(Yicai Global) May 15 -- The Chinese arm of Costco Wholesale Corp., the US discount retailer known for its members-only business model of warehouse clubs, plans to build its first brick-and-mortar outlet in China after entering the country’s e-commerce market more than three years ago.
Costco China Investment Co. has agreed with Shanghai Pudong Kangqiao Group Co. to set up a flagship store and headquarters in Shanghai’s eastern district of Pudong with partner Galaxy Holding Group, online media outlet Jiemian News reported. The store will be located in Kangqiao town close to a subway line and west of Shanghai Disney Resort.
Once referred to as Walmart Inc.’s only rival, Costco launched its first online store in China in 2014 through Tmall.hk, a cross-border platform run by Chinese retail giant Alibaba Group Holding Ltd., where it mainly sells food and health products under its Kirkland Signature brand. Last September, it opened an outlet on Alibaba’s premium domestic platform Tmall, offering a wider range of goods including food, home appliances, apparel, daily necessities and products for mothers and babies.
Costco’s online presence was deemed a necessary preparation for its expansion into the offline market. Through its e-retail channels, Costco sought to find target customers and offer them the right products. But it does not require membership to make purchases. The company has yet to bring that business model to China.
Based in Issaquah, Washington State, the company has a global supply chain covering some 4,000 selected stock-keeping units. It operates 749 stores in the US, Canada, Mexico and South Korea. With over 90 million members worldwide, the firm has a membership renewal rate of 87 percent.
Costco’s membership fees brought in USD2.85 billion in fiscal 2017. Last year, its net profit jumped 8.7 percent to USD2.7 billion on a more than 14 percent gain in revenue to USD129 billion.
With total assets worth more than CNY5 billion (USD787 million), Shanghai Kangqiao Industrial Development Group oversees foreign investment in Shanghai's Kangqiao town. It also develops and operates residential housing projects and property in the finance, tourism and hotel sectors.
Founded in 2011, Galaxy Holding owns malls and shopping centers including Coco Park and Coco City. It is also in the real estate, industry, property and finance sectors. The firm had revenue of more than CNY27 billion last year.
Editor: William Clegg