Costco to Bring Wholesale Changes to East Harlem

By Joshua Tapper on Oct 13th, 2009

Representatives at Costco's pre-opening office, near the site at 325 Pleasant Avenue, screen job applicants and offer membership packages. (Photo by Joshua Tapper)

Representatives at Costco's pre-opening office, near the site at 325 Pleasant Avenue, screen job applicants and offer membership packages. (Photo by Joshua Tapper)

In a neighborhood dotted with tiny Hispanic groceries and 99-cent stores, the opening of a Costco Wholesale superstore might be expected to cut into the income of smaller businesses. But East Harlem shopkeepers and residents are embracing the mid-November arrival of the North American chain despite the traffic and potential competition it will bring.

“It’s a good idea,” said Sammy Sey, who works at El Grocery, a 24-hour bodega on Second Avenue at East 124th Street. If anything, the increase in visitors to East Harlem can mean only more business, said Sey, a Yemenite who has lived in the neighborhood for 20 years.

Costco’s arrival will have “no effect,” said Yusef Zindani, as he wrote down stock items behind the counter of a 99-cent shop on East 125th Street. He is confident Costco poses no threat. “Even if Costco opens across the street, it’ll be fine,” he said. “Even the supermarket doesn’t bother small stores.”

Many local residents can’t afford the wholesale chain, slated to open on Nov. 12, Sey said. “Everyone here is on welfare,” he said. “If you only have two dollars you’re going to come here, not Costco.”

Costco will join a host of big box stores—including Target and Best Buy— opening at the nearly completed East River Plaza off FDR Drive between 116th and 119th Streets. Costco assumed the lease of space that Home Depot had intended to use before it was hit by economic troubles. The East Harlem Costco will be Manhattan’s first.

While Sey and Zindani exuded unbridled enthusiasm, some businessmen, like Francisco Garcia, owner of Mexico Lindo Grocery on Second Avenue and 116th Street, sounded less optimistic. Garcia, who has run his bodega for 19 years, acknowledged he’s going to lose business, but there is “nothing we can do,” he said, adding that if he can’t keep paying his rent, “we have to move out.”

In all likelihood, Costco’s arrival will not be wholly positive or negative, but a “combination of both,” said James Pisacano, president of Pisacano Management Group Inc., a local realty group. “Property value is going to be positively affected” and the store will “bring an influx of new blood via foot traffic,” said Pisacano, whose firm owns 30 properties in East Harlem.

The traffic, however, may be a double-edged sword, Pisacano said. Pollution and noise from supply trucks could pose a problem. Costco has offered noise-reducing double-pane windows to businesses along truck routes, he said. Costco is also offering new air conditioners to businesses that need to keep their windows closed to block noise.

Still, he said, “Costco is a plus. It’s bringing more people into the area.” Pisacano predicted that Costco shoppers from outside the neighborhood will also pop into local stores while they’re in the area.

An increase in traffic into East Harlem is expected from the Willis Avenue and Triborough Bridges, as well as from FDR Drive. Hector Quiroz, owner of Lechonera La Isla, a Puerto Rican restaurant on East 125 Street and Second Avenue, was unfazed by the likely traffic snarls. “It’s New York,” he said.

Ernest Johnson, a senior director at Strive Inc., an East Harlem-based non-profit that assists the chronically unemployed, concurred with storeowners that Costco will have a minimal financial effect on local businesses. “People will still shop at local stores,” and Costco “will allow small area businesses to exist,” he said.

“We intend for them to be our customers,” said Justin Callaghan, Costco’s assistant vice president of human resources, Eastern Division, referring to local businesses. Shopkeepers “are going to recognize immediately that they have been paying too much money for soda and they’re going to recognize they can become business partners.”

Local businesses can buy goods wholesale from Costco. The company has already distributed information booklets to such neighborhood shops as Zindani’s 99-cent store. “If Costco has it, and we can get a deal to sell it, we’ll get it,” Zindani said.

“There’s so much opportunity for small bodegas,” Callaghan said. “They’re going to be able to sell at the same price, but pay a lot less.”

“It’s just great that Costco’s coming to this location,” said Jeffrey Feiner, an adjunct associate professor of marketing, with a specialization in retail, at Columbia Business School. “Costco has prices that will allow people of all income stratums to shop there. I think Costco will be affordable enough for a large percentage of the local population.”

Moreover, Costco understands differential marketing, Feiner said. “They just don’t come into a market and plop down a store, they really study it. Costco is very aware that it has to provide different kinds of merchandise, different kinds of pricing for the different markets it goes into.” When Home Depot first opened stores in the borough, Feiner said, it avoided impractically large products in favor of merchandise a Manhattan apartment-dweller could handle.

“It’s going to be slightly smaller than our other buildings,” said Callaghan, referring to the East Harlem location. “The item selection will have a lot to do with the market we’re in.”

The store—the “most unconventional Costco in the world,” said Courtney Stern, assistant funding manager—will be structured like a supermarket, specializing in fresh food.

A traditional knock against big-box chains is the tendency to consume the market by offering one-stop shopping, capturing as many consumer dollars as possible, said Stacy Mitchell, author of “Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses.”

Mitchell, a senior researcher at the Institute for Local Self-Reliance, a national organization that supports local business ownership, argued that Costco leaves little for a consumer to purchase elsewhere. “People don’t have to venture out of the East River Plaza,” she said. “If you had something integrated on the street, that might be a synergistic relationship.”

The losses will outweigh the gains, Mitchell predicted. While Feiner was confident that Costco’s annual membership costs will be “offset by savings,” Mitchell was “disturbed” by officials’ bringing in a big-box chain. “The resulting closure of small businesses is going to result in long-term vacancies, more job losses than job gains and more tax revenue losses than gains,” she warned.

Nevertheless, East Harlem residents and shop owners are welcoming the store with bulk-sized gratitude. “Costco, when coming to the East River project, wanted to make sure the community was involved,” said Johnson of Strive. “Most people are pretty appreciative.”

Categories: Economy
Tags: , , ,

2 Responses for “Costco to Bring Wholesale Changes to East Harlem”

  1. Susannah says:

    I think it is remiss to write an article about the impact of a new Costco in the East Harlem neighborhood without addressing the economic factors which made its arrival possible and the exclusionary practices it will have once its doors open.

    Costco’s construction is due in part to $55 million in tax -free bonds and grants from the city of New York. At this point, the Costco opening up in East Harlem doesn’t plan to accept food stamps. Costco has stated that it will begin implementing a pilot project to accept food stamps at 2 different New York City locations and, based upon the success of this project, may in the future accept food stamps at the East Harlem location. Acceptance of food stamps at the East Harlem location is contingent upon Costco being satisfied with the pilot program at other locations. Costco has not yet set out what the criteria for success of this program will be, nor has it set a time-line for when success will be measured.

    In addition to Costco demurring from any actual commitment to accept food stamps in East Harlem, it is outrageous that Costco, whose presence in the neighborhood is due, at least in part, to taxes paid by community residents, will not accept the dollars of these very residents because they come in the form of food stamps. This thinly veiled discrimination should be portrayed for what it is: exclusion of the poor made possible by misallocation of taxpayer resources.

  2. Costco has not yet set out what the criteria for success of this program will be, nor has it set a time-line for when success will be measured.

Leave a Reply

Log in / Advanced NewsPaper by Gabfire Themes