In order to tap the increasing demand for imported products and brands by Chinese consumers, Costco Wholesale Corporation (COST) is foraying into the country in collaboration with Alibaba Group Holding Limited (BABA). The Issaquah, WA-based warehouse retailer will use Alibaba’s Tmall Global online platform to offer food and healthcare items, and its private-label Kirkland Signature products in China.
The move to enter the Chinese market is being seen as part of Costco’s initiatives to augment its E-commerce capabilities. The company has already been operating its online portal in the U.S., Canada, U.K. and Mexico. In the recent concluded fiscal year 2014, the company generated E-commerce sales little under $3 billion.
The model of entering into a new market through an E-commerce platform is gaining traction because this requires less investment as it does not involve the opening of physical stores. Costco hinted that Tmall Global’s bonded warehouse will facilitate in lowering logistics expenses and reducing the delivery period.
Costco will gradually expand its range of products and brands after carefully analyzing the tastes and preferences of Chinese consumers. The company, in order to gain market share and withstand competition, would offer products at compelling prices. This is not the first time that Costco has entered an Asian country. The company already operates 20 warehouses in Japan, 11 in Korea and 10 in Taiwan.
Costco’s strategy to sell products at highly discounted prices has helped in sustaining growth amid soft economic conditions, as cash-strapped customers continue to reckon it as a viable option for low-cost necessities.
Costco currently carries a Zacks Rank #3 (Hold).
Other Favorably Ranked Stocks
Better-ranked stocks worth considering in the retail sector include Burlington Stores, Inc. (BURL), sporting a Zacks Rank #1 (Strong Buy) and Ross Stores, Inc. (ROST), carrying a Zacks Rank #2 (Buy).
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