Why Costco's China Debut Was A Mess

Despite the disruption in global trade caused by the pandemic and invasion of Ukraine, Costco appears to have sunny days ahead. The Motley Fool points out that this is due in part to how it is projected to open its second and third warehouses in China before the end of 2022.

However, Costco's first attempt to open a physical Chinese warehouse in 2019 proved disastrous. For five years running up to it, That's reported in 2019, Costco had been operating an online service in the country. Forbes covered how in the first month of their operations, Costco made $6.4 million in revenue. It managed this by partnering with Alibaba, the Chinese online commerce company.

Following the boom of its first month, Costco accrued data that would help it pinpoint which parts of the previously impenetrable Chinese market could in fact be won over (per Dauxe Consulting). Moreover, by the time the company decided to lay down the foundations of a physical presence in Shanghai, it had years to develop its reputation as a trusted brand.

Too much excitement

However, the problem with opening the first physical location of a trusted brand in Shanghai is that many people would be interested in checking it out, very many people. So many people that, according to CNBC, a nearby school issued a warning to parents explaining that "Please expect the student dismissal this afternoon to be severely delayed due to the grand opening of Costco Supermarket." The local authorities forced the store to shut down soon after as there were simply too many people crammed together in the new space.

Business Insider wrote that despite the mobbing to purchase discounted meat, no one was reported hurt. 

The next day, The Guardian reported that Costco had to limit its warehouse capacity to 2,000 people. The piece also noted that such congestion was not entirely unheard of. When Shake Shack opened its first store in Shanghai, people waited hours for the foreign novelty. Several months after the opening, CNN translated a complaint made on the Chinese microblogging website, Weibo that any Costco member would sympathize with: "To get a rotisserie chicken, one has to wait at least half an hour. The three places at Costco you need to line up: cakes, pizzas, and rotisserie chicken. But foodaholics think it's so worth it!" So, it's safe to say that the mess represented more of an unleashed enthusiasm than a prospect-killing blunder.