PORTLAND, Ore. — With many families suddenly struggling to feed themselves, the big warehouse clubs known for king-size packages of steak and jumbo boxes of Cheerios are increasingly competing with grocery stores for the 36 million Americans now on food stamps.
Costco Wholesale Corp. said last week that it would start accepting food stamps at its warehouse clubs nationwide after testing them at stores in New York. That is a big about-face for a chain that has catered to the bargain-hunting affluent with its gourmet foods.
Costco joins warehouse-club competitor BJ’s Wholesale Corp., which started taking food stamps last April, and Sam’s Club, which began accepting them in the fall of 2008.
Until recently, some wholesale clubs were skeptical poor people would be willing to pay the $50-a-year membership fee or would be interested in buying food in the quantities for which the stores are famous.
But now, in this economy, stores are battling for every dollar and see a big potential market in the growing ranks of food-stamp recipients. From warehouse clubs to supermarkets and mom-and-pop groceries, stores are retraining their cashiers and hanging new signs to welcome such customers.
“Certainly this economy was a wake-up call,” Costco chief financial officer Richard Galanti recently told investors. “It is not just very low-end economic strata that are using these.”
The rolls of food-stamp recipients have grown by 10 million over the past two years.
Most major food chains — like Wal-Mart Stores Inc. and Safeway Inc. — have accepted food stamps as payment for many years.
Costco had refused to do so, arguing that there would not be enough shoppers to make it worth the trouble of updating its electronic payment systems and that food stamps would slow down the checkout lines.
In May, however, Costco began accepting food stamps in New York under political pressure, and the practice turned out to be more popular than expected. Galanti said the company’s assumptions were “probably a bit arrogant.”
The warehouse clubs are not waiving membership fees for food-stamp recipients, and memberships cannot be bought with food stamps.
But Costco executives said they were surprised to find that some shoppers are paying the $50 fee because the company takes food stamps.
The company hopes to accept food stamps in about half its 407 stores in the U.S. by Thanksgiving.
Peter Hsia, a retail strategist for the Kurt Salmon Associates consulting firm, said taking food stamps could help stores even after customers don’t need them anymore.
“They’ve got a big slice of their core customers who are now using food stamps, and you don’t want to lose them when the economy picks up,” he said.
Numbers
10 million Increase in food-stamp recipients over the past two years
200,000 Number of retailers that accept food stamps, 20 percent more than in 2005
