Costco, a chain member supermarket from the United States, will open its first store in Nanjing on May 28th, marking Costco's seventh store in five years since entering the mainland.
Unlike its previous stores in mainland China, the biggest highlight of Nanjing Costco is that this store comes with a gas station that can accommodate 24 cars for full self-service refueling - like other store services, it is only open to members, and the fuel price is also lower.
This also makes this Costco more like its model in other overseas markets, which has a certain appeal for consumers who go shopping with their families.
In addition, according to Costco's statement to Interface News, like other city stores, Nanjing stores will also add local foods such as duck blood vermicelli soup.
Photo shoot: Interface News Li Ye
Costco is one of the world's largest retailers, and its annual report shows that as of December 31, 2023, Costco has over 870 stores worldwide, making it the membership supermarket with the highest number of stores in the world.
For domestic consumers, One of the highlights of Costco is that it often attracts a large number of consumers by attracting high-value luxury goods during its opening. For example, Herm è s and Maotai in Shenzhen stores were sold out within half an hour of opening, with some people queuing up the night before, with a queue time of up to 4 hours.
Compared with Sam and Metro AG, Costco's first store in Chinese Mainland, Shanghai Minhang, was opened in 2019, and its second store in Suzhou was opened in 2021. But now Costco has noticed the changes in the current Chinese consumer market and there is a trend of increasing speed.
In the past year of 2023, Costco opened three stores in one go, located in Pudong, Ningbo, and Hangzhou in Shanghai. As of now, the Nanjing store, Costco operates a total of 7 stores in mainland China.
Unlike the gradually declining traditional hypermarkets, membership based supermarkets, with fewer SKUs, highlight the cost-effectiveness and cost-effectiveness of their products in precise control of the supply chain. At present, the pursuit of high-quality and cost-effective products by Chinese consumers has given membership supermarkets an unprecedented opportunity for development.
Within local enterprises, Hema X member stores opened their first store in Shanghai in 2020, with 3 million customers paying fees within 3 years. Currently, there are 10 stores distributed in Beijing, Shanghai, Nanjing, Suzhou, and other places; Fudi has opened three member stores in Beijing in over two years, and previously planned to add 15 new stores in 2024; In the latest fiscal year, M member stores under Gaoxin Retail opened three member stores with a total membership of nearly 240000.
Within multinational corporations, Sam is currently the largest in scale. In December 2023, Wal Mart China mentioned in its WeChat official account that it is expected that 6-7 new Sam's stores will open every year in the future, entering a period of rapid development. Since 2023, Sam has added 5 new stores in Shanghai Zhenru, Shenzhen Qianhai, Fuzhou Cangshan, Wuhan Hanyang, and Shanghai Jiading. As of the latest, Sam has operated 47 stores in China. Compared to the number of Sam's 36 stores at the end of 2021, Sam maintains a pace of opening a new store in about two months. Another member supermarket, Metro AG, had 24 member stores in China as of November last year.
However, Costco's speed is not fast enough by comparison. According to the monitoring of the Kaidu Consumer Index, over 10% of Chinese households have purchased fast-moving consumer goods in member stores in 2023, and the overall growth rate of member store sales compared to 2022 has exceeded 40%. Among them, foreign retailers will continue to maintain advantages over local enterprises. Sam and Metro AG still occupy an absolute share and continue to maintain rapid growth.
As a brand also from the United States, Costco's biggest competitor in China may be Sam, both of which maintain SKUs at a relatively streamlined level and have highly competitive proprietary brands. Sam's SKU is around 4000, Costco stated that it is less than 4000, and large packaging is commonly used in shopping malls, which makes their target consumer groups overlap to a certain extent. However, one difference between Sam and Costco is that in recent years, Sam has been adept at creating popular items to attract members in China, such as the previously popular baking stars such as sweet potatoes and durian layers.
Photos of some products from Costco's own brand KIRKLAND: Interface News by Li Ye
In addition, foreign member supermarkets entering China also face localization adjustments.
Compared to foreign consumers who are accustomed to making large purchases once a week, Chinese consumers may prefer products closer to home and shopping more frequently. For Sam, its store area often exceeds 10000 square meters and is usually located in the suburbs, but the brand is building a front warehouse to bring its products closer to the community. In addition, Sam also tries to match the multi-level and multi scenario needs of its member consumers through various online delivery services such as one hour express delivery, city wide delivery, and nationwide delivery. This has to some extent helped Sam's membership growth rate reach a historic high.
And Costco, which is also located in the suburbs, almost every store opened in China will be asked if there is any "online delivery" issue.
In fact, it is also being adjusted. As early as October 2022, Costco has launched an online delivery service in Suzhou, covering the city of Suzhou. In 2023, it also added a daily delivery service. Afterwards, this business expanded to five cities including Wuxi, Nantong, Ningbo, and Hangzhou, all of which were fulfilled by third-party companies through "picky shopping" for delivery and after-sales services. However, currently, this service still needs to be improved due to relatively high delivery thresholds and higher product prices compared to physical stores.
Costco told Interface News that the online shopping platform "Home to Customers" has been launched in Shanghai, Shenzhen, Suzhou, Hangzhou, and Ningbo. The online shopping service for Nanjing Costco's opening customers will be prepared and launched after the store opens. This year, Costco's opening customers will further improve the commercial layout of online shopping.
However, as one of the world's largest retailers, Costco's global supply chain size is one of its advantages. "By purchasing big brands globally, we can screen and provide members with higher quality globally popular products, and bring synergies through leading global procurement scale advantages to gain a competitive advantage," Costco said to Interface News.
Overall, the consumer market of membership supermarkets is still mainly concentrated in first tier new first tier cities, especially in East and South China. Considering consumer habits, internationalization level, and brand awareness, there are not many opportunities for member supermarkets to exert their influence, which has led to a situation of "close combat" in some cities.
Taking Nanjing as an example, with the opening of Costco, the competitive landscape of membership supermarkets in Nanjing has become more intense. So far this year, Nanjing has welcomed three member stores: in January, The opening of the first M membership store in Nanjing; In May, in addition to Costco, Jiangbei Sam's Club will also open. At this point, the total number of membership supermarkets in Nanjing will reach 7, and the competition among member supermarkets will "upgrade".
Zhang Shuyun, the general manager of Costco's market opener in Chinese Mainland, said that for the future store expansion plan in the Yangtze River Delta, Costco is actively preparing for the Yangtze River Delta region and even the Chinese market, which has always been a key focus of Costco's opening customers. In the future, Costco's opening customers will continue to deeply cultivate this market.
This also means that competition will enter a more motivating stage in the future. In this context, member based supermarkets are also constantly trying to optimize. On May 15th, Hema Beijing X Member Jianguo Road Branch announced its closure, stating that according to business adjustments, Jianguo Road X Member Store will cease operations at the end of May. At this time, only 7 months have passed since the store opened, and after the closure, there is only one Hema X Member Store left in Beijing.