The Costco Connection

WORLDWIDE WAREHOUSES

CONTINUED FROM PAGE 29

Patrick Noone, vice president and country manager for Costco Wholesale Australia, wasn’t surprised by the success of the American icon down under. “Intuitively I knew how successful we would be. A lot of Australians travel, so they knew Costco,” he reports. “The surprise was in how fast it happened. We have 1. 2 million members already.” More than 18,000 signed up that first day.

He attributes that easy acceptance to another fact: “As soon as we came in, people wanted to come to us because there wasn’t a lot of choice there. We basically have two supermarkets here, Coles and Woolworths. There are a few smaller players, including IGA and more recently Aldi, but the big two dominate the market. They sell the same things and have the same strategies, leaving the consumer without an effective choice.

“The key thing is Costco is a world-class
retailer in a world-class retail market. By tak-
ing those values and ethics and technology
down to Australia, it works pretty well.
Generally speaking, we’re doing things
quicker and better than the local retailers are
because we’re coming from the competitive
market in the U.S. Australia’s been very wel-
coming. The public has embraced us down
there. Employees have embraced our employ-
ment practices and concepts.”
Perhaps the greatest hit is what Patrick
calls the biggest and most welcome item.
“That would be Costco’s Kirkland Signature™
hearing aids. Australian hearing aids are
$5,000 to $6,000 apiece, and our Kirkland
When Costco opened in Japan 16 years
ago, there were a lot of comments about all the
things that wouldn’t work. The country would
never warm up to the membership club con-
cept. Western-style bakeries wouldn’t have any
appeal. Bulk sizes wouldn’t work in a culture
with small cars and smaller pantries. And
nobody, outside a stray homesick American,
would want a hot dog and soda meal, even if it
were just $1.50.

Wrong, 20 times and counting. That’s the number of Costco locations in Japan today, attracting 4. 6 million members. Three new warehouses are slated to open in August in new regions, with more planned at the rate of three or four per year. All of the traditional Costco features—the free samples, the bargain Food Court meals, the Pharmacy and Optical departments, the big-bulk, low-price deals, even gas stations as of this summer—are as popular in Japan as they are in any U.S. warehouse.

So what’s different there? In Asia, available land is at a premium, so many of the warehouses in Japan are multistory, with parking floors above the merchandise floors. Members get from one level to the other effortlessly via special moving ramps.

The look and feel is universal Costco, but a
visitor will likely be impressed with one differ-
ence: Fish is a staple in Japan, and Costco ware-
When asked what product in Costco’s
Taiwan locations is most popular among
members, country manager Richard Chang
replies without hesitation: Kirkland
Signature Mixed Nuts. Each Taiwan ware-
house sells about seven times as many of
these simple jars of nuts as a U.S. Costco.

It’s just one sign of how Taiwan members are nuts about Costco. The country has 2. 4 million members, membership renewal rates reach into the 90 percent range, the warehouses are busy with shoppers who don’t hesitate to use a clever “auto walk” escalator system to get from one floor to the next and new warehouses are on the calendar. Most interestingly, Taiwan is the center of Costco’s first foray into China, through the online Tmall, operated by the huge e-commerce company Alibaba.

The Taiwan warehouses are a vibrant mix of Costco’s international products—its Kirkland Signature brand as well as huge international brands—and local favorites. You’ll find a two-pack of dried squid along with beef jerky from the U.S., and black free-range chicken in the fresh food department, along with rows of fresh fish. “Our goal is, if you were to walk into our Taipei warehouse you would say, ‘Wow, I’m in Costco,’ ” says Richard.

That success can be credited to Taiwan’s 4,000 employees, who have embraced Costco’s commitment to service. As is true throughout the company, the focus is on understanding Costco’s mission and philosophy—its culture. “Our employees have blossomed,” says Richard. “By promoting from within, it’s elevated [them] on the market,” says Diane.

Exporting international goods is an impor-
tant facet of Costco’s global expansion; it goes a
long way in building relationships with local
governments and new suppliers alike. Due to
the economic situation, this was especially ben-
eficial for Spain. “Spain has a lot of wonderful
hidden treasures,” says Diane. “Their olive oil,
their cheese, their ham, produce. Now Costco
buyers from Japan and Korea are buying [some
of these items] from Costco Spain.”
Diane says she looks forward to expanding
to more cities. A second warehouse, in South
Madrid, will open in September, and a third
location, in North Madrid, will follow next
year.—HM

Australia

First location: Docklands, Melbourne

Opening date: 2009

Number of locations: 7

Most popular item: Hearing aids

Unique item not found in the U.S.:

1-kilo tub of Vegemite (yeast extract)

Signature hearing aids are $1,800,” he explains.
“Literally, we had people fly from all over the
country to come to Melbourne when we first
opened. They were able to pay the airfare and
actually have a vacation in Melbourne for the
savings they got on the hearing aids.”
Americans visiting Australian ware-
houses should be completely comfortable.
“To walk into an Australian Costco—the
branding might be a bit different, but it’s the
same as walking into a U.S. warehouse,”
Patrick says. “We’ve stuck to our roots. The
vast majority is Australian-sourced, but in
non-foods it’s virtually the same merchandise
you sell in the States.”
The only difference, he notes, is that
Northern and Southern Hemisphere seasons
are opposite, “so in the middle of summer
we’ll sell Christmas trees and lawn furniture.
Surfboards and Santa Claus.”

—Steve Fisher

Japan

First location: Hisayama

Opening date: 1999

Number of locations: 20

Most popular item: Bulgogi beef

Unique item not found in the U.S.:

Sea grapes

houses feature market-like fish departments with everything from tuna to squid, plus sushi.

And about those bakeries. They do about five to six times more sales than a bakery in a U.S. Costco, says Ken Theriault, Costco country manager for Japan.

Today the biggest challenge for Costco in Japan is no longer introducing a business concept, but dealing with issues facing all businesses. These include coping with natural disasters, such as earthquakes and typhoons; locating affordable land for expansion; and being able to afford construction labor, says Ken.—Tim Talevich