Costco in China: what the US wholesaler is doing right (2023)

Costco is performing pretty well in China. The US wholesaler officially entered the Chinese market in August 2019, when its first physical store opened in Shanghai.The opening weekend marked a hive of activity– there were three-hour waits for parking spaces and thirty-minute queues at the checkouts. It caused local authorities to shut the store down for a few hours to ease the traffic congestion building on the neighboring highway. In November 2021, Costco opened another store in Suzhou, which is its second store in China.

Costco in China: what the US wholesaler is doing right (1)
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As ofJune 2022, Costco in China has announced its plans to open 7 additional stores, mainly located in Shanghai, Guangdong, Jiangsu, and Zhejiang. Among them, the Shenzhen Longhuamen store will be the largest Costco flagship store, and Costco’s South China headquarters will also be located in Shenzhen. The announcement of opening stores created a buzz among Chinese citizens, according to Baidu Index.

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Costco in China: how to do it right

Costco’s long-established business model is to sell products in bulk, allowing consumers to benefit from wholesale discounts. Critics accused such a sales model of being incompatible with the Chinese market, specifically highlighting that the vast majority of those in East China live in small apartments that do not have the necessary storage space for goods bought in bulk.

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These criticisms are not unfounded; rather, they are based on the precedent of Western retailers entering China but failing to establish themselves or expand. For example, Walmart sold itsChinese e-commerce businessto in 2016; Amazon also withdrew after failing to compete with the domestic Alibaba in 2019. By 2018, Marks and Spencer joined the exodus of Western retailers. EvenCarrefour, once China’slargest foreign retailer, sold 80% of its stake in Chinese stores to Suning International. A clear pattern emerged of Western retailers failing to grow in China. This article will examine the key elements of Costco’s business strategy that allowed it to expand in China successfully.

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What did Costco in China do differently?

1.Establishing itself online presence before opening an offline store

Five years before opening its doors in Shanghai, Costco in China operated throughflagship storeson multiple e-commerce platforms. Tmall Global,, and Ymatou all sold Costco’s goods to consumers across Greater China. Not only did these partnerships allow Costco to build a reputation for itself by becoming a household brand name, but they also provided Costco with analytics to detect where they were gaining the most traction, which products were selling the most, and who the target consumers were. Thus, by the time Costco became a brick-and-mortar business in China, it had a clear understanding of where they should be located (East China due to higher average GDP and increasing consumer awareness of foreign brands) and whom they should be targeting (thegrowing middle-classwho are providing demand for foreign products and premium goods).

2. Marketing its productsas premium yet affordable

Premiumization – establishing products as high-quality, affordable, and accessible to rival goods – has never been more important. AsChina’s middle-class grows, the demand for luxurious products is soaring. Costco’s business model of selling products in bulk is highly cost-effective when it comes to upmarket brands. For instance, Costco supplies high-end bags hailing from designer brands such asChanel,Hermes, andPrada. This marketing strategy of offering branded products at more affordable prices aligns with middle-class consumers’ desires to purchase good quality products at more affordable prices. In order to maintain affordable pricing and high operating efficiency, Costco warehouses usually only carry around 2000 to 3000 SKUs in China, which is a distinct competitive advantage as compared to local supermarkets and therefore makes it more selective when it comes to choosing what brands to associate with.

Costco in China appeals to consumer demands forpremium foreign goodsand provides a means to acquire luxurious local goods at lower prices through their wholesale discounts. For example, the upmarket white liquor brand Maotai typically sells for 2500 RMB, but at Costco, it sells for1499 RMB. In November 2021, before the opening of Costco’s Suzhou store, people were lining up before sunrise to snap up premium liquor like Maotai and Wuliangye. Besides appealing to consumers who desire luxury products at less expensive prices, Costco’s marketing strategy is enticing to producers. Representatives of Maotai remarked that they were glad to be cooperating with Costco to reduce their reliance on other intermediate sales companies who raise their prices for consumers, which fail to benefit the spirit brand itself.

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3.The allure of exclusivity

A highly significant element of Costco’s marketing strategy is its membership program. Shoppers require a Costco membership to shop at the retail giant, with standard membership costing 299 RMB. On the first day of opening the Shanghai branch back in 2019,139,000customers signed up for its membership. This number grew to more than 200,000 cardholders within the ensuing opening months. The success of this membership program – which quickly surpassed Costco’s goal of attaining 100,000 members – highlights how successful Costco’s business model has proven to be in China.

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A membership program reinforces the notion that Costco is an exclusive place to shop and reaffirms to customers that their loyalty allows them to access benefits (in the form of wholesale discounts) that non-members fail to reap. Furthermore, an annual membership is more likely to cultivate customer loyalty, encouraging habit formation in which members choose Costco over other retailers, becoming reliable consumers.

