Costco extends its reach with home furnishings concept - Costco Corp to open Costco Home

DSN Retailing Today, Nov 25, 2002 by Doug Desjardins

KIRKLAND, WASH. -- What's in a name? That's the question Costco Corp. will try to answer next month when it moves into the home furnishings arena with the opening of Costco Home. The new concept store will open Dec. 5 in Kirkland, Wash., on a site once occupied by Home Base.

The warehouse retailer is hoping the Costco name, combined with low prices on name brands, will help it find a niche in a competitive market.

"First and foremost, we're going after the fine home furnishings market," said John Ostmeier, general manager of the Costco Home project. "We're not looking to compete with the IKEAs of the world with ready-to-assemble furniture."

The 103,000-square-foot store will feature a wide range of high-end home furnishings, including sofas, beds, recliners, tables, lighting, plants, mirrors and carpeting. It will also offer a limited selection of commercial and home office furnishings along with a small home electronics section featuring high-end products such as plasma televisions.

And Costco Home will have a different look than the typical warehouse. The store will have no ancillary businesses, such as a one-hour photo center or food court, and the retail floor will be laid out like a typical high-end furniture store.

"We're trying to blend the home furnishings culture with Costco culture, so you'll still have the concrete floor and high ceilings," said Ostmeier. "But you'll be walking along a show floor with living room and bedroom settings the way they would appear in a home."

Sales assistants will also be present on the show floor, but Ostmeier said they would have a low-key role. "Nobody is on commission, so there's not going to be any sales pressure," said Ostmeier. "They'll be there to provide assistance."

Customers will have the option of carrying their purchases out of the store or having larger items loaded onto vehicles at a special loading area. Home delivery will also be available at a charge separate from the purchase price. The store will also feature an area where customers can have mirrors custom made in any size and style and have them shipped to their homes.

Costco has not disclosed which manufacturers it will feature in Costco Home. In a recent conference call with analysts, Costco executive vice president Richard Galanti would only say that Costco had "several firm commitments from major manufacturers."

Ostmeier said that Costco would keep its vendor deals under wraps until the week of the store opening. "We're still in negotiations right now but we already have some very good, high-end vendors on board and I think people will be pleasantly surprised."

Costco began promoting the Costco Home opening in early November when it distributed 50,000 fliers to each store in the greater Seattle area. It also notified Costco members in the area through mailings. "We have 940,000 households in the marketplace so that should get the word out," said Ostmeier.

Most analysts have expressed support for the Costco Home venture. Deborah Weinswig of Solomon Smith Barney said in a recent report that Costco at the very least "will learn new merchandising techniques and bring that knowledge into its club business."

Analyst Jonathan Ziegler of Deutsche Banc Alec Brown said Costco Home will be a challenge for Costco given that it's a company "driven by inventory turn going into a notoriously slow-turn business."