Costco Shanghai: Massive Membership Cancellation after the blowout Grand-opening

Costco Shanghai: Massive Membership Cancellation after the blowout Grand-opening

Last week, the Grand-opening of Costco caused a huge swarm of consumers in Shanghai. Crowds were lining up to for bargains.

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Today, crowds are lining up to cancel their membership.

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So, What happened?

Costco, first opened in the U.S. in 1976 on a members-only base, offers bulk items at wholesale prices.

Costco?s exuberant first day in Shanghai China caught the attention of the entire retail industry. There were so many people that the store had to shut itself down in the afternoon.

Why it attracts so many Chinese consumers at first?

[1]Super low prices

[2]No frauds

[3]Generous return policy

Having heard of the welcoming deals on social media, consumers came like a herd.

Costco is something they?ve never seen before. And it?s cheap. So, it?s a must-come.

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Membership? Or more like a refundable ticket.

In Shanghai, Costco?s annual membership fee is 199 yuan($28) before opening and rose to 299 yuan($42) thereafter. A few days ago, more than 100,000 people had got into the membership.

With the membership, not only they can get better deals on some daily grocery products such as meat and dairy. They can also buy Maotai(the most prestigious alcohol brand) with an insanely low price. It?s been a hit on social media, that a smart customer made 12000($1680) in a day by selling Costco Maotai to others.

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On the evening of the 28th, the share price of Costco in the US rose 5% compared with the previous period, and the total market value increased by 7.8 billion US dollars in 2 days.

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Take best advantage of the rules.

However, 3 days after coming to mainland China, Costco, which is famous for its shopping experience, has undergone some changes.

Discounts disappeared. Prices? Even higher!

Being in a crowd makes people feel indecent. People sweating, children crying, nonstop quarrelling.

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Customers not only queued up to return the card but also, refund the products. Roast chicken, sushi, cakes(that are already been eaten half)? Thanks to the generous policy.

Refund reason is easy: bought too much!

There were so many people asking for refund, that the staff couldn?t even manage to have lunch.

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Can Costco survive?

According to its financial report, in 2018, Costco?s membership fee revenue was 3.142 billion US dollars, an increase of 10.1%, and the net profit for the same year was 3.134 billion US dollars.

With a substantial membership fee, Costco was able to further reduce the gross margin of the products sold and exchange them for more customers at a lower price. The addition of these new customers has also led to the growth of membership fee revenue, giving Costco the possibility to continue to cut the price of goods, forming a virtuous circle.

However, the localization of foreign supermarkets can be a problem.

Although foreign supermarkets have items such as durian and milk tea on shelves, they also launch promotions on traditional holidays, but they will never sell live fish from aquarium like local supermarkets.

With much smaller homes, Chinese consumers may not be as open to the idea of one-gallon jars of mayonnaise and 36-packs of toilet paper. (Forbes)

After all, we know one thing at least:

Chinese consumers know how to take the best advantage of the rules.

[References]

Seeking Alpha. Costco: Be Cautious About The Exuberant Scene In Shanghai

The Washington Post. Shoves, brawls and shouts: Welcome to Costco?s opening day in China

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