Fairfax, United States - December 3, 2016: People with shopping carts filled with groceries walking out of Costco store in Virginia Photo: iStock

Not all mega-retailers have met with success in China.

Korea’s Lotte and British supermarket powerhouse Tesco may have retreated from the world’s second-largest economy, but that has not deterred United States hypermarket giant Costco from dipping a toe in the China market.

According to mainland media Jieman, Costco will open its first Chinese store in Shanghai’s Minhang district between May and July.

Compared with rival Walmart, which entered the market in the 1990s, Costco has been very cautious about expanding into China. In 2014, it first joined the Alibaba Tmall portal, and did not start its first flagship store until 2017.

In December 2017, Costco formed a company in Shanghai with a registered capital of US$86 million in partnership with the Shanghai Pudong Kangqiao Group. It also inked an agreement with Shenzhen-based real estate developer Galaxy Holding to open another membership retail club store.

Industry observers predict that Costco, which runs a total of 770 stores worldwide including 12 stores each in Taiwan and Korea and 25 in Japan, may find itself in an uphill battle against Chinese culture.

The company’s relatively loose refund policy is already the subject of considerable online discussion, speculation that might severely hurt its profitability.

Famous for its membership system that provides huge discounts for bulk purchases, Costco pledges refunds to consumers even after the goods are consumed.

Taiwanese media was full of stories about consumers who received refunds even as they consumed the last piece of the goods concerned.

So will Costco change its strategy in Shanghai to better cater for the market?

One online commentator joked that Dama, the famous group of female retiree dancers might swamp Costco’s free food-tasting counter, or may be found queuing with clothes or bags at refund counters after using their purchases for days.

China. An emerging but risky market.

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