Costco, founded in 1976, is the world ’s first member-based supermarket and the second largest retailer in the United States and the seventh largest retailer in the world. Consumers need to apply for a membership card to enter the store for shopping, and their members are mostly stable middle-class consumer groups. Costco insists on providing customers with the lowest priced products and is very popular. According to the company’s latest announcement, it currently has 778 stores worldwide.
Since the first domestic store opened in Shanghai at the end of August, Costco has caused three hot searches in less than a month. What is the charm of this supermarket that is being eagerly studied by Ali and Jingdong and mentioned most by Lei Jun in public? Will it take root and sprout in China?
Make money with membership fees
The stock market best reflects the growth capability and value of a company. Today, Costco’s market value has exceeded US $ 128.5 billion (about 920 billion yuan).
Making money from membership fees is Costco’s most bizarre first point, with membership fees exceeding $ 3 billion per year almost equal to its net profit. Costco members are divided into two types: ordinary members (GoldStar Membership) and senior members (Executive GoldStar Membership).
In the United States, the average member costs $ 55 per year and holds a membership card to shop at Costco stores around the world. Applicants can also apply for a secondary card for their family members free of charge; annual membership fee of 110 US dollars for senior members, in addition to enjoy the same rights as ordinary members, you can also enjoy 2% of the rebate (the total amount of rebates does not exceed $ 750 per year) Some additional services.
The best part is that in the United States and Canada, Costco’s membership card can not only buy high-quality products, but also can be used as an ID card, without boarding ID when boarding or going abroad, you can also get a Costco membership card.
So far, Costco has more than 94.3 million members worldwide, including more than 51 million paid members. In 2018, the renewal rate of paying members in the United States and Canada was as high as 90%, and it was 88% worldwide.
Horrible value for money
For ordinary consumers, as a paid membership supermarket, Costco is so popular because it has achieved a terrible price-performance ratio.
Whether it is fresh, daily necessities, or even luxury goods, jewelry, and cars, all are within Costco’s business scope. Costco is a cost-effective target. For example, the day when the Minhang store opened, it was fired to nearly 3,000 yuan. Flying to Moutai, Minco Costco sells for 1498 yuan, second light.
Supermarkets are large with few categories. In the Costco supermarket, the business area is usually between 14,000 and 20,000 square meters, and there are only about 4,000 product categories. The pursuit of fewer and more refined, although there are few varieties, it is sufficient to cover customer needs. Costco has improved the bargaining power through such a selection of goods, while controlling the quality of the goods, and ensuring that the price is low enough, it always makes people feel like they are losing money without buying.
Don’t want to make more money, but also lose money. Generally, the gross profit margin of supermarkets is about 15% to 25%. Costco’s average gross profit is only 7%. Products with a gross profit of more than 14% must be reported upwards and approved by the board of directors before they can be put on the shelf. If external suppliers are priced lower than Costco elsewhere, their products will no longer appear on Costco’s shelves.
Costco has an ultra-cheap hot dog package that hasn’t changed the price, at $ 1.99; the super-delicious and delicious roast chicken only costs $ 4.99, sells more than 50 million each year, and costs 30 to 40 million dollars per year. For this roast chicken, Costco has dedicated $ 275 million to a chicken processing plant in Nebraska.
Dissatisfied withdraw at any time, casually. At Costco, all products except electronic products are returned for an unlimited time without reason. A watermelon was eaten in half and then returned for a refund due to unsweetness. Absolute price control. This is Costco’s worst point. It is necessary to grasp the absolute right to speak of the price, and no one’s face is given. Apple once required that Costco must only sell Apple products in offline stores. The price must be set by itself, and it was not allowed to sell online. As a result, Costco once directly blocked Apple and did not sell Apple mobile phones and computers. Coca-Cola also refused to reduce prices, and Costco Directly replaced Coca-Cola with Pepsi …
Not only does Costco have to listen to Costco, many manufacturers even pay Costco in order to occupy a good shelf position.
The calm after the noise is the beginning of the real test
At present, the Chinese market is experiencing a bonus period of “the rise of the middle class”, and the paid membership system is also emerging, and the market is large. However, the current new retail is still in a period of adjustment after initial exploration. Traditional retail and e-commerce platforms are also struggling to transform, and a number of “new models” such as membership-based e-commerce and fan e-commerce have been born.
Costco is undoubtedly not only the originator of membership retail, but also thoroughly used the “fan economy”. Over 90 million members worldwide have an average renewal rate of more than 88%. The reason is that its best not only lies in the low price, but also only sells explosive models, such as Dyson’s appliances, and some of the hottest ones now Luxury and light luxury brands are even hundreds or even thousands of dollars cheaper than e-commerce platforms and purchasing. For example, a Burberry bag sold at the Minhang Shanghai store is priced at 8,699 yuan, but it is 11,900 yuan on an e-commerce platform.
For such a cost-effective beast, whether in other countries and regions, or in the Chinese market, there will be no shortage of crowds.
However, Costco’s shortcomings in China have always existed, and many people worry that Costco will follow in the footsteps of Carrefour and Wal-Mart and be “convinced” in China. For Chinese consumers, Costco does not have the lowest prices for all products, and Taobao Jingdong’s product price advantage is also very prominent. And the store is far from the city center, shopping is not very convenient.
A Costco spokesperson said that the number of members in the Shanghai store currently exceeds 170,000. “Consumers have previously refunded their cards, but this is also a normal phenomenon worldwide at Costco. The number of card refunds in Shanghai stores is within a reasonable range, and there has been no rumored” row queue, “malicious card refunds.”
However, according to the latest report for the third quarter of fiscal year 2019, in the third quarter, Costco membership fee income was US $ 776 million, net profit was 906 million yuan, and membership fee accounted for 85.65% of net profit. Costco’s membership fee in China is 299 yuan a year, calculated by 170,000 members, and the current membership fee is over 50 million yuan. For Costco, which has just been established for less than a month, it is a good result, but in the long run, it is not enough.
Yunyangzi, a special researcher of the e-commerce research center of the NetEconomy News Agency, said that Costco’s business model in China will definitely change, and at least it should join e-commerce.