Costco Looks to Crack Chinese Retail Market with Discount Stores
It is a problem every retailer wishes they had to face: too many customers trying to squeeze through its doors. When Costco, the US discount retailer, opened its first store in China earlier this week, the Shanghai police had to be called on the opening day to restore order as the store was swamped with shoppers.
The company has 778 stores, called warehouse clubs, around the world, the majority of which are in north America. The clubs are popular with shoppers because they offer great value on selected items bought in bulk in return for an annual membership fee.
Costco has had an online presence in China since 2014 through a partnership with Chinese ecommerce giant Alibaba. This week it decided to open its first brick-and-mortar store in China and it was an instant success with customers waiting up to two hours to pay at the checkout.
So what was the big attraction? Unsurprisingly, the low prices, particularly on imported US goods, which are coveted by Chinese shoppers. But was is perhaps more surprising that the range of items offering discounts of up to 60% including premium products such as Moutai, the leading luxury liquor in China.
It remains to be seen whether the crowds will keep coming to Costco’s Shanghai store once the initial fascination dies down. China is a tough market for foreign retailers and it faces competition from long established rivals in China such as Walmart, Alibaba and JD.com
Nevertheless, Costco has been very successful in Taiwan, where it has been operating for 22 years and has 13 stores. It is the island nation’s third-largest food retailer. Encouraged by the success of its Shanghai store, Costco is already thinking of opening a second hypermarket in China.
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