Click to read the original article for details After testing the waters online via Tmall Global, according to information obtained by "天下网商" (Tianxia Netrepreneur) from informed sources, this time, Costco may really be coming to open a store in mainland China. Text/ He Chengxuan, reporter for Tianxia Netrepreneur Recently, an informed source told a reporter from Tianxia Netrepreneur that Costco (好市多), the second-largest retailer in the United States, is preparing to open its first warehouse club store in mainland China in Shanghai. Another related person who declined to be named also corroborated the store-opening plan. This American membership-based chain warehouse supermarket is known for "not relying on products, but on membership fees to make money." The gross profit margin of all its products does not exceed 14%, and consumers must pay an annual fee of at least $55 before entering the store to shop. Due to its unique model, Costco has long been a focus of attention and imitation by domestic retail practitioners. Although it has already opened stores in Taiwan, it remains unknown how much of a splash it will make upon entering the mainland market this time. Costco, Which Has Tasted Success After Testing the Waters in E-commerce Costco's idea of opening stores in mainland China has been evident for several years. In October 2014, Costco opened an overseas official flagship store on Tmall Global, starting with advantageous categories such as food and health products, to test the waters in the mainland Chinese market. According to a Reuters report at the time, this move was aimed at understanding the market's consumption structure to avoid obstacles. However, for Costco, developing from online testing to opening physical stores will inevitably require importing goods through general trade. An import product regulatory consultant told reporters that for imported products with strong demand, such as milk powder and health products, obtaining domestic registration and certification is very cumbersome and may take a long time before they can be put on shelves. This issue is particularly evident in Costco's exclusive products. These are also the products most welcomed by domestic consumers. The best-selling items in Costco's overseas official flagship store are its private label Kirkland (科克兰) mixed nuts and Ocean Spray dried cranberries, with total sales in the hundreds of thousands. In more than two years, this store has consistently ranked in the Top 10 of Tmall Global's sales during each Double 11, with the number of SKUs expanding from an initial few dozen to the current 400-plus. Most shipments are from Costco's Taiwan warehouse, with some from the United States. The categories covered have developed to mainly include snacks, wine, health products, maternal and baby products, and household goods, which are basically consistent with the best-selling categories on mainstream cross-border e-commerce platforms. What Might Costco's Physical Store Look Like? Coveting Costco's popularity, in January 2016, a supermarket named Jiashide (佳市得) in Wuhan opened under the banner of "the first Costco physical store in mainland China." Tianxia Netrepreneur previously verified this store and found that it had obtained the import and sales rights for Costco products in mainland China, but it was not a franchised store. However, merely relying on the Costco name still caused quite a stir. Later, Ye Guofu, founder of the fast-fashion retail chain Miniso (名创优品), mentioned at a meeting in April 2016 that he hoped to introduce Costco products into his stores. After these twists and turns, the form in which Costco will enter mainland China has become a question that intrigues the industry. International retailers, including Walmart, Carrefour, and Auchan, have all tried to find product mixes and store designs that suit Chinese consumers' tastes, adopting a strategy of a large number of local products supplemented by a small number of imported products. In addition, Sam's Club, which also adopts a membership model, uses domestic products for items that are not easy to standardize and transport, such as daily chemicals and fresh food, with some labeled under its private label "Member's Mark"; while categories such as snacks, milk, alcoholic beverages, maternal and baby products, and beauty products are mostly imported. Due to Sam's Club's annual membership fee of 260 yuan, since entering China in 1996, it has been in a lukewarm state. Furthermore, more and more enterprises are opening cross-border e-commerce experience stores to fill the gaps that international retailers cannot satisfy. At the end of 2016, a cross-border e-commerce complex named "Xigoumao" (西狗茂) opened in Hangzhou's Cross-border Trade Town, adopting a strategy of combining e-commerce with offline boutique experiences. Similar to this is the cross-border e-commerce supermarket "Choice Xixuan" (Choice西选) under Intime. Users can purchase duty-paid goods on-site or scan a QR code to buy bonded goods online and have them mailed. However, according to reporters, due to pressure from inventory of bonded goods, chaotic sources of duty-paid goods, and mediocre scan-to-shop experiences, the foot traffic at these cross-border experience stores actually declined in 2016, but they still remain competitors for imported supermarkets. In addition, new retail formats have emerged domestically, such as "Hema Fresh" (盒马鲜生) (second-generation stores named "Hema Market") and Yonghui Superstores (new stores named "Super Species"), which combine dining and retail, online takeout and offline experience. They use on-site food processing to drive fresh food sales and directly bring e-commerce bestsellers to offline shelves, offering instant delivery and door-to-door returns and exchanges. This service experience may be more easily accepted by young consumers. Costco, which emphasizes consumer experience and allows "no-reason returns," may not stumble in this regard. However, unlike Sam's Club's mid-to-high-end positioning in China, whether Costco, known for "good products at low prices," can maintain its price advantage in mainland China under the membership threshold and attract consumers with its rich SKUs remains to be seen. And against the backdrop of Walmart increasing its stake in JD.com and seeking omni-channel transformation, how Costco will respond is also worth anticipating. -END-