Where will Costco be laid out next? Can the membership model be as good as the Romans?
Editor’s note: This article is from Daily News (ID: nbdnews) , Author: Yu Peiying.
August 28th, Costco store situation (Source: every intern reporter Zheng Jie)
On August 27th, Costco’s first store to enter the Chinese mainland market opened in Minhang District, Shanghai. It was parked for 3 hours and closed for 2 hours. It was suspended for half a day because of the passenger flow. Such a hot opening scene also makes investors optimistic about the 34-year-old company. On the opening day of the Shanghai store, Costco’s share price rose 5%.
As early as October 2014, Costco officially announced that it will cooperate with Alibaba Group to enter Tmall Mall and use the power of the e-commerce platform to send its own branded products such as food and health products to the mainland China market. After a lapse of five years, Costco finally brought its membership-based operations to the store.
Where will Costco lay out next? Can the membership model be as good as the Romans? On these issues, the Daily Economic News (WeChat: nbdnews) reporter exclusive interview with Costco’s chief financial officer Richard Galanti.
Richard Garanti
Opening the second store in Shanghai at the end of next year
NBD: After the hot scene of Shanghai Costco store appeared, Costco’s share price also rose. Is there any plan to open the next store?
Richard Garanti: We plan to open a second Costco store in Shanghai by the end of 2020/0221.Wang (the second store) can start construction as soon as possible. In addition to the two Costco stores in Shanghai, we are already looking for opportunities to open stores in other places in the future, but this will take time. We first need to make sure that the first few stores are working well, both for our employees and our members.
NBD: Why did Costco choose to open the first store in mainland China in Shanghai? Have you considered other cities at the beginning?
Richard Garanti: Shanghai is a city with a high standard of living, coupled with a large number of international residents, and local demand for imported products, which constitutes Costco’s opening in Shanghai. The perfect choice. At the same time, in our Tmall store, Shanghai has the highest penetration rate, which also confirms our decision to open a store in Shanghai.
NBD: The same is a membership-based warehouse store. Sam’s Club has been in the mainland market for 23 years. Why did Costco choose to enter the Chinese mainland market now rather than earlier?
Richard Garanti: We have always believed that the Chinese mainland market has great potential. In fact, over the past 15 to 20 years, our company’s senior management has visited China many times in the hope of expanding our market in the future. At the same time, we also hope that when entering the mainland market, it is the time when Costco and the entire management team are fully prepared and able to successfully enter this market. In the past few years we have been preparing for the first opening (in mainland China) and are looking forward to more possibilities for future expansion.
NBD: Have you ever thought about the popularity of the opening of the Shanghai store on the day? Has there been a similar event in other cities? Considering that Chinese shoppers have different shopping habits from shoppers in the US or Canada, do you think such a grand event will become a daily phenomenon in Shanghai?
Richard Garanti: In terms of the success of Costco on the first day of operation and the first week, we did expect huge customer traffic before. Much of this expectation is based on the fact that a large number of new members have been registered in the past two or three months, and because of the enthusiasm on social media (netizens) before the opening. Although we did think that there will be a large number of passengers on the opening day, the actual passenger flow of the Shanghai store and the situation of the day still exceeded our expectations.
Although we are optimistic about the long-term success of the Chinese mainland market, we also hope that the overcrowding on the first day of the opening can be eased. For Chinese consumers who show different shopping habits with consumers in the US or Canada, we believe we have and will continue to bring high quality and exciting new products to the world and our members (customers).
