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The move makes a direct play for small restaurant, business and convenience store owners who buy from Costco because they are too small to do business directly with a company such as Unilever, and for office supply companies whose business models are based on higher margins.

If they work on the same gross margin…that will significantly disrupt the wholesale market

“This could devastate some wholesale distributors,” said Bruce Winder, partner in Toronto-based Retail Advisors Network, noting elements of the new business will compete with Grand and Toy, Staples, and manufacturers and wholesalers in food office and furniture supply such as Unisource Canada Inc., Sysco Canada and Teknion Ltd.

Costco Business Centre will also compete with Amazon Canada’s business in dry grocery, technology, and paper. The business centre will offer next-business-day delivery to commercial addresses and has its own fleet of trucks, Costco said.

“Costco operates on a 15 per cent margin at retail,” Winder said. “If they work on the same gross margin (for the business centre), which I believe they do, that will significantly disrupt the wholesale market, because wholesalers work on a margin of anywhere from 30 to 50 per cent.”

With annual sales of close to $21 billion and 94 warehouse stores across this country, Costco Canada is embarking on an aggressive expansion in fiscal 2017, opening seven warehouse stores as well as the business centre. Typically, Costco opens one to three warehouses a year in Canada, one of the company’s most robust markets.