Costco delivers …

By Brian Sodoma

Tuesday, June 30, 2009 | 2:40 p.m.

It was a Costco location for the past 20 years. Now it’s a, well — Costco — but different. The Costco Business Center, located at 222. S. Martin Luther King Blvd. in Las Vegas, has been open since February and is setting itself apart from other retailers and even its sibling locations by catering to the needs of local business owners.

“It’s going great. A lot of business owners come in here, particularly restaurants and convenience stores,” said Scott Sims, the store’s general manager.

The multimillion-dollar transformation from the old Costco location means the café and its inexpensive pizza slices and chicken bakes are gone, along with the apparel and cosmetic products. But the 135,000-square-foot site certainly isn’t short on food. It’s just sold and prepared differently. Business owners can buy items in bulk but also can find them individually wrapped for resale. There are about 50 Gatorade flavors (a typical Costco may have three or four), massive racks of meat, sunflower seeds, snacks, large packs of individually wrapped baked items and “everything from a three- to four-thousand-dollar stove top to an 89-cent spatula,” Sims added. “That was our goal, to service those businesses (restaurants and convenience stores).”

Since opening, the Costco Business Center, which is open to all Costco members, also has served office-related, hospitality and other businesses as well. It houses a full-service copy center that Sims says is 50 percent cheaper than Kinko’s, third-party credit through HSBC Bank and next-day delivery when an order is placed by fax, phone or online prior to 3 p.m.

“We wanted to give added value to our business members and get down to the nitty-gritty of what you buy to run a business,” Sims added. “Before, (our business members) would have to buy what they could from us, then have to get other things delivered from somewhere else. We wanted to become a one-stop shop.”

Sims and his staff have had a ready ear for customer needs. In a few short months, the store has added 200 to 300 new items as a result of member requests.

“We have our own team of buyers. It makes it a lot easier (than traditional Costco stores) for us to get new items,” he said.

The business behind the business center

The business center concept started in Los Angeles in 1992. Costco has added six more locations since then, an additional center in Los Angeles, two in Seattle and one each in San Diego, the Bay Area, Phoenix and now Las Vegas.

Nowhere near the grow-at-all-costs approach made popular during the past two decades, the business center model has taken the slow road for good reason, said Sims. From the outset, the idea was to build the traditional Costco brand and membership base in a particular market, then take a central location, such as the Martin Luther King Boulevard site in Las Vegas, and convert it into a business center. Las Vegas has more than 300,000 Costco members and is ready for the business center offering.

“We already have a successful core business here now. And we figured if we tap into the business side with a centrally located (property), it’s almost a perfect setup. … It makes sense, when you have a cluster of successful Costcos, to put one business center in the middle,” Sims added.

But the slow-growth approach may not last long.

“We’ve become the most profitable division in the company. … and with that, we’ll probably be expanding more aggressively in the future,” Sims offered.

The manager said a typical business center sees about half the foot traffic of a traditional Costco location, while taking up about the same amount of space. But each client spends about four times the amount of a normal Costco customer.

“Those are the types of customers you really want to keep,” Sims said.

With this model, it seems Costco is effectively keeping them all.