On Aug. 27, Costco’s first store in mainland China opened on the outskirts of Shanghai, covering an area of nearly 20,000 square meters. On the first day of opening, Costco was forced to shut down because of the influx of customers and the traffic around it. This American members-only warehouse supermarket is famous for its good prices and low prices. According to Costco, it sold 160,000 memberships on the first day, sending its stock up more than 3% at one point. Everything here is “big”, with 1kg of crisps, 2m of stuffed bears, moutai priced below the official price and hermes dispensated.
Every year, Costco stores in Canada attract a huge rush of Chinese dama, who can empty a whole container in a few minutes. The opening of Costco’s Shanghai store was also dominated by “Shanghai auntie”. Although only members can enter, but the staff did not even check the membership card, the scene is comparable to the Spring Festival travel. At 1,498 yuan per bottle, it was 1 yuan cheaper than the official retail price, and was immediately wiped out.
Costco is the second largest supermarket company in the us after WalMart and the third largest retailer in the world. Over the past decade, wal-mart’s sales have grown at an average of 5.9 percent, while Costco’s has grown at an average of 9.19 percent. Costco is no. 35 on the 2019 fortune global 500 list. At Costco, the real reason why there are so many big parents is that the prices are generally lower than the average supermarket. Costco’s non-food department store prices are 30 to 60 percent below the market price, while food prices are 10 to 20 percent lower.
Costco is expanding more slowly globally each year, with only about 25 stores. For mainland China, Costco is more cautious — it started Tmall international in 2014, and its China team has been more than five years in preparation. Previous cooperation between Costco and Tmall international showed that Costco’s mainland buyers were mainly from east China, with Shanghai being the most popular. Why choose to leave first store in Shanghai, Costco stan.l Zhang Sihan was explained, the goal of Costco user is have ability to consumption of middle-income group, Shanghai minhang district in the business circle has seven international school, which means that the near of the large number of middle-income groups with high spending power, in accordance with Costco sales strategy.
In China, most supermarket membership CARDS are used to exchange points or discount some goods. However, at Costco, only members can enter the store to make purchases, and the membership fee is not used to purchase goods. It is simply a cost to obtain the purchase qualification and enjoy the service. Costco covers roughly the “pain points” a middle-class family might face in spending. It also offers additional services such as gas filling, tire repair, medical check-ups, eye exams, photo development, insurance, etc., to maximize membership benefits. In terms of returns and exchanges, except for electronics (which are free for 90 days), Costco will return everything from half-eaten fruit to unwrapped snacks. Members can also withdraw their membership card at any time and get a full refund.
According to costco’s 2018 financial report data, the company’s revenue is divided into sales revenue and membership fee. The sales revenue of fiscal year 2018 is 138.4 billion yuan, but the gross profit rate is only 11.03%. Membership fees accounted for $3.14 billion, just 2.2 percent of total revenue, but contributed 70 percent of operating profit. Out of more than 300 million people in the United States, Costco just wants to target 50 million of them to “stock up.” Stocking up at Costco may seem like a cheap and easy way to get started, but it’s also a low-key affair. Shanghai residents also show their real consumption power in Costco, which is likely to become a popular lifestyle in the future. One netizen even mocked them, “working days are more free than you, not working than you have money, than you have money than you will save money.”
Costco expands slowly, but in terms of turnover, it is a “speed” competitor. Costco’s inventory cycle is only 29.5 days, while wal-mart’s is 42 days.
Costco’s gross margin for any product is around 1% to 14%, and its combined gross margin is only 6.5%. By comparison, traditional stores are about 35 percent. While wal-mart has 130,000 skus, Costco has nearly 4,000, with only one or two choices for each small sub-category, but all of them are of superior quality. Since its inception, every product at Costco has had to be hand-picked and tried out by management, and one with the potential to be a “hot style” has become a staple of the middle class.
Costco tends to buy out suppliers for selected items, many of which are not available in other retail channels. Costco not only increases the bargaining power of suppliers to get a more favorable purchase price, but also strengthens the management ability of supply chain and warehouse to maintain high inventory turnover and capital operation efficiency. In addition, Costco aggressively promotes its own brand. Twenty-five percent of Costco’s sales come from its own brand, and Costco’s own Kirkland Signature is the no. 1 health brand in the United States by sales. Private label is an important step for Costco to further benefit its members by offering lower prices, while consolidating its “speed” business model.
After be well-known for a time, Costco has a long way to go in China.