Costco Wants Harlem’s Frugal Customers But Not The Poor Ones
According to Crain’s, Costco Wholesale Corp. bowed to political pressure and agreed to accept food stamps in it’s East Harlem store which is scheduled to open in September. As a result of the decision, community leaders and elected officials including Rep. Charles Rangel and Manhattan Borough President Scott Stringer called off a rally planned at the construction site.
According to their website, “Costco Wholesale operates an international chain of membership warehouses, carrying brand name merchandise at substantially lower prices than typical retail.” In addition to basic household items, they are known for their high quality, low price, brand name bulk food department. I think that poor families who qualify for food stamps would be their ideal customer. I guess they think differently.
Currently, Costco does not take food stamps but they are starting a pilot program in their Brooklyn and Queens stores to do so. Politicians and community leaders had to demand that the East Harlem store be included in the program. According to Crains, “32,000 East Harlem residents are eligible for Supplemental Nutritional Assistance Program (SNAP) payments, colloquially known as food stamps”.
State Attorney General Andrew Cuomo had to write a letter reminding Costco of their obligation to accept SNAP payments since they received tax breaks for the East Harlem store. (The store has been developed with $55 million in tax-free bonds and grants.)
Mayoral candidate and City Comptroller William Thompson, Public Advocate Betsy Gotbaum and City Councilman Eric Gioia, also contacted Costco. Thompson’s letter carried a little more weight than the others since he oversees New York City’s pension fund (one of the top five in the country) which contains $82 billion in the city’s investment funds including 1.5 million shares of Costco stock, valued at $66 million.
Last November, the New York Times contacted Costco about not accepting food stamps. At that time, executives at Costco said they declined to accept food stamps for three reasons.
- They did not think they would qualify based on the federal government requirements.
- It was too expensive to adapt their equipment to accept food stamps.
- With their annual fee/bulk-purchase model, people on food stamps probably could not shop there anyway.
The Times asked one of the same questions that I asked myself, “If the corner bodega could qualify to accept food stamps, why wouldn’t Costco?
I guess the answer goes back to the title of this article — Costco Wants Harlem’s Frugal Customers But Not The Poor Ones.
Notably absent from the Costco discussion is New York City’s current Mayor and candidate for reelection, Michael Bloomberg. In another article, the New York Times states that “food stamps have been a touchy issue for Mr. Bloomberg, particularly since 2006, when he clashed with aides and declined to extend food stamp benefits for able-bodied adults, even though New York’s relatively high jobless rate allowed him to do so. In February, the issue flared up again when the a provision in the stimulus package allowed Mr. Bloomberg to extend food stamp benefits again, but he stuck to his position that if these adults want to receive food stamps for longer than three months in a three-year period, they can enroll in a city workfare program.”
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Update: I forgot to mention that Costco has a $50 dollar yearly membership fee.
Category: Harlem News, POLITICS, Reflections
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thank you for this.
I hope that the customers realize that you have to become a member of Costco and have to pay a fee to join. If you don’t join you can not purchase anything from the store.
Maybe it’s just me, but why would a national change change their policy to appease the-powers-that-be of Harlem? If you don’t take food stamps, then don’t take food stamps. Costco is a national members only change. I hope the Harlem native realize that Costco is not the normal shopping establishment.
To MalikAlex, the article states that Costo is obligated to take food stamps at its Harlem location since the chain received tax breaks for that location. The powers-that-be simply reminded them of their obligation (p.s. Rangel is the only Harlem politician listed in the article).
Generally, I think it’s funny that Costo reps think food stamp shoppers don’t buy in bulk. Clearly they have never been in a supermarket at the first of the month where you can find folks with not one, but two carts filled to the brim with food items. Besides, I think food stamp shoppers will be a small portion of their clientele. Most people will be in there spending cash. I’m tired of businesses acting like poor people’s money ain’t green.
Malik,
I’m all for free enterprise and believe that private companies should operate their businesses however they want, but once you take public dollars you have to be accountable to the public.
If Costco doesn’t want to take food stamps they should cancel the $55 million deal that they made and continue to do business as they wish.
to N & Around Harlem,
Costco was GIVEN the $55 million tax break as an incentive to build in Harlem. If they were not given that tax break they would have built the store in a more lucrative market. The powers-that-be put that deal together as part of rezoning Harlem. Costco’s business model is out of place in the EAST HARLEM location.
And if you recall, they were going to put a TARGET in that location, but the deal fell through. Costco was a SECOND choice. The original plan was to put a HOME DEPOT and a TARGET but TARGET pulled out and developers had to scramble to find a second “anchor” store to complete the deal.
So back to my original statement…if I was Costco I would not take food stamps, it doesn’t fit into my model. If you ask me to come into YOUR neighborhood to save your deal then you loose bargaining power on how we structure the deal.
But again,this is just my opinion. (But the facts of the deal are true facts…Google it)
Malik,
I disagree. They did not come just because of the incentive.They realized the value of the location just as many have recently realized the value in Harlem from a location point of view.
In regards to building in a more lucrative market, in NYC where space is a premium, income demographics are the least of most retailer’s concerns. For the amount of space need for Costco to come to NYC, there are very few other places in Manhattan that could accommodate its needs.
The project should be win/win for everyone.
Also, I’m sure Costco checked their membership records and saw how many people from Harlem and other NYC neighborhoods cross the bridge daily to go to Costco in NJ.
They are not a new company to many people in Harlem.
Finally, no one is forcing them to take the tax/grant incentives. They can give them back and continue to do business as they wish.
This deal has been in the works for a long time and while you may not agree, the truth is that Costco was the back-up plan. The two main stores were supposed to be TARGET & HOME DEPOT.
In your own blog on 3/3/2008 you mention this deal. And at that point it was still a deal between Home-depot and Target.
It’s a two-way street. Yes, the tax breaks are incentives to draw businesses to places like Harlem, but no amount of money will bring a corporation to a neighborhood that cannot sustain it’s bottom line. Costco is conducting business, they’re not doing Harlem a favor. Target and Home Depot are setting up shop nearby in the Bronx and can expect to pull Harlem dollars anyway.
Malik,
I don’t see it as a back up plan. You present the deal and whomever closes first wins. Multiple negotiations exist in projects this big. And, everyone always has an out. It’s business.
N,
Exactly. I get tired of people suggesting that business who come to Harlem are doing us a favor. They are not giving away anything.
It’s a mutually beneficial relationship.
April
I heard that Costco in Puerto Rico accepts food stamps. Please let me know if that is true. If it is, then what is the problem?
costco need to stop it. costco don’t know anything about poor people-to narrow minded. costco is not doing harlem any favors. iam so sick of people making big issues out of everything when it comes to harlem. costco should have just stayed away especially with the cop-out reasons they gave which are not realistic and out of touch with reality. with a 55 million dollar a year tax break how could you not meet the fed/gov requirements. too expensive to adapt your equipment for food stamps when the money you put out is returned back in a very short time through your sales which is one of the reasons you choose that location. your annual fee and the bulk purchases is nothing for people who know how to swing a dollar.