Cost Less Express -- Order To Delivery: Lets This Business Do The Shopping

Cost Less Express

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-- Owners: Barry and Robin Stuck, Bernie Goldberg

-- Business: Buys and delivers merchandise from Costco to businesses.

-- Goal: 4,000 to 6,000 regular customers by the mid-1990s, more visibility among Eastside businesses.

-- Tip: Big sales do not always mean big profits. Cost Less Express had sales of $1.2 million in its first 12 months, but because of high operating costs and a need for new equipment and more workers, the company did not show a profit until this year.

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Russ Holmes strolled through a Costco warehouse in south Seattle last week, a computer print-out in hand.

Pushing a large wooden cart, he stopped near a stack of candy boxes.

Scanning his print-out, he selected 36 Twix, 36 Mounds and 48 Snickers candy bars. He added a jar of licorice, 40 packs of chewing gum, 36 bags of Gummi bears and 18 packs of a fruit snack to his load.

Then he moved to the next aisle: nuts.

As other shoppers stared, Holmes, grinned. Shoppers might assume he is a Costco employee or a consumer obsessed with buying in bulk. But Holmes, 22, works for Cost Less Express, a delivery service that buys and delivers goods from Costco to businesses.

At its south Seattle headquarters, 16 employees take telephone orders from companies who belong to Costco Wholesale Corp. Cost Less shops for the products, loads them in trucks and delivers them the next day.

Started by Barry Stuck and his wife, Robin, Cost Less today serves 1,300 Puget Sound companies. Sales totaled $2.7 million last year and are expected to top $4 million this year.

``We're essentially a customer of Costco, a very large customer of Costco,'' Stuck said.

Although Stuck's small company has no affiliation with the giant wholesale club, he says the two complement each other.

``We're undoubtedly good for their business,'' he said. ``And they save us money. We don't have to worry about our inventory or pay for a large storage area.''

Customers say Cost Less Express helps them save time and money. Many joined Costco for its lower prices. And since Cost Less Express shops only at Costco, customers say they know they are getting affordable goods in a timely manner.

``It's a low-cost, time-saving service,'' said Bonnie Little, who handles purchasing for 15 Richard James Realtors offices in the Seattle area.

About once a month, Little orders coffee creamer, sugar, coffee filters, paper, scissors, pens, file folders and other items.

``When we had only six offices, I did the shopping myself and it took the whole day,'' Little added. ``Fifteen offices would take at least two days.''

While working for a Southern California company in the 1970s, Stuck often purchased office supplies. Not only was finding the right products difficult, the prices upset him as well.

``I thought it would be really neat to have a truck make deliveries at an office park and offer the supplies at an affordable price,'' Stuck said.

He found at least half the equation in 1982 when he moved to Seattle and began work as a buyer for Costco. The other half, he said, came from Costco president Jim Sinegal. When Stuck told Sinegal he wanted to start his own business and discussed the concept, Sinegal proposed that Stuck become a supplier of products from Costco.

``We thought there could be a need for a business like that, someone who could deliver our merchandise to the people who liked our prices and the kinds of things we carry,'' Sinegal said.

In October 1987, Stuck and his wife quit their jobs, pooled about $120,000 from personal savings, bought a truck and a computer and leased a warehouse.

Then they prepared a catalog. Walking through the aisles of Costco, they jotted down item numbers, prices and product descriptions, compiling information on about 3,000 products.

Costco would not give the Stucks its list of commercial customers. But it gave Cost Less access to its computer so the new company could determine what products were in stock.

Since the Stucks could not afford to advertise, Costco hung banners in its Seattle-area stores with Cost Less's name and phone number. The Stucks also handed out fliers.

In a business plan, the Stucks predicted they would have about 400 ``mom-and-pop'' enterprises as customers in the first 12 months, each ordering an average of $30 of supplies.

Instead, their customers were medium-sized companies, which often needed supplies worth several hundred dollars. Cost Less's delivery fee increased with the size of the order, so larger orders meant more money, Stuck said. But there was a price.

``We had been thinking that with mom-and-pop customers we could fit all the deliveries into one truck,'' Stuck said. ``Immediately, we had to get more trucks, hire more people.''

After a year, the company had bought a second truck. It also hired six people. Cost Less now owns four trucks, employs 16 people and has moved for the third time to larger quarters.

For capital, Stuck turned to a longtime friend, Bernie Goldberg. Goldberg, who had been semi-retired, chipped in $75,000 and became a partner.

Much of the company's revenue has been used to buy new equipment and pay employees. Even though Cost Less Express showed a gross profit margin of 10 percent, it did not have a net profit until February.

``We were expecting to make money more quickly,'' Stuck said. ``But because of the scale, it's taken much longer.''

Individuals in other cities that have Costco stores have expressed interest in developing similar operations - though many lose interest when they discover the company's high operating costs.

Stuck would consider entering licensing agreements with entrepreneurs in other cities who would like to copy his concept. But he says developing a formal franchise operation could be too time-consuming at this point.

Costco president Sinegal said a few entrepreneurs have developed similar delivery services in Spokane and in the San Francisco Bay area.

Stuck also wants to increase the company's presence in the Seattle area - particularly on the Eastside, where new office parks are going up by the dozen.

Said Stuck: ``We send one truck out there every day now. We could be sending out six.''

Small Business Snapshot appears weekly in the Business Monday section of The Seattle Times.