Hyper-markets coming to Federal Way

By next spring, Federal Way residents should be able to buy their gas at CostCo.

But they won’t have to purchase it in 55-gallon drums along with their mega-size groceries.

The warehouse retailer plans to start construction by February on a new gas station along Enchanted Parkway near its existing Federal Way store.

Costco is not alone in going from groceries to gas.

Safeway, too, plans to open a gas station in Federal Way next summer, but a spokeswoman would not confirm where it would be placed. She did say it would be near one of the city’s four Safeway stores.

The grocery store gas stations follow a trend started in Europe some years ago where more than a one-third of residents purchase gasoline at so-called “hyper-markets.”

Paul Latham, Costco vice president in charge of gasoline, said the first Costco gas station opened in Tucson, Ariz., six years ago, and 17 stations have since opened in Washington state.

“We’re trying to put gas at every Costco site,” Latham said, but parking and land-use issues have prohibited some sites from gaining stations.

Costco is by no means leading the charge.

Safeway and Albertson’s each have more gas stations than Costco, and Fred Meyer’s parent company, Kroger, has been placing gas stations at many Northwest Fred Meyer stores, Latham said.

The reason for the trend is obvious. “One thing that gasoline does is that it drives people to your business on a regular basis,” Latham said.

“We always intend to be the lowest-priced gasoline in our market area,” he said. However, due to fluctuations in the market and supplier contracts, the price difference will sometimes be dramatic and other times merely competitive, he said.

“We’re not operating in a vacuum. All of our competitors are free to react to (our price),” Latham said.

Construction of the Costco station will begin after Jan. 1 if all goes according to schedule, which puts the station opening in the springtime, Latham said.

Safeway, meanwhile, has 38 gas stations open or opening soon in its Northwest region, covering parts of Washington, Idaho and Alaska. More are on the way.

“It had to enhance one-stop shopping so it took us a couple years to get involved in this,” said Cherie Myers, a Bellevue-based Safeway spokeswoman. “We’re kind of a little bit behind the curve.”

While Safeway gas stations have recently been placed in Tacoma and Renton, Myers said she couldn’t reveal more about plans for a future Federal Way site until permit applications were filed with the city. But she said she expects the customer base to be solid.

“It’s certainly something the customer embraces,” she said, adding that Safeway Club cardholders reap most of the benefits in cost savings over national gasoline brands.

“We will always be competitive within the market area,” she said

Despite the grocery corporations moving in, not all local competitors are shaking. They say they have a niche market, and many customers won’t wait in line for gas.

Valerie Koch, manager at Ernie’s Fuel Stop on Pacific Highway, not far from the Costco warehouse, said her station was part of the Commercial Fueling Network which drew a lot of truck traffic. Because of that, about 5,500 gallons of diesel are pumped each day at the station. Likewise, the station’s conspicuous Pacific Highway location draws the customers who pump a collective 3,000 gallons of unleaded fuel daily.

“It would probably bleed off some of the regular customers,” Koch said, “but Costco can’t open a truck stop.”

Some of Koch’s customers say they won’t change their ways at the pump if it means longer waits to fuel up.

Ernie’s Fuel Stop customer Morris Hardcastle, a Seattle resident who frequently visits Federal Way, said he’d prefer to support independent businesses when buying gas.

“I don’t care where I get it as long as the car runs,” he said, before adding that time was the biggest factor.

Though Hardcastle is a Costco member who says he would not wait in line at the warehouse store to pump gas.

“I wouldn’t wait for 10 minutes,” he said while pumping gas at Ernie’s. “That’s why I came in here.”

Another fuel stop customer, Enumclaw resident Caryn Hopkins, who works at the Federal Way Home Depot, said cost and convenience were big issues. Even though she works near Costco, she wouldn’t wait to pump gas in the cold, she said.

“If I had a new car,” Hopkins said. “I might care what I put in.”

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