US giant on the lookout for Dublin site

THE IRISH retail industry could be set for a major shake-up with confirmation that US giant Costco is looking for a site in the Dublin area for a large warehouse outlet.

Costco is famous for its discount “shopping club” where customers pay an annual fee to be allowed purchase bulk goods and luxury items at bargain prices.

The company tried to open a €20 million store at the Fonthill Industrial Park in west Dublin over 10 years ago but was refused permission by An Bord Pleanála because the planned 11,500sq m (123,785sq ft) retail outlet was considered unsuitable for a site zoned industrial. Concerns were also raised over the adverse impact it would have on local traders.

Costco is understood to have engaged Dublin estate agent Jones Lang LaSalle to identify a 10 to 12-acre site easily accessible to most parts of Dublin and the east coast. Such a site is most likely to be on an industrial estate off the M50 where values have fallen by up to 60 per cent in the past year.

Stephen Murray, head of retail services at Jones Lang, said his company represented Costco on the Fonthill scheme but he was not in a position to make any further comment. Costco’s decision to make another pitch for a Dublin site has apparently been prompted by the collapse in property values and a renewed focus on cut-price trading as a result of the recession. Turnover at stores operated by the two German discounters Aldi and Lidl is believed to have risen sharply over the past year.

Costco is in a different league to the German companies, appealing not only to well heeled shoppers but also to a broad range of shopkeepers. Its colossal purchasing power and policy of relying more on the membership fees than the size of profit margins for most of its income gives it a considerable edge over competitors.

Costco’s cash and carry operation would provide a strong alternative to Musgraves and leave RGDATA, the representative organisation for independent family grocers, having to continue its support for Musgraves in opposing Costco’s arrival or side with the hundreds of small traders who would benefit from new competition in the market.

With Ikea due to change the retail landscape when it opens in Ballymun in July, politicians are only too aware of the widespread support for cut-price operations, like Costco, at a time when money becomes ever more scarce and customers are looking for more value.

Should Costco choose to build its warehouse close to Ikea (there are plenty of sites available including those in Gulliver’s Retail Park in Santry), it could clearly cash in on the critical consumer mass Ikea will attract.

Costco’s successful formula of club warehousing has reshaped the retail industry in the US where Walmart is regarded as the king of the commercial strip. But in recent years Sam’s Club, the Walmart warehouse club unit that competes with Costco, has been unable to match the sales growth of its rival. Costco’s warehouse clubs have close on 50 million members who shop for a variety of goods, including food, wine, hardware, electronics, furniture, office products, jewellery and what it calls “funeral items” – everything from the cradle to the grave.