Notably, some Chinese consumers are preferring purchasing products from Costco through Daigou instead of joining the membership program. On Chinese e-commerce platforms like Taobao and, consumers can easily find a Costco Daigou to satisfy their shopping needs by paying around 8% to 10% Daigou fees on top of the original price of the products.

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4. The Shopping Experience

Costco’s marketing strategy suits the retail needs of consumers, but it has also created a culture or lifestyle that is compatible with China’s market.IKEA, the Swedish furniture giant, is a predominant example of aWestern brand succeeding in the Chinese market. Not only does the minimalistic furniture suit any culture, but the shopping experience of going through the store from top to bottom turned trips to IKEA into a complete experience. Costco is similar in this sense – consumers have been noted to spend up to three hours in the store, embracing the experience of looking through crates and piling goods upon their trolleys.

Thus, Costco succeeded where other traditional retailers failed: they created a consumer experience that elevated one’s typical retail shop into an enjoyable day trip where customers can peruse stock, eat at afood vendorwithin the building, and enjoy the process of shopping at Costco.

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The double-edged sword of the Covid-19 Pandemic

Whilst theCOVID-19 pandemicposed a severe threat to the longevity of many businesses across different industries and sectors, Costco has managed to not only survive but to capitalize on the lockdowns. The uncertainty surrounding the disease and the unprecedented lockdown saw an increase in consumer demand for buying products in bulk, propelled by the uncertainty of how long they may need to be confined in their homes. Costco’s wholesale model was fervently welcomed by customers stocking up on toilet papers and other essentials as the world entered such an unprecedented period. Globally,Costco’s salesreached 195.9 billion dollars (around 1,311.5 billion RMB) in 2021, an increase of 17.49% from 2020.

The flipside of the pandemic is that many consumers shifted to online stores. However, as Costco had established itself in the e-commerce market, though physical stores may have gained less traction, it still acted as a competitive vendor in the online market for fresh produce and essential goods.

Due to another wave of the pandemic in 2022, Costco’s Shanghai Minhang warehouse was closed on March 28. From May 18 to June 1, Costco Minhang warehouse was opened to only activated memberships in the precautionary zones (防范区) of Huacao township with vouchers issued by the government and negative nucleic acid test results within 48 hours. To compensate the members who were unable to shop due to the temporary shutdown, Costco extended the membership validity for members in Shanghai and Suzhou.

Although the pandemic has brought more uncertainties to Costco’s existing stores in China and put its plan to open more stores in China on pause, Costco’s ability tomatch consumer-specific demands during the pandemicsuggests that more stores could materialize in China’s retail landscape.

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Key Takeaways from Costco’s China market strategy

  • Costco’s business strategy ofselling in bulk proved to be compatiblewith China’s market demands,aided by the pandemicand the frenzy of hoarding.
  • Consumers are satisfied with access topremium branded goods at more affordable prices,targeting thegrowing middle classsuccessfully.
  • Costco’smembership systemandits shopping experienceare effective atfostering consumer loyaltyand cultivating habitual shopping.
  • Cooperation with e-commerce platforms helped Costco in China to expand its influence and reputation in the Chinese market, especially due to the impact of the Zero-COVID lockdowns.

Learn more about the long-term Zero-COVID impact on Chinese Consumption


Is Costco doing well in China? ›

Costco in China: How the US-based warehouse giant continues to expand in China. Costco is performing pretty well in China.

Why is Costco successful in China? ›

The membership-based wholesale retailer had a hugely successful launch in China. The secret may be a mixture of brand buzz, market timing, and old standbys like discounts—all tactics that associations can deploy in new markets as well. Costco came to China optimistic about its prospects to succeed in the market.

What feature would help Costco be more aligned with its competitors in China? ›

“Adding new features such as home delivery would enable the retailer to be more aligned with its competitors,” Chan said, adding that it would help Costco retain existing members and find new ones.

Is Costco opening new stores in China? ›

Costco is expanding across the country and the globe this year. The wholesale retailer plans to open 24 stores this fiscal year and relocate three others, Insider reported. Of the new locations, 15 will be in the U.S. and nine will be international, including a third and fourth location in China.

What are costcos weaknesses? ›

Costco's Weaknesses (Internal Strategic Factors)
  • Limited product mix.
  • Exclusivity to members.
  • Low profit margins.
Feb 6, 2017

Can US Costco membership be used in China? ›

Membership Cards and Fees

Your membership card is valid at any Costco warehouse worldwide and is not transferable.

Why do so many Asians go to Costco? ›

Households of Asian descent tend to be larger than those of the overall U.S. population. Asian Americans are more likely to buy in bulk and seek bargains. As a result, Asian consumers are more than twice as likely to shop at warehouse clubs than the average U.S. consumer.

What competitive strategy does Costco use? ›

When compared to other similar retailers, Costco's competitive advantage lies in its own private label, its discount prices, and its membership dues. This has provided customers with a product that they can rely on at low prices. It is also a stable business model that investors seek as a good investment.

