By Ruth Bayang
NORTHWEST ASIAN WEEKLY
SHANGHAI — Costco was forced to close early on Aug. 27 on its first day of operations in China due to large crowds of bargain-hunting shoppers.
Despite a deepening trade war between Beijing and Washington, thousands of people thronged the aisles of its maiden store in Shanghai as the Kirkland, Wash.-based chain became the latest overseas retailer to try its luck in China’s fast-growing consumer market.
Traffic within a half mile radius around the Costco outlet was brought to a near-standstill as lines of people formed outside. The store suspended operations in the afternoon after officials warned over the traffic.
The Paper, a media outlet run by the Shanghai government, reported government officials as saying, “Because there is a high concentration of people around the newly opened supermarket, for the safety of the public, we recommend that residents consume in a reasonable manner and choose to go shopping at an off-peak time.”
“The store has been clogged up with crowds,” Costco texted club members. “To provide you with better shopping experience, Costco will suspend business in the afternoon. Please don’t come.”
A long queue formed outside the store’s entrance, with some parts of the store so full they were impossible to enter immediately. Costco’s own-brand baked goods, such as muffins, were among the most popular items.
“There are discounts as the business is opening now. Meat is cheap here,” said Rick Zhou, 31, who drove for more than an hour to the store.
Clips circulating on Weibo and other Chinese social media show customers crammed in aisles, playing tug-of-war with raw poultry and elbowing other shoppers out of the way.
“Milk powder is very cheap and meat is cheaper than the average supermarket,” said a 60-year-old man Mr Wang, who spent Rmb1800 ($251) at the store, adding, “New Zealand apples are also well-priced.”
Costco confirmed that it would re-open on Aug. 28.
MG2 team and their spouses (Photo provided by Mitch Smith)
“Local police will assist in improving traffic in the area, in order to lessen the disturbance to our neighbors, and we have improved our internal guest flow system,” Costco said.
“During the upcoming week, we’d like to ask our members to check there [sic] SMS before visiting—we will notify you if we are nearing maximum capacity or if there are long wait times.”
Costco apologized on Chinese social media site WeChat, saying it will enforce a 2,000-person cap on the number of customers permitted in the store at one time.
Meanwhile, the Northwest Asian Weekly has learned that the architect for the Shanghai Costco building is MG2, an architecture firm based in Seattle. MG2 and Costco are longtime partners. The firm has helped build the Costco brand and more than 725 warehouse locations around the world.
The Costco opening highlighted optimism among U.S. companies about the Chinese market, where wealthy consumers are increasingly demanding high-quality products that foreign brands are well-positioned to provide.
Costco’s opening comes at a time when other international retailers have failed to succeed in the Chinese market.
Costco’s corporate counsel James Doane told the Northwest Asian Weekly, “Our membership warehouse club model has been very successful everywhere we do business around the world. We have been in Japan, Korea, and Taiwan since the 1990s, for example.
Looking at opening in mainland China was a natural progression. We tested the market through e-com using Tmall.com, operated by Alibaba, and what we learned selling in China online helped us when we decided to invest in our first brick and mortar location in Shanghai.”
Costco’s senior vice president for Asia, Richard Zhang, said that Costco carefully marketed the brand to Chinese consumers, building brand-awareness.
“Chinese consumers are ready to pay for a membership card that grants them an exclusive privilege to buy at a warehouse store, it’s not a new concept in the country,” Zhang said.
Sam’s Club has been in China for about 20 years. The warehouse chain has roughly 24 stores open in the country. It said earlier this year it plans to add 16 more locations in mainland China by 2020.
Ruth can be reached at editor@nwasianweekly.com.