Why would Costco pivot KC location? It would make more money, strategist says
The Costco in midtown Kansas City must become a business center if it is to stay open, the bulk grocery company says.
That would mean its offerings would cater to small businesses and restaurants, and amenities like the bakery, food court, optical center and pharmacy would be nixed.
But why, wonder faithful midtown shoppers who aren’t ready to part ways with their regular spot? Some are threatening to cancel their memberships if Costco changes its 241 Linwood Blvd. store as it plans. Is the switch really worth the frustration it incites for customers?
At a contentious meeting last Tuesday, Costco development director Steve Cross told neighbors the decision was made at the corporate level, and he couldn’t discuss contributing factors.
“There’s a high decision, but what this ends up with is you end up with a business center, because the alternative is, it’s closed,” Cross said.
The major retailer’s reasoning isn’t a mystery to professor Vincent Barker, who teaches business strategy at the University of Kansas. The Edmund P. Learned professor says, simply put, Costco isn’t receiving the return rate it needs from the store.
The company likely has a certain profit threshold for its stores, and whatever that is, midtown isn’t hitting it.
“Assuming Costco knows what they’re doing, and they probably do because they’re a pretty big company — they’re very, very successful — it’s probably not generating enough total business to cover the costs and (make) the amount of money they want,” he said.
The idea, Barker said, is that restaurants and other businesses spend far more money at the store than individual consumers. Buying in bulk means a bigger profit for Costco, and a higher volume of products will move through the store.
He thinks the convert-or-close sentiment shared at the recent neighborhood meeting is no fib. Granted, Barker said, it’s unfortunate for the existing customer base.
“Yeah, there’s a lot of people that probably depend on that Costco for low price stuff,” he said. “I can understand why people would be sort of upset by that as a consumer.”
In Tuesday’s meeting, however, Cross assured customers that they could still shop at the business center. A long list of food products will still be available.
“You might think, well, ‘I’m going to buy 50-pound bags of onions,’ and yes, you can buy a 50-pound bag of onions, but you can also buy the regular-sized onions that you get at the Costco today,” Cross said. “So, not everything is super sized.”
What Costco’s pivot means
In this case, Costco is performing what’s often called a focus business strategy. It’s paring down its customer base and catering to a smaller group in hopes of dominating a niche market and driving up profits.
It’s a fairly common business practice. Rolex sells watches, not to the masses, but to those who are willing to forfeit a pretty penny for accessories. Whole Foods caters to consumers who will spend extra on groceries for healthier options.
“The average business transaction is going to be much higher than the average consumer transaction,” Barker explained. “Costco obviously thinks they carry enough stuff that’s attractive to businesses or restaurants.”
Not to mention, there aren’t as many competitors in the business-centric grocery space, though there are a few. Restaurant Depot at 1500 W. 12th St. and Index Restaurant Supply at 521 Main St. are on the short list.
Many restaurants utilize distributors like U.S. Foods or Sysco.
“They probably are fairly competitive in that category if they’re wanting to expand in it,” Barker said.
The worst-case scenario
What would be the worst case scenario, in Barker’s mind, is if Costco closed the midtown location completely.
“They’re a good employer,” Barker said. “You just want to keep those jobs around. If you take a look at your average retail job, Costco is above and beyond in terms of pay and benefits.”
Last week, The Wall Street Journal published a story about its benefits as an employer: high hourly wages, increased bonuses, retirement plans, etc. Tenured lower-level workers, like one profiled by The WSJ, have become millionaires.
Still, some neighbors expressed frustration with the change last Tuesday. Area resident Kim Wilson said many are dependent on the Costco location.
“The reason I have a problem with it,” she told The Star in a previous interview, “is that there are a lot of people in this community who don’t really have anything of bulk that they can go to. They have a lot of families to feed. Like, for myself, helping to care for a family member who is right down the street, this is really quick and convenient. I told them, ‘I’ll be right back.’ It’s taken five minutes to get here.”
Of Costco’s more than 900 warehouses, over 27 of those are business centers, according to its website.
Plans for the midtown business center remain under review by city staff.
The Star’s Dylan Lysen, Eric Adler and Chris Higgins contributed to the reporting of this story.
This story was originally published July 13, 2026 at 1:26 PM.