Costco’s strategic patience and distinctive bulk-buying approach have positioned the retailer to surpass Aldi in profitability within Australia — and the gap continues to widen. But here’s where the story gets intriguing: many Australians are now willing to go the extra mile, both literally and figuratively, to shop at Costco for essentials, fresh food, electronics, and home appliances. This trend has significantly boosted Costco’s earnings, making it more profitable than Aldi, which boasts over 600 stores across the country.
For the past year ending August 31, Costco reported sales approaching an astonishing $12.6 billion — a figure encompassing bulk groceries, clothing, electronics, and other goods. What’s driving this? Consumers are increasingly broadening their shopping horizons, favoring value over convenience, and spreading their dollars across various retailers instead of sticking to traditional supermarkets.
Costco’s model, characterized by a membership-only approach, remains a key differentiator. The company currently operates 15 warehouses nationwide and plans to add two more in Victoria and Western Australia by 2027. The ultimate goal over the coming years is to expand to a total of around 35 stores, gradually enlarging its footprint without rushing.
Jeremy Barker, a retail strategist and managing partner at OC&C Strategy, explains, “Costco has played the long game. They are strategic about choosing prime locations. When they open a store, it’s often very successful because everything is done with precision.” He adds, “Their value proposition is straightforward — branded goods that offer excellent quality at competitive prices.”
Meanwhile, Australia’s supermarket giants, Woolworths and Coles, are resorting to aggressive price reductions to recapture market share. This shift came after last year’s public backlash over pricing practices, which led many households to compare prices more diligently and seek better deals elsewhere.
Financial documents obtained through regulatory filings reveal that Costco in Australia achieved nearly half a billion dollars ($499.2 million) in after-tax profit — surpassing Aldi, which operates over 600 stores here. Aldi’s local sales hit around $13.3 billion, with profits of about $403.7 million for the 2024 fiscal year.
Barker notes that Aldi and Costco cater to different types of shoppers. While Aldi has considered entering the bulk-buy space itself, it decided against it, observing that many customers prefer to shop within a fixed budget. He states, “For consumers who value trust, recognizable brands, and good deals, shopping at Costco is often seen as an enjoyable experience — it’s almost a fun activity. In terms of value, both Aldi and Costco outperform traditional supermarkets like Coles and Woolworths.”
Costco’s roots trace back to 1983 when it launched in Seattle, Washington. Its founders, Jim Sinegal and Jeff Brotman, pioneered an “inverse retail” model that focused on collecting profits primarily from membership fees. Instead of the typical 25-30% markup, they capped margins at 15%, leveraging large-volume purchases to negotiate substantial discounts with suppliers.
Today, Costco has expanded to over 900 stores across 14 countries, with most located in North America. Australia became a top-tier market after the first warehouse opened in Melbourne’s Docklands in 2009, quickly ranking among the company’s most successful outlets worldwide.
Costco carefully selects locations based on the need for extensive space (around 14,000 square meters), high population growth, and transport accessibility—all vital for the high-volume, low-margin sales model.
Popular items include everyday essentials like cleaning supplies and toiletries. Its private label, Kirkland Signature, is especially coveted, with standout products like its three-ply toilet paper, $6.99 rotisserie chickens, baby wipes, and large jars of nuts such as cashews and almonds.
During the Australian Competition and Consumer Commission’s late-2024 supermarket industry review, Coles CEO Leah Weckert highlighted how Australians are willing to travel long distances to buy Costco’s products, especially toilet paper. She pointed out that Costco’s stores often generate sales six to eight times higher than typical Woolworths or Coles outlets because customers tend to buy larger quantities in one trip.
Furthermore, last year’s federal government measures have restricted pricing abuses in Woolworths and Coles, requiring them to apply reasonable profit margins on their products, starting July 1. Meanwhile, Costco’s quality meat products received top satisfaction ratings in 2025 from Canstar Blue, with high consumer approval.
Costco increased its membership fee to $65 in September 2024, an essential revenue stream accounting for over 60% of its operating profits, even though only about two percent of total revenue comes directly from memberships.
As Costco continues to grow quietly but steadily across Australia, many questions remain: Will traditional supermarkets be able to adapt to this rising competition? And do consumers truly prefer the value and shopping experience Costco offers, or might there be a downside to their expanding dominance? What’s your take — do you see Costco’s longer-term strategy as a smart move, or are you skeptical about its potential to reshape the grocery landscape? Share your thoughts below.
