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Published: Sunday, 8/24/2008

After fast start, lull, Costco a success in 1st year in Toledo

BY JON CHAVEZ
BLADE BUSINESS WRITER
Angie Keween gets a hand with her piled-high cart from Costco employee Kaitlyn Leask on the way to the checkout. Angie Keween gets a hand with her piled-high cart from Costco employee Kaitlyn Leask on the way to the checkout.
THE BLADE/DAVE ZAPOTOSKY Enlarge | Buy This Photo

COSTCO Wholesale Corp. arrived in West Toledo a year ago with a warehouse store of high expectations for itself, its customers, and surrounding merchants.

As Costco at the rejuvenated Westgate Village Shopping Center on Central Avenue at Secor Road marks its first year in business this week,

it is a success.

But its effect on nearby retailers is less certain.

Toledoan Jennie Beck was pleased enough with the big store that she gave up shopping at rival Sam's Wholesale Club, which is in the suburb of Holland.

She goes to Costco three times a month and believes it is succeeding. 'I mean, it's 2:15 p.m. on a Wednesday, and look at all the cars,' she said of the parking lot, which was about half full.

'My whole family shops here a lot, and these days I always hear people say, Did you get that at Costco?' or Oh, I bought that at Costco.' That's really good.'

Stacey Baker, of Adrian, Mich., also gave up a Sam's Club membership to switch to Costco.

She is at the store every two weeks to buy for her home and for seven businesses that her husband, Matt, and brother-in-law Mark operate in the Adrian area.

'I actually get other people to switch over too,' she added. She shops at Meijer or Wal-Mart near her house but finds more of what she needs regularly at Costco.

'I first came here shortly after they opened to try Costco. I think their stuff is better, even when you're buying in bulk,' she said. 'Now I get almost everything here. I even get my gas here.'

The average Costco has sales in its first year of $76 million, the company said.

The company has 518 stores that average $130 million in sales annually.

Bill Koza, general manager of the 183,000-square-foot Toledo store, said it had a fast start, setting a Midwest record for customer memberships for its Aug. 29

opening.

But then it had a lull, although business has increased steadily, he said.

He declined to give sales figures, much like many other retailers.Doug Schutt

, executive vice president and chief operating officer for the northern division and Midwest region of Costco, said the Toledo store is meeting company expectations and sales have been better than at several other new markets.

The chain, which had $63.1 billion in sales last year, relies on people paying $50 a year to shop there. The Toledo store has handed out about 100 guest passes a day for consumers to look through the store.

In the last four months, it has added 20 employees to take care of the increase in customers, Mr. Koza said.

A typical supermarket has about 40,000 items, and a Wal-Mart has over 100,000.

Each Costco carries about 4,000 products and regularly changes about a fourth of them.

'It's a treasure-hunt atmosphere, and that takes getting used to,' Mr. Koza said. 'I think people are getting it more and more.'

Retail experts predicted that Costco would be a boon for surrounding merchants and perhaps a painful experience for competitors.

Liz Holland, head of Abbell Credit Corp., which owns the Westgate center, said the center's seven tenants have said their sales have increased.

'The tenants that we do talk to say they are very pleased' with Costco, she said. Two years ago, the center underwent a $35 million renovation that included demolition of

the stores and rebuilding with several new tenants.

But at Fiesta Hair & Tanning, a Westgate tenant for years, managers are awaiting higher customer traffic.

'Personally I think Costco hasn't done a whole lot for us,' said Linda Bruce, Fiesta's manager. 'If you want to know the truth, when Chipotle Grill opened next door [in early 2007], that's when we got our increase in business.'

Business has increased, she said, but only to where it was before construction on Westgate started.

A few doors away at Barry Bagels deli, sales numbers have increased, attributed to Costco, said owner Mark Greenblatt.

'I'm a Costco fan. I shop there, and their gasoline is the biggest bargain on the street.'

Nowadays, he said, 'I always see the place significantly full, not jammed. But there's always a nice flow of people consistently Monday through Sunday.'

North on Secor Road, Nazih Yaghnam, owner of Organic Bliss Deli & Bakery, gambled his business on the arrival of Costco by moving in advance to the Secor-Central area.

He was convinced his business would benefit from Costco shoppers coming to the area and taking a look around.

'I think Costco has improved the Westgate area and businesses in this area have benefited from Costco but I have mixed feelings,' Mr. Yaghnam said.

'Off the hip, I'd say it has improved my business. And when I'm in places like the gym or a bookstore I've heard people say I'm going over to Costco,'?' he said.

At Gen's Hallmark store on Secor in front of Elder Beerman, managers have noticed an effect that may be due to Costco, but they said it has not necessarily led to increased sales.

'We have noticed we are getting more people in their 20s and 30s coming here,' said Debbie Cope, the store's acting manager. It could be, she said, newer customers headed to Costco who saw Gen's on the way. The store used to appeal to elderly customers.

'So I think that we're doing much better as a business, but we don't know if it's because we're now in front of Elder-Beerman or because of Costco,' she said.

Other nearby retailers weren't so concerned with Costco benefits as they were with potential negatives.

Churchill's Super Market, on Central Avenue less than a mile east of Costco, feared a loss of business.'

We didn't think it would increase anything for us, but we were very apprehensive thatit might decrease sales,' said Bob Colwell, Churchill's co-owner. But a year later, he hasn't noticed any changes.

'We haven't felt any effects,' he added.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



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