North American “giant” Costco settles in Spain

The US retail giant Costco, which has more than 400 auditory centres throughout its network of 600 warehouses and has enjoyed a 26% annual growth in the sale of hearing aids, has begun its implantation in Spain by opening two large establishments, one in Seville, Andalucía, and the other in Getafe, near Madrid, which will also serve as the headquarters for the group in Spain. These outlets are dedicated to the sale of a wide range of retail products, from food to optical products goods.

Costco’s overall figures provide an overview of its scale worldwide in the field of retail: with a total of 161,300 employees and a turnover of €76,800 million, it has an estimated client base of 67 million customers and is now present in nine countries across several continents (United States, Mexico, Canada, United Kingdom, Spain, Korea, Taiwan, Japan and Australia). It has a total of 622 retail stores in the United States alone, and is considered the second largest retail firm in that country, and seventh worldwide.

Last May, it already established a foothold in Spain, and more precisely in Seville, where it is already providing audiology services thanks to a practice integrated into its warehouse, so that, among its many other services, it also provides an “independent optician and optometrist” service. It is now heading for the Spanish capital, with a second complex in Getafe, which will cover approximately 14,000 sq. m., in addition to another 2,000 sq. m. to host its Spanish headquarters. According to Getafe City Council, who have signed an agreement with the multinational to help it set up there, Costco hopes to recruit a total of 420 employees for the former and 100 for the latter.

LIMITED PRODUCT CHOICE

Costco’s business model is based on a principle of limited product selection: it offers a limited range of items, with less products than in traditional supermarkets which means it can offer a very large range of different types of products, but with restricted choice for each of them. Another key difference is that it is based on the principle of membership. Customers must be either Gold Star members (for private individuals, families or students) or Business members (for companies and freelancers), with subscription prices of 30 and 25 euros respectively, VAT included. Once they are members, customers can purchase “Kirkland signature” products, the company’s brand name, which the group describes as “offering the same level of quality, or higher, as other leading brands for products as varied as juices, biscuits, coffee, cookware, furniture, clothes and detergents”. The group further states that they are “price leaders”. On average, their “warehouses” as they call them, are approximatively 13,000 sq. m.

Costco publishes a magazine for its customers, featuring all its special offers and the latest news in the field of audiology (see pictures). This magazine is informative in nature, and as such, is not directly related to specific brands or products, but rather aims to provide information relating to auditive health and quality of life.

Costco was founded in 1983 in Seattle (Washington), and it is listed on the NASDAQ Stock Market. It operates as a private club with the sole requirement that its customers have to sign up as members.

NINETY-DAY TRIAL FOR HEARING AIDS

The audiology services provided by Costco are based on the following principles (in this order): price; “premium” technology with a series of “free” services, which include product demonstrations, hearing tests, follow-up appointments, hearing aid cleaning and check-ups, coverage for loss or malfunction, varying periods of guarantee, ten batteries for each device purchased, and a ninety-day trial period.

Through their website website, they the general public to perform regular hearing tests and present their different types of devices (open, BTEs, IEs), batteries, “Bluetooth accessories”, as well as a catalog of the products provided by their suppliers, informative videos, and a calendar of upcoming events by location.

In the States, Costco specializes, among other things, in the distribution of assistive hearing devices through a network of more than 400 centers. In an interview published in Bloomberg Businessweek (July 2013), Senior Vice-President of the brand, Richard Chavez, declared: “the sale of hearing aids generates a lot of revenue for us. We’re now one of the largest—if not the largest— hearing-aid distributors in the market.” He concluded, not without irony, “But I really don’t want anyone to know that.” The company’s records show that on average, the sale of hearing aids has increased by approximately 26% per year.

The company sells brands such as Bernafon, GN ReSound, Kirkland (the retailer’s own brand), Rexton, and as of last year, it also sells devices from Phonak. The company’s expansion in Europe is not limited to Spain, because it recently opened in France, where company officials hope to open fifteen or so warehouses, between four and six of which will be based in the Paris region. This imminent arrival is seen as a threat by local major retailers.

José Luis Fernández, editor in chief of Audiology Infos Audio Infos Spain

Photos: Costco