26 years at Costco Canada

Former Assistant General Merchandise Manager, Costco Canada

Why is this interview interesting?

  • How Costco compared to Price Club in 80s/90s
  • Why Sinegal took over the merged entity
  • How Costco can deal with inflation better than other retailers
  • Why Costco Canada is more profitable than the US
  • Long run store opportunity for Costco Canada

Executive Bio

Peter Malizia

Former Assistant General Merchandise Manager, Costco Canada

Peter spent 26 years at Costco Canada and joined in the early 90's at Price Club. He worked his way up the organisation as a buyer before becoming AGM where he reported to the General Manager who reported to the CEO of Costco Canada.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

How did you end joining Costco in the early 90s?

I started in 1991 when Costco and Price Club were two separate entities. Costco had the West Coast of Canada and Price Club had the East. I was on the East Coast in Montreal, which was where the Price Club head office was. I started there with only eight locations at that time, and it grew like a bad weed. Within six months, we reached a dozen locations and the following year we opened eight more. In 1993 the merger started being talked about and by the end of that year it was called PriceCostco. It was combined but still ran separately.

In 1995, it basically became Costco and, in the US, they only had one buying office in Seattle, whereas Canada still had two; one in Vancouver for the Western Canada buildings, and one in Montreal for the East. That stayed that way for several years, even though there were more synergies with common goals and buying principles. It took until 2001 for the Ottawa office to become the Canadian head office. In the early days, we were bitter rivals as Price Club was trying to expand in Eastern Canada, looking to the West, and the Western Canada guys were thinking about coming East and had actually made an offer to purchase land and backed out at the last minute. It became very much an East-West rivalry and stayed that way for a while, until finally things came together.

How would you compare Costco and Price Club before they merged?

Price Club was a loose cannon and would try anything to see if it would work. Costco Wholesale was more structured and specifically went after wholesale business. Price Club was getting many private members because if you worked for any Federal or Provincial agency, you qualified as a member. Even though the formats were large and they certainly wanted and had some small businesses, most of the East side membership was individuals who qualified to be members, whereas Western Canada had way more business members.

Why was Costco more structured than Price Club?

That came from the top, and Sol Price started Price Club, whereas Jim Sinegal and Jeff Brotman the real estate guy, started Costco. Jeff would negotiate properties and land and Jim was the merch guy. I got to know Jim over the years but I didn't know Sol very well as I only met him several times. I got to know Jim as well as you can for someone who only sees him several times a year, and there was no gray with Jim. It was black and white; we're doing what's best for the member. Their shareholders will be rewarded if the company does well, and so will the employees.

Sol was the kind of guy where the first building was an old airport hangar in San Diego. It was a terrible looking building but he took a chance on it because it was cheap and no frills. It was bare bones and nothing like what a Costco looks today. The shelving was terrible and the packaging was non-existent, it was all brown boxes. Sol threw everything against the wall, and what stuck, worked and what didn't, they didn't continue. It got more refined than that, but that's the way it started. It was totally novel in 1986 when the very first building opened in Quebec. It was totally out of the box, never been seen before, nobody had any idea what it was. It evolved quite a bit, but that was the biggest philosophical difference between Costco and Price Club back then.

Why did Costco grow quicker in those early days?

There were several reasons, but geography was the first one. Western Canada was called the Wild West as it was growing like crazy. Oil was through the roof and Alberta is based on oil production. They opened several Calgary and Edmonton buildings which did well, then they expanded in Alberta as fast as they possibly could. The reason they grew quicker was that they had a bigger commercial or business base than Price Club did, so it was easier to get big volume out of that commercial base. C-Stores and mom-and-pop shops only spent $300 a week whereas businesses spent $3,000 or $30,000 a week, which gave them exponential growth. Price Club grew slower and didn't expand as quickly as their first 10 locations in Eastern Canada were all in Quebec. They finally ventured into Ontario when we opened the first Ottawa building which was my first opening, then started ramping up in Ontario and there was a lot of growth there, so that was probably a big factor.

The member mix was more wholesale focus for Costco than a mix for Club?

Yes, and even the merchandise mix was different in the early days. When we flew to Vancouver we would go into a Costco and find a much more industrial type, similar to a Costco Business Center today, whereas Price Club was geared more towards the consumer. Some of the quantities were more reasonable and there were more brand name electronics and small electrical appliances. Western Canada carried those but took whatever they could get their hands on. Back then, many companies did not want to sell to Price Club or Costco.

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26 years at Costco Canada(June 8, 2022)

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