The Rio Grande Valley’s first Costco is a game changer. Costco is the largest membership warehouse club in the U.S., according to Greg Brenner, Costco Warehouse Manager in Pharr. It’s the seventh largest retailer in the world with sales of $90 billion annually, while its nearest competitor rings up $50 billion.
Built from the ground-up in only three months, the 151,000-square-foot Costco warehouse is the 601st store of the Washington-based giant known for retailing at wholesale prices. Selling name-brand and their Kirkland private-label merchandise, Costco limits markups to 14 percent. Costco has jumped into the region ready to compete on price, selection and service. It is going up against existing food service suppliers, office supply stores, membership stores, bakeries, and providers of pharmacy services and hearing aids. Costco has become the largest retailer of wine in the world. Business services include credit card processing, Electronic Health Records, domains and websites, payroll services, and 401(k) plans.
Clipboard in hand, Larry Lindsey walked the frozen food displays comparing Costco prices with those of Sam’s Club. As the owner of Plantation Childcare in Mission and Easy Beginnings Childcare in McAllen, Lindsey has a lot of mouths to feed. The verdict: some were higher, some were lower, and some the same. What Lindsey really hopes to see is Costco opening as early as 7 a.m. for business members.
“We are going to be the great equalizer with our pricing strategy on multiple levels,” Brenner said. But Costco’s economic impact on the Valley will reach beyond increased sales tax revenue for Pharr and pressure on competing businesses.
Costco is known for paying the highest wages in its industry. Starting pay is $11 per hour with time and a half on Sundays. Some experienced supervisors earn $22 per hour, Brenner said, along with a comprehensive benefit package. “That creates longevity and the lowest turnover.” It is also geared to create a company culture, with new employees learning service standards and ethical business practices from experienced peers.
One month before Costco opened, 11,000 online job applications had already been filed for approximately 200 jobs. “It’s exciting that we get to pick the best,” said Brenner. “A lot of applicants have years and years of retail experience and management. People down here have done their homework and know what Costco is about. They want to get in on a great place to work. We are strictly a promote-from-within company.”
A shopping culture
Costco had been on the verge of opening a Valley store twice before but couldn’t jump the hurdles. “Finally last year we were able to work things out with the city, and we’re where we always wanted be,” which is on Kelly Avenue, just off of Highway 83 and Jackson. “The city of Pharr has welcomed us with open arms,” Brenner said. The EDC leased Costco a spacious hacienda where the pre-opening team held job interviews, mixers, and made marketing calls. The crew was accustomed to working from on-site trailers so the Pharr experience was memorable.
“The potential down here is absolutely limitless. This is a major retail hub, a shoppers’ culture. People love to shop down here. It’s very eye-opening” Brenner continued. With two Costco stores in Monterrey, the Pharr store is not counting on the Mexican consumers who head north to shop at the region’s other consumer meccas: La Plaza Mall, RGV Premium Outlet Mall and BassPro. Instead, memberships having been selling like hotcakes to Winter Texans and Valley residents.
“We couldn’t wait till it opened here,” said Danny Aguilar. His Weslaco family got their Costco membership in January. “We used to shop once a week at Costco when we lived in El Paso. The quality of their products is fantastic.” Aguliar homed in on the Galaxy tablet and directed his wife to a nearby display of colorful wraps, saying, “That looks like something you would wear.”
Worldwide, Costco has 65 million card members. “Word of mouth advertising is what does it for us. Our members advertise for us,” Brenner said. “On a day-to-day basis, our focus is giving great service. We instill that culture: that we always want to go above and beyond what’s expected. It has worked for us.”
Robert Revelo, owner of Cornerstone Grill in Edinburg, walked through the huge, refrigerated produce room and came away impressed. “They have more variety in dairy and produce than the competition.” He has been a member of another warehouse club for 12 years and bought his paper and plastic supplies there. “But it’s more convenient to get everything at one store.”
Brenner admitted it will to take time for business members to come in and begin using Costco for sourcing everything from asparagus to zucchini, printers to paper shredders. “That doesn’t happen overnight. We have to make sure we have the right merchandise mix. We have to carry items that will cater to those members.” Other Costco stores do significant business supplying restaurants. “Although each region has a different mix, Costco helps businesses save money on supplies.”
Business can shop Costco for LED signs flashing OPEN as well as industrial racks and office water coolers. The Valley’s shopping culture has found a new candy store.
April cover story by Eileen Mattei