Magazine article Marketing

Costco Coup No Cause for Panic

Magazine article Marketing

Costco Coup No Cause for Panic

Article excerpt

The news that the Costco warehouse club in Essex will open in four weeks' time is great for consumers. This Christmas promises to be the best value they have seen for years. The supermarket chiefs will not be the only marketers, however, to view the development with deep dismay.

Brand manufacturers will regard it as yet another blight on their businesses. Having had to contend with falling volumes during the recession, harder and harder negotiations with the big grocers, and a surge in own-label and very low cost "killer brands", they now have the prospect of a further wave of price reductions. The effect on margins doesn't bear thinking about.

In this climate -- and who, in the balmy days of the late 80s, could possibly have foreseen this prices' hurricane? -- reassuring marketing talk about premium pricing and quality positioning sounds like the mocking of some Hallowe'en ghoul. The truth is that Costco and its wafer thin margins are the new reality.

Or are they?

There is no doubt that the new warehouse sheds will be cheap. Not just low, low prices, but prices from a bygone age. A quarter off food shopping, as much as half off other items. Irresistible? For many, it will be.

But marketers should not panic. Warehouses will not suck the entire British economy into their cavernous maw. …

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