Costco to establish physical presence in China

Date : 11 May 2018

Costco is turning to China as its next destination to establish a physical presence.

First store in China next year

Costco has been trading on Alibaba's marketplace Tmall since 2014, selling for example, branded healthcare and personal care items. The American wholesaler has now signed an agreement with Shanghai Pudong Kangqiao Group to set up its Chinese headquarters in Shanghai’s Pudong district.

Source: IGD Research

It plans to open its first physical store in the country in Minhang district next year and a second in Pudong in 2021. Costco will also look to open a membership store with Shenzhen-based real-estate firm Galaxy Holding. There has been no disclosure, however, on secured planning permits.

Of the 749 Costco warehouses worldwide, in Asia it operates 26 in Japan, 14 in South Korea and 13 in Taiwan. Costco also has ecommerce sites in Korea and Taiwan.

Our view

Costco's entry to the market follows a similar route to Aldi - trading online via Alibaba's Tmall before moving offline. Entering China online before offline is not only a cost-effective option, but it allows retailers to test demand and further understand local consumers to refine its products. Costco's presence on Tmall will remain relevant, especially as a means to connect consumers living in tier 3 and 4 cities.

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