Costco will represent 'large retail shock' in Thunder Bay
The economic value of having a Costco in Thunder Bay has its merits, according to some local experts.
Jamie Taylor, chief executive officer of the Thunder Bay Community Economic Development Commission, says having a large retail warehouse helps to position the city as the hub for regional shopping.
"Many people currently travel to the United States and Winnipeg as well as online shop instead of shopping in our community," Taylor said. "The business model is expected to deliver significant economic benefits to Thunder Bay, including increased visitation to the region, longer visitor stays, additional regional spending within the city, short-term construction employment, long-term jobs, and new property tax revenue."
Taylor called the Costco development a catalyst for other development opportunities in the retail and commercial space around Innovation Drive.
Livio Di Matteo, professor of economics at Lakehead University, said Costco represents a large new entrant into the Thunder Bay retail and consumer market, and its expansion into the city is part of a larger expansion process the company is pursuing across North America. He noted that the size of the proposed store is a typical standard-sized store for Costco and is designed to serve primary trade populations in the range of 100,000 to 250,000 people.
"The impact of its arrival is not just on Thunder Bay," he said. "It is designed to service the entire region as a destination shopping centre."
Di Matteo added that a store that size will likely have a full grocery section with fresh food, meat and bakery as well as a pharmacy and gas bar, along with a range of electronics, household items, general merchandise, and even clothing and some furniture items.
"It represents a fairly large retail shock and one suspects it will affect Walmart, Superstore and to some extent Home Depot, Canadian Tire," he said.
Di Matteo also agrees with Taylor that the American-based warehouse will probably redirect much local and regional spending away from Duluth and Winnipeg Costcos back to Thunder Bay, providing a boost to local employment as well as the municipal tax base.
"Its short-term effect will be to boost competition and also bring down some prices, particularly in gas, household products and some groceries as a result of its bulk buying approach," he said.
Di Matteo says the Thunder Bay and regional market have been growing in terms of population and, in the short term, should be able to support existing retailers as well as accommodate Costco.
"Retail in smaller communities might be hit a bit harder, but they already compete with larger retail in Thunder Bay," he said. "The longer term is more uncertain in this regard and depends on continued population and market growth in the region."
He added that the long-term impact on more competitive pricing is also uncertain.
Thunder Bay appears to be at the end of several east-west supply chains, resulting in more costs in bringing things here.
"Also, the local market remains relatively isolated and while Costco likely does have a standard formula approach to its pricing, in the end, after it has grabbed a sufficient market share, the risk is it might price like everyone else, because it can," he said.
