SHANGHAI: The US retail giant Costco is diving into the thorny area of food retail in China with its first store opening this week, but analysts warn it faces a tough ride as it looks to succeed where a series of international retailers have failed.
The move also comes at a challenging time with Beijing and Washington engaged in a tense trade war that has seen them swap punitive tariffs on hundreds of billions of dollars of two-way trade.China has proved a brutal battleground for overseas food retailers in recent years, with many failing to understand consumer habits and tastes as well as local competitors building a stronger presence, reports AFP.
In June, French supermarket giant Carrefour agreed to sell 80 percent of its China business to domestic giant Suning after repeated losses.
And German wholesaler Metro is in the process of selling its operations to a local bidder and British grocery giant Tesco pulled out of the Chinese market in 2014.
“The Chinese market is very complicated and requires retailers to innovate and localise,” said Jason Yu, general manager of Kantar Worldpanel China.
But Costco thinks it can avoid the malaise that has plagued others with its “no-frills approach” and bulk-buy strategy.
The retailer will throw open its doors on Tuesday, five years after making its first online foray into China through Alibaba’s cross-border e-commerce platform Tmall Global.Richard Zhang, Costco’s senior vice president for Asia, told AFP they had a “conservative” goal to sign up at least 100,000 new members for the new store, which is in a suburban district of Shanghai with a two million-strong population.
And Zhang said they had taken time to make sure that consumers in China knew their brand and the market was mature enough.
Costco will be targeting China’s affluent growing middle class, who know the brand from international travels.
However, analysts warned that local competitors are stealing ground with popular homegrown retailers such as Alibaba’s bricks-and-mortar Hema stores integrating online and offline shopping.