'Destination' of HK people going north: How did Costco Shenzhen rise?

Costco, the warehouse-style members-only supermarket in Shenzhen, has celebrated its first anniversary since its opening. The management stated that although the number of Hong Kong members is growing slowly, during the past month coinciding with the peak season for Lunar New Year shopping, the average spending per Hong Kong member was around RMB 900, a nearly 6% increase from August last year.

Costco opened in Longhua District, Shenzhen, in January last year, marking the group's first physical store in South China. Currently, the membership at Shenzhen Costco exceeds 200,000, with Hong Kong members accounting for around 35,000.

8% of customers daily are from HK

Lin, a market manager of Costco, believes that even though the trend of Hong Kong consumers traveling north for shopping is not as strong as a year ago, Hong Kong residents still enthusiastically visit the Shenzhen store. Currently, 5% to 8% of the store's daily foot traffic consists of Hong Kong members. He continued to say that due to Costco's universally applicable membership system, the overall membership numbers continue to grow.

Lin pointed out that in the past month, nearing the Lunar New Year shopping season, the average spending per Hong Kong member was around RMB 900, nearly a 6% increase from RMB 850 in August last year. He mentioned that to cater to the quick Lunar New Year shopping needs, Costco has added many pre-made dishes, including limited-time offerings.

Regarding the weak economic performance in the mainland, Lin believes that since Costco operates on a membership basis, even in economic downturns, members still need to shop, hence the impact on business is not significant. When asked about the business volume during the Chinese New Year, he mentioned that the relevant data is not disclosed to the public, but he expects the sales situation for Chinese New Year this year to be ideal.

With the one-year anniversary of its opening, the Shenzhen Costco store has introduced a membership fee discount. Until the end of January, new and renewing members can join for RMB 199, a discount of RMB 100 from the original price of RMB 299, equivalent to a 33% discount, making it the lowest price among global branches, aiming to attract more members.

Enhanced same-city delivery coverage extended to 20 kilometers

Lin mentioned that they have recently strengthened the support services for online shopping same-city delivery, expanding the coverage from 8 kilometers to 20 kilometers, with delivery within two hours. Members in the main urban areas such as Nanshan, Luohu, Futian, Longhua, and Bao'an can purchase Costco products through WeChat, and Hong Kong residents can place orders through their phones, and the goods will be delivered to their hotel.

Analysis | Traditional supermarkets transit rapidly in response to the rise of warehouse-style supermarkets

Warehouse-style members-only supermarkets have become a rising trend in recent years, attracting considerable interest from Hong Kong residents shopping in the mainland, with bags full of purchases during holidays. A report from iiMedia Research predicts that by 2024, the market size of national warehouse member supermarkets will reach RMB 38.78 billion.

Warehouse-style supermarkets operating on a membership basis, including Sam's Club, Costco, and Metro, have been actively expanding in mainland China, reviving the operating model of preposition warehouse, with self-branded products becoming the "star" sellers. Taking Costco as an example, their in-house brand Kirkland accounts for about 30% of total products, enhancing product differentiation, with items being 15% to 20% cheaper than similar products, becoming popular choices among members.

In contrast, the once glorious hypermarket model is fading, with traditional supermarkets losing their appeal. Many traditional supermarkets have joined the "transformation trend" by adjusting service details, quality control, and restructuring product offerings. Among them, Yonghui Superstores have completed renovations at 29 stores, with plans to open and renovate 40 to 50 stores before the Spring Festival.

In fact, traditional supermarkets have long faced severe problems of product homogenization. Therefore, apart from transforming their business models, creating differentiated products is the key to breaking the deadlock. Products are the greatest competitive advantage, and only unique in-house branded products can retain consumer interest.

(Source: Wen Wei Po)

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