warehouses or to a Costco depot, which then distributes products to individual stores. Costco reduces its costs by not buying from a distributor. It also cuts losses by keeping a tight watch over entrances and exits.
Whether it's the merchandising theatrics or the low costs, customers are choosing Costco more often. Costco's December sales were 7 percent higher than December 2000.
With a tone of regret, Sinegal said the recession does help his company.
"Could you make an argument that in a turndown we would become more attractive in the short-term? You could, because people would become more cost conscious," he said. "We would rather see good times because it benefits everybody, including us."
Advertiser staff writer Susan Hooper and the Westchester, N.Y. Journal News contributed to this story.
