Over the years, I have counted at least two dozen Chinese startups who claim to be building “the Costco of China” – with models ranging from pure membership play to “optimised” retail to “premier selection” of limited SKUs.

Even Yunji, which many labels as an MLM permutation, at some time styled themselves as “Costco of China”.

And some companies in China try to mix and match the models of Costco, Amazon Prime and American Express (yes we also wonder why for the last one). Alibaba last year launched a membership scheme; and Black Fish, a rising star, is offering membership-based credit for e-commerce – a complex model where the company is racing very fast to capture ground.

Real Costco 

So obviously the opening of the first real Costco store in China garnered a lot of attention. Plenty of news articles are telling how crazy the first day went – the store had to shut earlier to avoid more people rushing in.

This widely circulated picture says that drivers need to wait for three hours to enter the carpark, which is already full:

People rushed in for a reason – the products on sale are just so cheap. Many news articles in China bothered to run a sample comparison between Costco prices and those of e-commerce sites and other retail outlets.

Even for luxury bags, Costco is offering at a much lower cost.

Even Moutai, a staple Chinese liquor whose value kept appreciating, is offered at a much cheaper price than official channels.

What next?

However, shoppers in China – despite all the claims of ‘upgrades’ and ‘premium’ – are by far and largely quite price sensitive and extremely fickle.

Retail in China is generally a hard business to do, as Carrefour has learnt over the years. Even the new retail, with funding from giant internet/e-commerce companies, is finding it hard to justify the business case.

Whether Costco’s model will work in China is still a question mark and it will depend on a lot of factors. What is certain is that Chinese consumers now finally get a real sense of what real Costco is like – pretenders will find it hard to make their claims.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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