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Aug 28, 2019

Costco caps the number of China shoppers one day after 'crazy' debut

Costco's first China location shuts early as customers mob store

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Costco Wholesale Corp.’s first outlet in China has capped the number of customers at 2,000, a day after it opened and was overrun with customers willing to fight over discounted products and wait hours to pay for their purchases.

The American retail giant said on its official WeChat account Wednesday that it will limit the number of shoppers at its Shanghai store to better serve its customers. It had to suspend operations on Tuesday citing “heavy traffic and customer flows,” according to a text message to consumers shared on Weibo, China’s micro-blogging website.

The frenzy at Costco’s store comes at a time when the U.S. and China are locked in a tit-for-tat tariff war that shows no signs of abating and is making American firms wary of investing in the largest Asian economy. Costco is also entering a market where many of its global rivals have struggled and given up. Carrefour SA sold an 80% stake in its China unit at a discount in June while German wholesaler Metro AG is looking to sell its operations.

Costco’s shares rose five per cent to a record high in the U.S. on Tuesday, while the broader S&P 500 declined. The stock has climbed 44 per cent this year.

“There’s no other word to describe Shanghai’s Costco but crazy,” said a Weibo user, who gave up on the shopping plan Tuesday after seeing two-hour queues at the checkout counters. Other Weibo users shared that they had to wait three hours to enter the parking lot while some decided to walk to the store to avoid the traffic jam.

Grabbing Packets

Other pictures showed customers grabbing packets of roast chicken and elbowing out other shoppers at the store. Local news reports said the retailer offered discounts as deep as 60% on some products and initial annual membership for just 199 yuan ($28).

Costco didn’t answer phone calls and an online inquiry on Tuesday seeking comments on the shopping frenzy.

The sale also includes the nation’s famous fiery liquor drink from Kweichow Moutai Co. and Wuliangye Yibin Co. Moutai’s coveted baijiu bottles, according to messages posted on a local investing website, are being lapped up as these are available in Costco at 1,500 yuan and can be resold at marked-up prices of as much as 2,500 yuan. Moutai’s liquor is always scarce owing to high demand coupled with low supply.

While other retailers have failed to make a mark in China, Costco can look to at least one success story.

Sam’s Club, its big box rival that’s also membership-based, has thrived in China over the years. The warehouse chain owned by Walmart Inc., which entered the country more than two decades back, has gained by going upscale and offering foreign goods to increasingly affluent Chinese consumers.

--With assistance from April Ma.