Why is China Good for sourcing? ›

Sourcing in China is the best decision if the organization wants to reduce costs when it comes to acquiring materials. China offers low-cost materials which are why it is very popular in the trade industry. However, language barriers and some business practices can be challenging for foreign buyers.

What are Costco's six rights of merchandising? ›

"The Six Rights of Merchandising"

Our merchandising philosophy, very simply stat- ed, requires that we have the Right Merchandise, in the Right Place, at the Right Time, in the Right Quantity, in the Right Condition, at the Right Price.

What was Costco competitive advantage compared with their other counterparts? ›

What Differentiates Costco From Its Competitors? The most significant differentiator is that only members can shop at Costco, which allows it to offer products in bulk lower prices than its competitors.

What sets Costco apart from its competitors? ›

Because the company's signature brand accounts for a substantial amount of sales, Costco relies on fewer suppliers and requires lower inventory levels than other retailers. The company carries 4,000 stock keeping units (SKUs) per warehouse compared to 30,000 for most supermarkets.

Why is there only one Costco in China? ›

Costco was forced to shut its first China store after thousands crowded the wholesaler and caused traffic jams outside the store. Analysts believe Costco satiates the hunger China has for a new concept, at a time when the development of the market is ideal.

Can I order at Costco in China online? ›

If you have a membership from a country outside the U.S., you can still place an order on as long as you have a U.S. shipping address to use for the order.

How many warehouses does Costco have in China? ›

As of January 2023, Costco has 847 warehouses worldwide: 583 in the United States and Puerto Rico, 107 in Canada, 40 in Mexico, 31 in Japan, 29 in the United Kingdom, 18 in Korea, 14 in Taiwan, 14 in Australia, four in Spain, two each in France and China, and one each in Iceland, New Zealand and Sweden.

What are Costco's biggest challenges? ›

The 8 Costco Problems No One is Talking About
  • The membership fee. First, let's talk about the $60 elephant in the room. ...
  • Bulk isn't always better. ...
  • You don't always find what you're looking for. ...
  • Things get discontinued. ...
  • Forgetting the other perks. ...
  • You might waste money and time. ...
  • No bags. ...
  • Not enough sales help.
May 20, 2022

How much does 1 Costco make a day? ›

Costco has over half of the wholesale club market (55.5%) and a single Costco location makes on average $526,000 per day, close to $200 million a year.

Is Costco doing well financially? ›

Financial Analysis

During the pandemic, revenue increased by 17.5% in 2021 and 15.8% in 2022. This is significantly higher than the 15-yr average of 8.8%.

Is Costco still open in China? ›

The retail giant opened its first store on the Chinese mainland in 2019 in Shanghai's Minhang District on the west side of the Huangpu River. It announced the start of the construction of its second store in Shanghai in February 2020.

Does my US Costco membership work in Korea? ›

Once you sign up and get a membership card, you can shop at Costco around the world. In other words, you can bring your Costco membership card from your home country and shop at Costco Korea.

Can you order from Costco internationally? ›

Currently, products on are available for U.S. delivery only. We do offer shipping to Canada. You'll find those items at our Canadian website:

Is Costco popular in Asia? ›

Such an overseas story does not come as a surprise when one learns that the retailer has been popular in Asia since as early as 2007, when Seoul — which saw its first Costco outlet opened in 1994 — became the company's most profitable single store worldwide (Taiwan became the second most profitable in 2010).

Is Costco successful in other countries? ›

They pay employees two to three times higher than their competitors as well as offer health insurance to their employees. All these strategies allow Costco to be dominant in their market. Costco's worldwide success proves that their formula is a proven success strategy.

What is the busiest Costco in the country? ›

What is the busiest Costco in the world? The Iwelei Costco on Oahu Island in Hawaii is the busiest in the world. Costco estimates that 1 in 4 residents of the island are Costco members, and with Oahu having a population of over 950,000, it's easy to see why this location gets a lot of foot traffic.

Who is the biggest investor in Costco? ›

Costco (NASDAQ: COST) is owned by 66.05% institutional shareholders, 0.79% Costco insiders, and 33.16% retail investors. Vanguard Group Inc is the largest individual Costco shareholder, owning 39.03M shares representing 8.80% of the company. Vanguard Group Inc's Costco shares are currently valued at $18.94B.

Who makes the most money at Costco? ›

Costco Wholesale Company employees with the job title Licensed Optician make the most with an average hourly rate of $24.59, while employees with the title Front End Clerk make the least with an average hourly rate of $14.83.

What happens when Costco is out of stock? ›

Once an item has sold out, it's automatically removed from, or you'll see the "Out of Stock" banner added to the product page. Items are also continually added to, re-stocking existing merchandise as well as expanding what we offer.


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