US discount retailer Costco has captured a 1.2 per cent slice of Australia's $88 billion supermarket industry despite only owning a handful of stores across the country.
It sounds inconsequential against German discounter Aldi's 8.1 per cent share, and Coles and Woolworths' combined 70 per cent share, but fill in the details and the Costco threat becomes more obvious, an IBISWorld report says.
Costco has gained 1.2 per cent of the market within six years and with only seven stores.
Its ongoing expansion, and diversification into petrol stations, means it will capture more of the market and heap more pressure on heavyweights Coles and Woolworths, report author and industry analyst Brooke Tonkin says.
"For a company that only entered the industry in 2009, 1.2 per cent is quite an achievement," she told AAP.
"Costco's supermarkets are far, far larger than Coles or Woolworths - they are massive warehouses where consumers spend a lot of money buying in bulk.
"Its bulk-buying power allows it to offer very low prices on a larger range of products (than the other players)."
Ms Tonkin said Costco's annual membership fee of $60 also allows it to remain profitable while offering large discounts on products ranging from food to televisions.
"The majority of the company's profitability comes from this fixed source of revenue, allowing it to pursue aggressive price competition," she said.
The introduction of a fuel station at its North Lakes store in Brisbane last year prompted a flurry of price cutting in the surrounding area.
But Costco was still able to offer lower fuel prices than other retailers, with customers saving up to 15 cents per litre, Ms Tonkin said.
Costco first established fuel pumps in Victoria and NSW.
As a result, Coles and Woolworths have attempted to broaden their reach by expanding their fuel station grocery offerings into mini-supermarkets.
Coles and Woolworths have also slashed prices and expanded private label products as competition from Aldi intensifies.
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