- Costco’s CEO Ron Vachris said crowded parking lots are a key concern for the wholesale club.
- In some cases, busy locations are a sign that the company needs to open a new warehouse nearby.
- One recent opening in the Bay Area is situated near three existing high-volume locations.
Costco’s popularity comes at a notable cost: parking at some warehouses can be downright nightmarish.
One shareholder even put the question directly to CEO Ron Vachris this week at the company’s annual meeting: “What is your plan to address lack of adequate parking in your warehouses?”
Vachris said that some options include buying nearby land to add space or building upper-level parking on top of some locations.
But full parking lots generally mean busy warehouses, and that’s where a more recent trend has been emerging for the company: just add a whole new warehouse nearby.
Vachris said the company refers to the move as “cannibalizing these buildings to take some pressure off.”
One of Costco’s most recent openings — in Pleasanton, California — is exactly this sort of play.
The new location sits between three older high-volume warehouses in the Bay Area and still managed to do the highest-ever US opening day sales for the company, with a whopping $2.9 million.
These so-called in-fill locations are an increasingly important piece of Costco’s growth strategy, execs have said on earnings calls.
Last May, Vachris said eight locations were opening that year that initially cannibalized existing Costco warehouses. That accounts for about a third of the total number of new locations Costco typically opens in a year worldwide.
“We had one in Toronto that cannibalized four buildings around it, but they’ve built back their sales within six months,” he said.
In addition, when customers spend less time trying to find a parking spot (and less time waiting in lines in the warehouse), Vachris said they’re much more likely to come back more often and spend more money.
“Frequency improves significantly because members can get back into a high-volume club,” he said. “And so it’s strategic cannibalization.”
So the next time you find yourself sitting in your car waiting for someone to Tetris a super-sized pack of toilet paper into an overstuffed Toyota Prius, it could be the first sign that Costco is dreaming up plans for a new warehouse nearby.
