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Thilani!De!Silva!!
U!3093510!
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COSTCO!
Table&of&contents&
Introduction!.....................................................................................................................................!2!
Current!Competition!.....................................................................................................................!3!
Competitors!.................................................................................................................................!3!
Competitive!advantage!...........................................................................................................!3!
Obstacles!............................................................................................................................................!4!
Environmental!Uncertainty!..................................................................................................!4!
Technology!trends!....................................................................................................................!4!
What!customers!want?!...........................................................................................................!4!
Conclusion!.........................................................................................................................................!5!
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Thilani!De!Silva!!
U!3093510!
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Introduction&&
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In! the! current! economic! and! social!
environment,! the! retail! industry! faces! an!
uncertain! future! with! many! potential!
challenges! such! as! Internet! retail! on! the!
horizon.!!
United States retailing giant Costco has gradually sneaked into the Australian
market and the impact it is likely to have on other Australian supermarkets is
pretty high.
Costco was expected to open 6 new stores around Australia, their first store
was opened in Melbourne in 2009. At the time of publication, Costco had
almost finished building its two new stores in Sydney and Canberra, which
were meant to be opening that week. Opening 9 new stores would make a big
change in the Australian market and the end result would be more price
reductions. However according to analysts’ predictions, it would have little
impact on current market share as all major supermarkets closely monitor
competitors’ prices and their strategies.
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Thilani!De!Silva!!
U!3093510!
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Current&Competition&&
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Competitors&
Costco’s!three!large!competitors!in!Australia!are!Coles,!Woolworths!and!Aldi!
supermarkets.!Competition!within!the!supermarkets!industry!has!increased!
substantially!since!the!arrival!of!Costco.!There!has!been!a!price!war!against!Coles!and!
Woolworths!for!several!years!now.!Now!that!Costco!has!arrived,!things!will!even!get!
worse!for!supermarkets!so!it!is!obvious!that!Costco!needs!to!have!good!strategies!in!
place!to!
dominate!
competitors.!!
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Competitive&advantage&
Costco’s!three!large!competitors!in!Australia!are!Coles,!Woolworths!and!Aldi!
supermarkets.!Competition!within!the!supermarkets!industry!has!increased!
substantially!since!the!arrival!of!Costco.!There!has!been!a!price!war!against!Coles!and!
Woolworths!for!several!years!now.!Now!that!Costco!has!arrived,!things!will!even!get!
worse!for!supermarkets!so!it!is!obvious!that!Costco!needs!to!have!good!strategies!in!
place!to!dominate!competitors.!
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Thilani!De!Silva!!
U!3093510!
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Obstacles&
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Environmental&Uncertainty&
People!facing!the!GFC!and!losing!their!
jobs!will!not!be!able!to!spend!much!
money!on!their!groceries.!So,!instead!of!
buying!bulk,!they!may!end!up!buying!
just!the!amount!that!they!can!afford.!
Costco!charging!a!$60!Membership!fee!
from!their!customers!may!be!another!
barrier!causing!some!people!to!stay!
away!from!Costco.!!
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Technology&trends&
When!it!comes!to!technology!Costco!is!well!behind!with!other!supermarkets.!There!
is!no!selfKcheckout,!mobile!applications!or!online!shopping!services!that!other!
competitors!offer.!
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What&customers&want?&&
The!bulk!nature!of!most!of!the!goods!at!Costco!means!that!the!quantities!are!too!
large!for!middle!size!families!who!do!not!have!a!big!storeroom!or!a!spare!freezer.!For!
small!families,!Costco!may!not!be!an!option.!As!an!example,!instead!of!buying!6!roles!
of!toilet!paper!rolls,!you!have!to!buy!48!rolls.!!
Costco!only!has!a!very!limited!number!of!stores!in!Australia.!Most!of!the!customers!
may!not!be!able!to!travel!that!far.!This!will!limit!Costco’s!market!share.!
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Thilani!De!Silva!!
U!3093510!
Conclusion&
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The!Costco!model!is!quite!simple!–!bigger!is!better.!Their!stores!are!big!
compared!to!the!retail!stores!here,!and!the!number!of!products!that!they!sell!is!
higher!than!the!number!of!products!sold!by!other!competitors.!!
Costco!is!to!build!9!giant!stores!in!Australia,!but!Australian!supermarkets!such!as!
Coles!and!Woolworths!have!over!1000!stores.!With!the!competition!facing!
Costco!from!Coles!and!Woolworths,!it!will!be!hard!for!Costco!to!establish!a!firm!
place!in!the!market.!In!the!current!economic!uncertainty,!it!will!be!difficult!for!
Costco.!But,!I!think!that!Costco!‘s!concept!is!proven!worldwide!and!can!be!
successful!in!Australia!if!Costco!can!survive!the!current!economic!conditions!
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