Supermarkets fight back against Costco: Customers offered bulk discounts and a range of special incentives

THE big supermarket groups are fighting to keep their customers from defecting to Costco, the discount warehouse that opened in Essex last week, with special offers and loyalty incentives, writes Heather Connon.

Tesco has about eight stores within a 20-minute drive of Costco's Thurrock store. At the Dartford Tunnel store, which is just around the corner, it has dedicated one of its aisles to Bulk Savers, offering discounts of 5-20 per cent on cases of 120 branded products. It is also offering catering packs of mayonnaise, vinegar and similar products.

Customers are also being offered a Clubcard, which gives them money off their shopping bills when they spend certain amounts. Customers get one point for every pounds 5 they spend, provided they spend pounds 10 or more. When they have accumulated 50 points, by spending pounds 250, they get a pounds 2.50 voucher. The card is also being tested in two other stores - at Wisbech, Cambridgeshire, and Sidcup, Kent.

A spokesman for Tesco said take-up had been 'quite encouraging', although it would take some time to evaluate the results.

Safeway is using a similar technique in its Chafford 100 store with a Safeway Savers card, although shoppers have to spend only pounds 100 to qualify for a pounds 2.50 discount. The card is also being tested in Maidstone, Kent. But a Safeway spokesman said: 'We are not playing down the tough trading conditions around Thurrock. It will be interesting to see how it works.'

Neither Sainsbury's nor Asda, which also have stores locally, has any special promotions.

The big three supermarkets started their fight against Costco before it even opened, mounting - but losing - a legal challenge to the local authority's decision to give it planning consent as a wholesale, rather than retail, operation. And all are anxious to minimise the impact of the warehouse club on their sales, already being hit by the expansion of discount chains and a price war between the three of them.

Costco, which already operates warehouse clubs in the US, is the first to open in Britain but a number of others are planned - Costco itself has plans for Watford. In exchange for pounds 20 membership, shoppers can take advantage of discounts of 25 per cent or more on compact disc players, bicycles, televisions and other household goods, as well as food.

However, Costco is selective - applicants have to be on a list of accepted highly paid professions.

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