Who can compete with Costco’s 20-store plan?

As Costco prepares to open 20 new Australian stores in just five years, a local retail expert says there are few, if any, homegrown competitors capable of challenging the American wholesale retailer.

Last week the bulk-buy business revealed plans to more than double its network of 15 Australian warehouses, through new sites in Hobart and Geelong and an expansion of its existing metro markets.

The plan is a major statement of intent from Costco, which reportedly took in almost half a billion dollars in profits, after tax, across the last financial year.

Financial results do not tell the full story, with one retail sector index ranking Costco as the nation’s favourite grocery brand in 2025, and Australia’s fourth-favourite retailer overall.

Given the business’ track record and resources, sector expert and Retail Doctor Group consultant Dean Salakas said there is little stopping the American business from growing its local operations even further.

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“They’re a super profitable business” with “mind-blowing” growth plans, Salakas told SmartCompany.

“Their model is great for the consumer, and their consumers are obviously super loyal.

“So it just screams there’s room for them here, and they’ve obviously seen that as well.”

Bulk retail easier said than done

Salakas, an online retail pioneer who went on to develop logistics systems for Woolworths, said there is no obvious direct competitor to Costco that operates in Australia.

While Woolworths, Coles, and Aldi do handle the bulk of grocery transactions, none directly challenge the Costco model — which sees customers pay annual memberships to access bulk goods in warehouse-format stores.

The membership model is a “genius” loyalty play that also blocks the incumbent grocery businesses from competing, said Salakas.

Woolworths and Coles do have their own paid membership schemes, offering discounts and deals on select goods.

But making entire stores membership-only would not be feasible, as it would effectively cannibalise each brand’s own sales, he said.

And spinning off new brands — like a hypothetical Woolworths XL — to compete with Costco would be too hard, or too risky, for investors to stomach.

“Let’s say there was a new entrant. I mean, it would be near impossible. I don’t know how you would do it as a new entrant,” said Salakas.

It would be “strategic suicide to go for a price leadership strategy when you don’t have genuine cost leadership… it doesn’t seem to have worked in the past,” he continued.

“You can’t just fake it ’til you make it.”

“The economics aren’t there to make it lucrative enough for someone to be willing to invest in such a loss-making exercise over such a long period of time.”

Will Amazon challenge Costco?

Costco’s domestic expansion plans coincide with another American juggernaut making a major play in the grocery space.

Amazon last month announced a partnership with independent grocers Harris Farm Markets, delivering fresh produce to Sydneysiders and disrupting same-day offerings from the likes of Woolworths and Coles.