Costco opens three in Southeast - Tampa, Jacksonville, FL and Durham, NC - Brief Article - Statistical Data Included

DSN Retailing Today, Dec 11, 2000 by Mike Troy

TAMPA, FLA. -- Costco's plan to enter nearly two dozen new markets during its fiscal year, which began Sept. 4, continued during November with openings in Tampa and Jacksonville, Fla., and Durham, N.C. Those openings followed September and October openings in the new markets of Fort Worth and Piano, Texas; the Minneapolis suburb of St. Louis Park; and Huntsville, Ala.

Twenty of the club operator's 28 planned U.S. store openings this year will be in new markets, according to cfo Richard Galanti. An additional eight stores are expected to open in international locations, increasing the total store base to 367 by yearend from last year's total of 331.

Although the new market entries are essential to Costco's long-term growth, the near term cost is potentially high as free memberships have to be offered to attract the volume of people needed to support an enterprise that exists on 10% gross margins. Costco's strategy for entering new markets, especially those where Sam's Club already operates, is to offer free one-year memberships for a several month period after a club first opens.

At the recently opened Tampa club, 30,000 people had already signed up for free membership the day before the club opened. If a high percentage of people in Tampa and other new markets who were attracted by the prospect of shopping at the club for free don't convert to dues paying members, Costco's membership revenue in subsequent fiscal years could suffer--especially since the company recently upped the cost of individual membership, called Gold Star, to $45.