What does shoppers' intense behavior in Shanghai Costco tell?
World Insight with Tian Wei
Costco's first physical store in China opened its doors in Shanghai's Minhang district last week. Huge crowds of customers have forced the American wholesaler to close its doors just five hours after opening. Costco offers a wide range of products from food and clothing to appliances and housewares.
The U.S. retail giant is diving into the thorny area of food retail in China, despite U.S. President Donald Trump's threat to try to force American companies out of China. So with such a busy first day, can Costco keep this "beginner's luck" alive? What does the strong opening of Costco's first China store say about how intertwined the China and U.S. economies are? CGTN's Senior Correspondent Tian Wei talked to a group of panelists.
Peter H. Chase, a Senior Fellow of the German Marshall Fund of the United States, said the trade war does affect American companies.
With the growing number of Chinese middle-class families, foreign supermarkets, and retailers, including Costco and Walmart, are battling to win over China's high-end consumers.
However, according to Chase, Costco is different. It's not so many Chinese consumers are changing, but the offering is changing. Costco's approach is counterintuitive because there is a gap in China between the high and low ends, and Costco is filling that gap.
Some other retail giants may look at Costco's model now and think whether they can replicate what Costco is doing. A lot of things at Costco are impulsive buying like a big roll of paper towels and/or a huge TV.
China says it always welcomes foreign companies and investors, but the fortunes of these overseas retailers in China will largely depend on their strategies in adapting to local consumer preferences.
And one of the first things that Costco did on its grand opening day is selling Moutai with deep discounts, which is one of the most expensive hot liquor in China.
"With Moutai, a U.S. company is bringing a business model and localizing it. They have low margins, but they have a margin," said Robert Koepp, director of The Economist Corporate Network.
Koepp thinks that he does not know how Costco worked out with Moutai, but they must have a special relationship with the brands, but with a lot of local brands. Costco is bringing in a style of American business with a local flavor.
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