Costco Takes On Walmart's Sam's Club In China With Opening Of New Store

Costco Wholesale
A Costco Wholesale retail club is photographed in Austin, Texas, U.S. (Photo: Reuters / Mohammad Khursheed)

In its attempt to steal away some of Walmart's market share in China, membership retailer Costco Wholesale Corp will be opening its first store in August of this year. The global membership warehouse retailer is setting itself up as a major competitor to Walmart China's Sam's club, which has already established itself as the go-to destination for China's high-end consumers.

Costco announced that it will be opening its first store in the Minhang district in Shanghai on August 27. Membership fees for family and corporate customers will apparently be priced competitively and would start at 299 yuan or $43 per member. Compared to other membership retailers, Costco currently boasts the highest membership renewal rate, which stood at 90 percent last year in the United States and Canada.

Costco has a total of 773 stores worldwide, including 536 stores in the US, 28 stores in the United Kingdom, and 100 stores in Canada. Apart from its stores, Costco has also expanded into digital retail with the establishment of e-commerce websites for UK, US, and Canadian markets.

Despite its strong track record in the US and Europe, Costco will likely have to work hard to be recognized in China. The company is known for its low prices and varied inventory, but it has yet to prove itself in Asian markets. Taking on Walmart's high-end membership brand in China could also be a difficult task given that its Sam's Club brand has already established its reputation.

Walmart is currently accelerating its expansion in China, with plans to put up more stores in the coming months. Walmart had also partnered with Chinese e-commerce giant JD.com to reach customers in other Chinese provinces. Last month, Walmart announced that it will be opening its eighth Sam's Club store in Beijing. The company reportedly aims to put up a total of 40 stores in China by 2020.

In its most recent earnings call, Walmart reported an 8 percent year-on-year growth for its Sam's Club brand in China. The growth was attributed to the company's newly implemented strategies, which included a premium membership option that features free dental care and other family services.

In order to catch up with Walmart and become competitive in China, Costco would likely have to strike a balance between pricing and operating costs.

The company would also need to utilize e-commerce platform, much like what Walmart has done. Costco would likely also have to innovate and improve its business model in China, given that there are already more established domestic players that offer similar services.

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