The Costco service station under construction at Westgate in northwest Auckland, just over the road from the retailer's 14,000sqm store. Photo / Cole Slawson
The Costco service station under construction at Westgate in northwest Auckland, just over the road from the retailer's 14,000sqm store. Photo / Cole Slawson
A petrol price war could be looming - at least for Auckland's northwest.
Costco says its administrative office is taking memberships from today - and that its service station, now nearing completion, will open before its main retail store.
The AA is expecting Costco to increase petrol price competition.
Butto gain access to one of its 27 pumps, you need a Costco annual membership, which costs $60 for individuals and $55 for businesses.
There is no online option, but people can join by visiting Costco's temporary administrative office In Kakano Rd which is open for membership signups from today, or by phoning 09 870 4700. (If you know the general area, it's near the Mitre 10, sandwiched between the Resene and Dulux outlets).
In Sydney, where there are three Costcos, the retailer typically sells for 10 to 20 cents per litre cheaper than other service stations (before loyalty programmes), according to Pricespy data.
A 2020 Houston Chronicle report said the giant retailer at times uses fuel as a "loss-leader", selling at 20c to 30c cheaper per gallon (3.7 litres) than traditional service stations to attract customers to the rest of its business. And in a March 11 article on the Ukraine crisis highlighting "cheap gas" at Costco and other big retailers, the Wall Street Journal said, "Big box retailers are counting on drawing in consumers with cheaper gasoline and then having them leave with an armful of groceries too."
The Costco service station at Westgate - which sits between the retailer's store and a neighbouring Mitre 10 - will have 27 pumps, a spokesman said.
It will be no-frills, with self-service, pay-at-the-pump only, and no car wash or shop. It will be open to Costco members only.
It is being built by Haydn & Rollett, which also has the lead contract on the giant Costco store being built across the road at a cost of more than $100m.
The Westgate Costco is around 14,000sqm, or the size of two football fields. Photo / Brett Phibbs
The service station looked close to completion when the Herald drove by. The Costco spokesman said it would open before the main store - which had been due to open mid-year but is now slated for August. But he declined to give any date.
AA motoring policy adviser Terry Collins told the Herald he expected Costco to have a downward pressure on petrol prices in the area, similar to supermarket-owned stations - but that exact impact would depend on who the retailer's distribution arrangements (in Australia, Costco is supplied by Mobil.
Here, Pak'nSave and New World owner Foodstuffs dropped Mobil in 2018 to sign a seven-year contract with Z, covering both its docket specials and supply for its own stations.
"When people ask me 'Why is petrol more expensive in my area?', it's usually tied to the number of outlets," Collins said. "The more competing outlets, the lower the price. That's a good rule of thumb."
He expected Costco to run opening specials. The US giant will be looking to make a statement with its initial pricing, and nothing will catch attention like discounts at the pump.
The Costco under construction at Westgate in Auckland's northwest, pictured in January. Photo / Brett Phibbs
In its recent report into supermarket competition, the Commerce Commission said, "Woolworths NZ [owner of Countdown] also told us that Costco is seen as a "destination shop" and that they have seen analysis from Australia suggesting that Costco stores have in-person catchment areas of approximately 25km."
That's for general shopping. Across the Tasman, a report for the New South Wales state government found Costco influenced petrol prices in a 5km radius around its stores.
The ComCom noted that while Costco was actively scouting for sites in Christchurch and Wellington, opening new locations would depend on the success of its first Auckland store - and would not impact competition beyond its immediate catchment area.
Costco's 2021 annual report says its 636 service stations account for 9 per cent of its US$163 billion revenue worldwide (as of December 2021, Costco had 828 stores or "warehouses" as it calls them, including 677 in North America, 29 in the UK and 13 in Australia).
