When Sam's Club, Costco compete, sales-tax revenue wins

When Sam's Club, Costco compete, sales-tax revenue wins

CHAMPAIGN — Both Sam's Club and Costco were founded in 1983, have a membership model and sell their product in bulk.

Each store's fans like to argue which has the better rotisserie chicken.

If and when Costco opens at the Market Place Mall in 2020, pending city council approval of a $2.75 million sales-tax reimbursement deal, it will be less than 2 miles from Sam's Club.

The store is expected to bring in $366 million in revenue over its first six years, according to the city.

While Costco may eat into Sam's Club's sales, the city said sales-tax revenue will increase overall.

To look at this, the city's planning and development department consulted with Business Districts Inc. to study how other cities with a Sam's Club that added a Costco have fared.

BDI looked at East Peoria, Melrose Park, Mount Prospect, North Riverside and Bolingbrook, all in Illinois.

"They looked at the community's total sales-tax revenue two years before Costco and four years after Costco opened," said Rob Kowalski, Champaign's assistant planning and development director. "They noted whether sales-tax revenue rose, stayed the same or declined, which would give an indication of whether Costco was eating up sales from other stores or adding to the pool."

While they concluded that there may have been "leakage" from other stores, Kowalski said, "in all cases, they found sales tax in those communities rose from what they were before Costco opened."

On top of this, the city projected what overall sales-tax revenue might look like in five years if similar stores nearby saw a 3 percent decline in sales annually because of Costco.

"It's still a pretty significant net positive in terms of sales-tax revenue," Kowalski said. "Perhaps there would be some shifting, but even if there is, the gain of the Costco means positive sales-tax revenues."

He declined to say which stores were included in the projection but said it included Sam's Club and other big-box retailers.

The decision to offer Costco the deal "wasn't necessarily about competition between stores, but overall sales-tax revenue and a new store that residents have been wanting in the community," Kowalski said.

Costco declined to comment, and Sam's Club did not return a request for comment.

But Kowalski said in talking with them, they argue they're not direct competitors.

"People go to Costco for very specific things," he said, buying bulk in advance rather than grabbing ingredients last minute. "They argue that they don't compete with other stores as much as one might think."

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