Captive clientele helps Costco dominate in Hawaii
In the section of town once known for brothels, where sailors bought sex for a single iron nail, stands a gargantuan Costco store. It is, by the most important measure, the king of Costcos.
This one sells more croissants and radial tires and fine wines and toilet paper and televisions than any other Costco store, well over $300 million worth of merchandise last year -- more than double the chain’s average. The store so outperforms other Costcos that in some circles its reputation has reached the level of myth.
It is a place where daily crowds seem the size of teeming cities, where checkout lines swirl like giant rivers and where customers, a kaleidoscope of nationalities, exit looking the same: pale and dripping with sweat, as if staggering out of a tropical storm. People speak of shopping there as they would speak of an Iron Man triathlon or some other epic test of endurance.
“Be prepared,” says Timoteo Itagia, a taxi driver who makes two or three trips a day to the Costco in Iwilei. Half of Oahu’s 900,000 residents carry Costco cards.
Itagia says he no longer shops there because of the toll it has taken on him, physically and financially. “I got crazy there,” he says. “Went in happy, walked out broke.”
Iwilei (pronounced ee-vuh-LAY), between Waikiki Beach and Honolulu International Airport, is changing from an industrial district to a retail one. Warehouses and boutiques rise up unevenly between empty lots and coconut groves.
From a distance, the Iwilei Costco looks much like the other 512 stores that the big-box chain, which rang up $60 billion in sales last year, has spread throughout North America, Europe and Asia. The Iwilei store, one of three on Oahu, opened in 2002.
Its parking lot fills to capacity almost daily, and waiting 20 to 30 minutes for a spot isn’t uncommon. But once shoppers make it inside the door, all that pent-up energy is released like greyhounds springing at the opening of the gates. The crowd swarms in all directions, big metal shopping carts whizzing by, shoulders rubbing, elbows nudging, wall-to-wall jostling. This is high-contact shopping.
Mountains of merchandise, plastic-wrapped and strapped to pallets stacked on gleaming concrete floors, rise to cathedral heights. On one end, flickering flat-screen TVs, on the other, frozen foods and crab legs -- 152,000 square feet of no-frills retail enclosed by four windowless walls.
In the center of the sales floor, tables and tables of shorts. Short shorts, long shorts, board shorts, cargo shorts, golf shorts and, naturally, swim shorts. A sea of swim shorts.
Costco customizes each of its stores to fit the market and provide “local flavor,” says Jeff Elliott, director of finance for the nation’s fourth-largest retailer. Among the offerings at the Iwilei store: Hawaiian-quilted auto seat covers, Polynesian blankets, concert-size ukuleles, tropical flowers and surfboards.
The unique stuff tends to be in the food section, starting with locally grown macadamia nuts and pineapples. A lot of items reflect the Asian influence brought to bear by the many Asians and Asian Americans who live on or visit the island. Japanese tourists arrive at this Costco by the busload.
Certain aisles could have been transplanted directly from a Tokyo supermarket. Industrial-size bags of rice sit a short distance from chopsticks sold by the crate. There’s fresh limu (a type of seaweed), raw Ahi tuna and a long well-appointed poke bar with four kinds of poke -- a dish made up of bite-sized chunks of raw fish traditionally mixed with seaweed and nut relish.
Iokepa DeSantos, a native Hawaiian, comes for the poke (pronounced po-keh). “It’s worth waiting 20 minutes for parking,” he says. Today, DeSantos has come for poke and passport pictures. On the way out he stops for a hot dog. The store’s outdoor concession stand sells 2,000 hot dogs a day.
Besides being customized to fit its shoppers’ tastes, there are other reasons why this Costco dominates. Oahu is home to two groups of people with compelling reason to buy in bulk: extended families who live together, common in the islands, and time-share owners who like to stock up just after they land at the airport 2 1/2 miles away.
What better location for a store than a heavily populated, relatively affluent island only 30 miles wide, says George Whalin, a retail management consultant who does business in Hawaii.
The people on Oahu, Whalin says, constitute a captive clientele. And Costco has established itself better than the competition among the captives.
Costco beat Wal-Mart to the islands (the first store opened in 1988); outnumbers its chief rival, Sam’s Club, and so far has shut out Target -- which has yet to open a store in Hawaii.
Sam Slom, a state senator and the executive director of Small Business Hawaii, gives two reasons why he carries a Costco card: milk and gas.
Slom says: “I can go to the corner store and buy a half-gallon of milk for $5.50. Or I can go to Costco and pick up a full gallon for $3.48.”
“Last week,” he continues, “the average island price for a gallon of regular unleaded was $3.14. At Costco, $2.98.”
Yet there’s a price to pay, besides the $50 annual membership, for such savings. It comes -- as Itagia, the cab driver, indicated -- in the form of excruciating waits, suffocating crowds and the seemingly inevitable overspending that comes with roaming aisle after aisle of bargains.
Phyllis Pai sits on a bench outside the store, catching her breath. She has the “I-went-in-happy-walked-out-broke” look. She watches her husband unloading two full shopping carts into the back of a small sedan after three hours of shopping.
Pai, who suffers from osteoarthritis, a form of arthritis that affects joints and cartilage, says she’s ready to sink into her living room couch for the rest of the day. “Whew,” she says.
Pai’s day has revolved around this outing. Shopping here isn’t so much an errand as an event. It must be planned for, executed and recovered from.
Her relationship with Costco is complex. “I don’t want to think about the next time,” Pai says. “It’s not really fun. I do it because I can’t help it.”
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