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Costco Chief blames Coles and Woolworths for slow Australian expansion

Costco has blamed supermarket heavyweights Coles and Woolworths for slowing the retailer’s expansion in Australia, with chief financial officer and executive vice-president Richard Galanti claiming competition for bulk-goods retail sites in Australia was fierce.

Costco SydneyCostco established its first supermarket site in the Docklands precinct in Melbourne in August last year, with plans to open another six Costco stores in the next three years across the country. In April, Costco was given planning approval at the NSW State Government level for a Costco superstore planned on Parramatta Rd at Auburn. The Auburn Costco will have about 14,000 square metres of shopping area and about 800 car parks, about 3-5 times more than a large Woolworths or Coles.

Costco however has encountered difficulty in finding bulk-goods zoned sites to develop across Australia, with competition and opposition from rivals Coles and Woolworths blamed by chief financial officer and executive vice-president Richard Galanti in an investment analysts teleconference according to the Sydney Morning Herald. Coles and Woolworths have denied Mr Galanti’s claims the supermarket giants were working to obstruct Costco’s expansion plans, labeling his comments as ”baseless” according to the paper.

The Sydney Costco proposal has come under fire from some of Australia’s largest shopping centre owners, including AMP and Westfield who is the owner of two large shopping centres nearby at Parramatta and Burwood, who both argued the development would be “anti-competitive” for other retailers.

Costco faces considerable competition for the limited number of bulk-goods zoned sites in and around major cities, with rivals Woolworths and US hardware giant Lowe’s planning 12 stores in Victoria, in addition to Bunnings Warehouse constructing 18 new sites in New South Wales over the next three years. The explosion in ‘big box’ retailing as a retail model will work against Costco’s plans for Australia, with the limited number of sites for Costco placing it in a bidding war against direct rivals who are also determined to expand their retail footprint.

Costco plans 10 stores in Australia in the short term, however sees the potential for as many as 25 of its massive supermarkets in Australia.