From the perspective of the domestic market, Costco's "roller coaster" development is full of drama

Looking at the domestic market, Costco's "roller coaster" development is full of drama.

At the beginning of this year, the opening of Costco's Shenzhen store sparked a craze, with over 140,000 people opening cards, setting a record for the highest number of cards opened in stores worldwide. However, shortly after opening, due to the lack of product quality control and management, a wave of card refunds from consumers followed.

On social media, many consumers began to roast that Costco's products were highly overlapped with Sam's, and some ham and bacon were even on the verge of death. In addition, the cumbersome card return process has been heavily criticized. Although online card opening is convenient, card refunds require on-site attendance and can only be refunded in cash, resulting in a large number of queues and seriously affecting user experience. There have even been "card refund strategies" online.

In a high consumption market like Shenzhen, although two Sam's Club stores and one Costco can still coexist, as a latecomer, Costco still faces challenges of lack of differentiation and inadequate management. An industry insider said that without breakthroughs in product selection, price positioning, and service experience, it is difficult to form long-term attractiveness solely by expanding the number of stores.

As is well known, Costco relies on membership income as its core source of profit, achieving stable returns through a low gross profit, large-scale "small profit, high-volume" model.

However, the latest financial report shows that its growth did not meet expectations: revenue for the fourth quarter of fiscal year 2024 was $79.697 billion, a year-on-year increase of only 0.96%, and full year revenue was $254.453 billion, a year-on-year increase of 5%. Despite a slight increase in total revenue, the performance of quarterly data did not meet market expectations, indicating a clear trend of slowing growth.

Costco attributes this to "weak consumer demand for non essential goods" and "inflation suppressing demand for essential goods," indicating that the external environment is increasingly challenging its traditional model.

Insufficient localization, Costco is not adapted to the local environment

Costco seems to be gradually losing its charm in the eyes of Chinese members, even its strongest label - high cost-effectiveness - has repeatedly hit consumers' lightning points.

Costco's cost-effectiveness strategy stems from two aspects: first, product selection strategy, with its own brand Kirkland adding explosive products to attract traffic; Secondly, streamline SKUs, reduce costs through large-scale procurement, and have a price advantage. But this model, which has been effective in other markets, has encountered some resistance in China.