Costco: 50 Japanese stores

Jan 15

Although widely dismissed as too un-Japanese to succeed when it first opened in 1999, Costco’s wholesale clubs are a roaring success in Japan. In 2015 it will take its chain to some 24 stores nationwide with ambitions for double that number. The membership club format may be unusual in Japan, but then it is not a common format anywhere, and the mixture of bulk buying, unique product ranges and a fun shopping experience continues to attract converts. The low prices help too.

Costco will open a second store in the Chubu region this coming November. The new store will open near the Hashima interchange in Gifu Prefecture, providing easy access for shoppers from across Gifu, and from as far south as Maibara and Shiga Prefecture. The latest wholesale club warehouse will be 15,000 sqm and add to the other Chubu store near Nagoya Airport, which targets shoppers from Nagoya and to the north-east.

Since opening a trial store in Fukuoka in 1999, Costco has expanded to 20 stores and signed up some 4.2 million active club members, each paying ¥4,000 (plus tax) a year for the privilege of shopping at a Costco – registered businesses pay ¥3,500. By the end of 2015, Costco is reportedly planning to have 24 stores in operation – one more in Kaminoyama in Yamagata Prefecture is already confirmed.

The privately owned Wholesale Club from the USA is today the most successful of any overseas FMCG retailer, even though the wholesale club discount format was yet another ‘foreign idea’ dismissed by domestic firms when it arrived.  Although Japanese shoppers traditionally prefer to shop everyday, buying small quantities of fresh product, Costco’s model appeals to many segments, both higher income customers looking for a shopping experience and unique products not found elsewhere in Japan, as well others looking for lower prices.

Some consumers also like to shop at Costco in groups, splitting products with friends. There are even those who go just for the novelty value – out of 10 countries and 650 stores, Costco Japan still sees customers pay for membership and then only buy a bag of nuts or enjoy the in-store ice cream and pizzas, just for the novelty. Such customers are increasingly in the minority, with the overall price per basket, or huge shopping trolley in Costco’s case, well over the international average of around ¥10,000. The numerous business customers who use the stores as a wholesale supply point are an additional bonus.

Costco has even recently picked up some praise from local journalists, with Chain Store Age and even Toyo Keizai making efforts to point out some of the unique advantages of the stores and how popular they are becoming with shoppers. Toyo Keizai went as far as saying it is an excellent store for men too, with plenty of electronics and other gadgets and toys to keep them happy while the rest of the family look for ‘mundane’ things like food and cheap fashion.

Costco currently plans to double its chain to 50 stores over the next 10 years or so, bringing this unique blend of US style shopping and Japanese levels of consumer interest to the whole country.