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The Seattle Times reports that Costco wants to create a 106,000-sq. ft. Costco Fresh store on the site of an old Kmart in Bellevue, Wash.

Costco Chairman Jeff Brotman told the Times that the store would offer “huge selections of all types of gourmet products” at low prices, including groceries, wine and beer.

The format originally was proposed some two years ago, but Costco abandoned its plans when neighborhood activists in New York City -- where it planned to first open the units -- objected. The company believes it will encounter no such opposition in what essentially is its own backyard.

If it gets through the planning and zoning process smoothly, the company expects the new Costco Fresh store should be open by late spring 2003.

Costco seems to be in a testing mode lately, as it also is building a new store in Washington State that will focus on home furnishings.
KC's View:
In the recent study that suggested the near future holds limited growth potential for the warehouse clubs is true, then it seems to us that these kinds of moves by Costco make sense. The company is isolating the categories that it believes can support stand-alone warehouse formats, and essentially is building satellite stores that will be so-called category killers.

It’s a good lesson for traditional food retailers, which often don’t have the killer instinct in the very category for which they are – or should be – known.

After all, if Costco is willing to create different kinds of formats for different kinds of markets, why shouldn’t mainstream food retailers do the same? And wouldn’t it also make more sense to focus in more expertly and relentlessly on the food categories that can allow these mainstream retailers to really differentiate themselves from big box stores?