Costco Food Stamp Compromise Follows BJ's Precedent

Costco will test food stamps in its New York locations but, while activists, politicians and even bloggers will take credit for persuading the company to change its policy, the competition had something to do with it, too.

In April, BJ’s announced that it would begin to accept food stamp benefits via Electronic Benefit Transfer payments in all of its 180 Cub locations.

In announcing the program, Laura Sen, the club chain’s CEO noted, “BJ’s recognizes the diverse financial status and changing needs of its members. We are proud to help members stretch their food budgets.”

The point she made is important. Many New York neighborhoods suffer a lack of major supermarket chain outlets and that includes Harlem, where the under-construction Costco that has been the center of the controversy is located. The retailer built there based on the relatively low costs and government incentives the location afforded and for the access the site provides affluent consumers from surrounding neighborhoods as well as better fixed locals. But the idea that many lower income Harlem residents who use food stamps might have restricted access to less expensive food and basic consumer goods than folks coming into the community to shop – particularly given that local residents might be shopping for food primarily at high cost grocery stores and bodegas - would naturally provoke area activists and politicians.

Although it has managed to develop one club each in the boroughs of Brooklyn and Queens, Costco has a history of community opposition in New York, as most big store operators have. Traffic issues, concerns about neighborhood character and old fashioned obstructionism all factor into problems retailers confront, and the opposition tends to organize and look for attention while folks who might like new retail options get less of a hearing. Yet developers and the retailers they that work with them have clout, and, despite a few struggles, particularly in Brooklyn, Costco has been able to penetrate the New York market, something that Wal-Mart is still attempting.

Costco has pulled out of Big Apple projects in the past, though. A food-oriented concept it was trying to develop for Manhattan was abandoned. Opposition from some in the community factored in, but probably more indirectly than activists believed. As one executive related the story in the aftermath, the entire project had become so consuming of senior management time – much of which was devoted to refining the presentation, operations and logistics of a store that would serve a unique group of customers in a high-volume but difficult to supply location – that leadership eventually scrapped it.

Particularly given BJ’s decision to embrace them, Costco’s decision to test food stamps in its New York City clubs was a wise compromise. It puts local politicians who want to boost community retail services back on its side, protects the investment the company has made to get into Manhattan and avoids a fight that would result in its villainization, one that would confer white knight status on BJ’s, with three clubs operating, its major competitor in the city