Source: Ten Billion Consumers (ID: gjgc168), Author: Fang Yu. Reprinted with permission. For reprint requests, please contact the original source.

Is Costco truly ready for the Chinese market?

Costco did not choose a weekend to open its first store in China, but rather an ordinary Tuesday to begin its offline journey. However, the grand opening did not go smoothly. When HUXIU left the Shanghai Minhang store at 12:30, traffic and crowds had brought nearby roads to a standstill. Several Shanghai traffic police officers were maintaining order under 37-degree heat. The ride-hailing car I called took a full 50 minutes to arrive, and both the driver and I agreed it was the strangest ride we had ever experienced, as the wait time was twice the actual driving time from the Minhang store to Hongqiao Airport.

Shortly after getting in the car, I received news from multiple sources that Costco's first store had decided to suspend operations for the day to disperse the crowds. For a retailer, having to close due to overcrowding is generally seen as a sign of popularity.

However, based on my morning visit, this was not something to be proud of; it was nearly a disastrous morning. Especially in Shanghai, where mobile internet is highly developed and which is the birthplace of new retail, this was even more unbelievable.

No matter who once endorsed Costco and put it on a pedestal, judging from the performance of its first store's opening, it cannot be said that this American giant was fully prepared. It could even be said that the management team's overconfidence and arrogance affected Costco's preparations. Although Costco has been operating on Tmall for over two years, communicating with consumers online through pure product strength is vastly different in significance and difficulty from communicating with the city offline through a vibrant store presence.

Disastrous Traffic Experience

At yesterday's Digital Expo, Jack Ma said that America is a country on wheels, while China is a country on the internet. But in Shanghai, the city has long become a city at your fingertips. Whether it's the last kilometer or the last half hour, Shanghai residents are accustomed to ordering with a tap on their phones and having goods delivered to their doors.

But if you came to Lianyou Road in Minhang, Shanghai, after 9 a.m. on August 27, the only road to the Minhang store, you would see a peculiar sight. Countless elderly people, some with children, walked the last kilometer to Costco on foot. Many others, like me, dragged suitcases, and some carried cameras—clearly media colleagues. Those media colleagues with cameras did not yet know what kind of "treatment" they would encounter later.

This scene was surprising, not only because this is Shanghai with its highly developed mobile internet, but also because Costco is described as a warehouse-style supermarket with products primarily in large packages. If, as Costco envisions, customers come once a month to stock up, they would need not only considerable strength but also a large vehicle to transport goods home. The shopping carts in the store were long enough for a school-age child to lie down and sleep, indicating that bulk purchasing is encouraged. It is more like a "wholesale retailer" than a retailer.

Before the opening, many Shanghai media outlets had warned that as a membership-based supermarket focused on family shopping, Costco must consider Shanghai's traffic conditions, which directly affect consumer experience. I left Jiangsu Road at 9 a.m., managed to hail a taxi at 9:30, and by taking the elevated road, arrived at a point 3.5 kilometers from the Minhang store by 10 a.m. At that point, the navigation system gave the unfortunate news that the remaining 3.5 kilometers would take at least 30 minutes. Although it was longer than expected, I decided to make the best of it.

Soon, our car came to a standstill on North Qing Highway. Seeing drivers ahead getting out to check the situation in the 37-degree heat, we sensed trouble. Approaching 11 a.m., the polite Shanghai driver and I had exhausted all topics of conversation. Finally, the driver, losing his composure, cursed in Shanghai dialect and asked if I wanted to take a detour. We decided to detour 10 kilometers, approaching Lianyou Road from the opposite direction via Huaxu Highway. But a few hundred meters from the intersection, the car stopped again. I gritted my teeth, got out, and walked 1.4 kilometers with my luggage, finally reaching the store.

By then, it was 11:50. A journey that normally takes 40 minutes had taken nearly 2 hours.

Upon arriving, I was immediately hit with another setback: a security guard told me that due to crowd control, only exits were allowed, no entries.

Membership System?

If it hadn't been for the timely appearance of several Shanghai aunties, I don't know how much longer I would have waited. But soon, arguing broke out at the entrance. Several Shanghai aunties, speaking standard Shanghai dialect, confronted the security guards. The driver had told me earlier that Shanghai aunties are formidable and that following them would not lead to loss. I followed them. The guards, clearly overwhelmed, eventually joined hands to open a small gap, letting the aunties in.

As if they had a choice! Once the gap opened, I, along with my suitcase and the aunties, was pushed into the store by the crowd behind. A female staff member shouted hoarsely, "Membership card!" but her voice was quickly drowned out by the crowd.

Inside the store, I finally saw the legendary large packages and specialty items, including a toy bear said to be taller than Yao Ming. Undeniably, the store was bustling, with checkout lines stretching from the cash registers to the bakery section at the far wall. HUXIU will provide a more in-depth report on the business model, products, and operations tomorrow.

Perhaps due to the massive crowds, the store staff seemed few and far between. They were mostly unable to give detailed answers to customer inquiries.

Inside the store, arguments were frequent, including shopping carts colliding. A media colleague told me that he had been hit in the waist and buttocks by Shanghai aunties' carts several times that day, wondering if it counted as a work injury. I have visited many retail stores, and even during the heyday of Chinese hypermarkets or during big promotions when customers knocked over shelves of cooking oil, the situation was no worse.

But to be fair, this is definitely not the effect Costco wanted. After all, they are a membership-based store. What is a member? Like an airport VIP lounge, it represents slow living in a fast-paced city, high-quality customers among the masses. A week before the opening, Costco invited local Shanghai media to tour the store, showcasing a clean, tidy, and spacious environment. In hindsight, it was like a military exercise trench dug but without bullet holes.

Undeniably, the chaos in the store may have prevented us from truly understanding Costco's product strength. A Shanghai auntie shouted in my ear that this supermarket was a scam, that after paying the membership fee, things were still expensive. But I noticed her cart was indeed full of goods. In terms of sales, despite the chaos, the half-day sales should still be considerable, if the company is willing to release the data.

Before the opening, Costco tested the Chinese market through its online e-commerce channel. Although Costco claims to serve customers within a 30-40 minute drive (Jiangsu Road happens to be on the edge of its service radius), the actual situation was vastly different from expectations. Any retail activity, once back on the ground, is no longer a theoretical value on a map. Just as a general cannot deploy troops based solely on a map, Costco, with its wholesale-retail model, is more like IKEA coming to a city: one store may serve a quarter or a fifth of the city's population. Costco must truly understand the daily routines, travel habits, and lifestyles of these people, and provide an all-around excellent and differentiated experience from products to services to the overall experience.

Leaving the e-commerce interface, Costco is communicating with the city on multiple levels: time, space, and regional culture. Costco is a product and part of this city, not an alien from outer space. From this perspective, today's Costco still has much to improve.

Tips will be paid 400-2000 yuan once adopted.