Pumped Up
Costco Companies Inc., which pumps gasoline at 32 of its membership warehouses nationwide, plans to more than double that number by next September, adding several more such outlets in Southern California.
The Issaquah, Wash.-based company, one of the nation’s largest retailers, has added members and boosted overall sales at warehouses where gas pumps have been installed, Chief Financial Officer Richard Galanti said Monday.
Costco opened its first on-site gasoline station three years ago in Tucson, Ariz. Members save an average of 10 to 12 cents per gallon of gasoline, the company said.
“It’s been a great success so far,” Galanti said. “We’ve actually had some people sign up to be members for the first time because of the gasoline.”
The price varies from location to location, he said, depending, in part, on what gas stations in the area are charging. “We check the competition every week,” Galanti said.
Costco, which merged with Price Club in 1993, operates 212 wholesale warehouses nationwide, 49 in Southern California. Over the next year, Costco intends to add gas stations at 35 more locations, including five in Southern California.
In Orange County, Costco opened its first outlet with a gas station in July on Technology West Drive in the Irvine Spectrum area. One more Orange County location will get gas pumps over the next year, but the site hasn’t been determined.
The Irvine station has been doing a brisk business, said Steven West, who operates it.
“It’s getting busier and busier as days go by,” said West, who said he scouts area pumps each morning to find out what other stations are charging. “On the weekends, we are just packed.”
On Monday, Costco’s station in Irvine was charging $1.05 per gallon for regular gasoline and $1.20 for premium. At a Union 76 station a couple of miles away--one of the closest stations to Costco--the per-gallon prices were $1.24 for regular and $1.48 for premium.
Only members can buy gasoline at Costco, which charges an annual membership of $40 for eligible individuals. Business memberships cost $35.
Analyst Donald T. Spindel said Costco has been “cautiously aggressive” about adding gas pumps at its warehouse locations. And the chain’s competitors have taken notice, he said.
Sam’s Club, a membership warehouse chain owned by Wal-Mart Stores, Inc., began experimenting with gas stations a year ago and now has pumps at five locations, none in California.
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“I think that tells you something about the success of it,” said Spindel, with A.G. Edwards & Sons Inc. in St. Louis. “Usually, among the wholesale clubs, if an idea is proven to be successful, the others will copy. So I think that’s another confirmation that the gas stations are going over reasonably well.”
By midmorning Monday, the Irvine station was doing a steady business and customers said they appreciated both the lower prices and the convenience of being able to shop and fill their tanks at one location.
“I try to do my shopping around when I have to fill the car,” said Maureen Doscher, a Laguna Hills resident who said she and her husband save about $8 a week by filling both their minivans at Costco.
“I love the prices,” echoed Linda Sargent, a Lake Forest resident who was filling up her sport-utility vehicle. “When you have a big ol’ gas guzzler like this, it really helps.”
Sargent said she has saved about $20 a month since the new station opened. While other discount-priced gas stations have comparable prices, Sargent said they won’t let her pay with a credit card, as Costco does. “I never have that much cash in my pocket that I want to use on gas--$20, $30, gone,” she said.
Frank Emami, manager of the Union 76 station on Sand Canyon Avenue, said his business has slowed over the past couple of months, but he’s not sure if it’s because of competition from Costco or because of ongoing construction on the I-5, which has closed the freeway ramp intermittently near his station.
Gas prices have actually been in a yearlong slump, with many Orange County gas stations offering relatively low prices.
As of Aug. 21, the average pump price of gasoline nationwide, including all grades and taxes, was $1.10 per gallon.
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Costco’s other Southern California gas stations are in Chino Hills, Oxnard, Van Nuys, Azusa, Burbank, Palm Springs, San Diego, Carlsbad and El Centro.
While the company will continue adding gas stations at new and existing locations, Galanti said not all sites will get gas pumps, partly because of zoning restrictions. For example, Costco opened a new warehouse without gas pumps last week in Torrance.
Costco had sales of $23.8 billion in the fiscal year that ended Aug. 31. The company does not disclose gasoline sales, but Galanti said they represent a very small part of total sales.
