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Yesterday, Costco opened its first store on the island of Manhattan, located on 116th Street off the FDR.
The store, featuring more than 105,000 square feet of selling floor, offers those familiar with Costco typical amenities, such as: a selection of more than 3,500 different products, a pharmacy, a doctor-staffed optical department, a hearing aid area, a photo center and a food court.
However, upon reading about this grand opening, I found out that a couple of not-so typical offerings were also spotted:
The Chanel classic flap handbag ($1,999.99) and the Louis Vuitton “Speedy 30” mini-duffel ($589.99).
I’ve been shopping at Costco dating back to when I was a little tyke. Back in those days it wasn’t even called “Costco,” the name of the company was “Price Club.” And in all those years of walking through the various aisles of its numerous stores all over the country I’ve never seen high-end couture items being sold. This got me thinking…why? Surely these shoppers in NYC aren’t being offered counterfeit merchandise!
I’ve acquired the answer. Obviously, Costco is not doing anything illegal so brazenly. They are simply participating in what’s called the “Gray Market.” The Gray Market is comprised of items that, while authentic, are sold outside the normal chain of distribution rather than being obtained from the manufacturer directly. Thus, since it’s not a direct relationship (aka “black & white”), it’s called Gray Market. Gray market exists primarily because of production overrun of goods, aka overstock from authorized resellers.
Costco is not considered an authorized reseller of LV or Chanel, unlike pre-approved distributors such as Neiman or Saks, so it must obtain said items from another reseller. Also, Costco doesn’t have a business relationship with the suppliers, and as a matter of fact I’d assume that the couture companies would frown upon their merchandise being sold by a “wholesale warehouse.” But they cannot control such a flow of their products since Costco is doing nothing illegal, simply buying goods in bulk and reselling them for a discounted retail price, as they do with all the products they sell. Simple macroeconomics.
So there ya go kiddies – your Econ 101 lesson for the day. See? I’m fun AND educational!
And fear not, Manhattan Costco shoppers! The Chanel bag you bought yesterday is indeed real. Too bad it’s also ugly.
