Costco Caters to Chinese

Published on Author bednart15

The U.S. retailer Costco has announced that it will enter the Chinese market through Alibaba. The company will offer access to consumer goods and its Kirkland generic brand through the platform known as “T Mall.” Not only will access to the Chinese market provide a new and different type of consumer base, but could help boost revenue for Costco, which has seen depressed revenues for the past five quarters.

Costco Logo

Costco’s entry shows more than the company’s desire for new markets and revenue though. Costco offers household, consumer goods for consumers that have enough house space and up-front paycheck to stock goods in order to save money. China’s expanding middle class, which includes greater amounts of household wealth and physical house space means a changing dynamic for retailers in China. Companies can now appeal to a class of consumers that is constantly growing and is roughly the size of the entire U.S. population. Costco will not be last large-scale consumer retailer to open Chinese operations in the coming year, but its move is indicative of an expanding middle class that is dominated by online retail.


4 Responses to Costco Caters to Chinese

  1. I wonder how Costco will fare in China. I recently read an article discussing how Wal-Mart has never been fully embraced by the Chinese. Wal-Mart has operated in China for almost 20 years, yet only has 400 or so stores there. Wal-Mart appears unable to understand their Chinese client’s buying behavior. Will Costco better adapt to the Chinese’s consumer behavior?

  2. Is 400 stores few or many? Only in the past 6 or so years has the expressway network been such as to make building stores away from the coast easy. Futhermore, and unlike the US, its stores are urban not rural. People simply did not have a way to get to suburbs or outlying areas. Now car ownership and infrastructure are changing that.

    However, Walmart has in general not fared well outside of NAFTA. My sense (from studying Japan’s case) is that the basic model is not terribly hard to stumble upon. Good logistics and inventory control, underserved locations – in the US and Japan none of the initial stores for the segment were urban – and a gradual extension of power up the supply chain. Carrefour in France, Tesco in England, Hypermarkt in Germany, Aeon and Seven&I in Japan are all like this; Walmart has withdrawn except for Japan, and it’s so far spent billions there without enough returns to mention in its annual statements….

    So how will Walmart fare when its stores are all urban? Will it be able to have a large enough area of draw to implement its volume purchasing model? I wonder whether local management in China will be given the discretion to implement strategies at variance with Bentonville — sooner or later HQ has intruded in other countries.

  3. Could this possibly mean in an influx of even more American based companies? With the potential for a strong middle-class in China, stores like Walmart and Costco could have a large market base and large profits. I would not be surprised if more firms attempt to enter this market, with what I expect will be very mixed results.