(By Zhu Daoyi, Edited by Zhang Guangkai)

As the largest membership-only warehouse retailer in the United States, Costco has shown good development resilience in the face of market fluctuations.

On May 30th, the international retail giant Costco (stock code: COST.US) officially released its third quarter financial report for fiscal year 2025. The data shows that in this quarter (the three months ending May 11, 2025), it achieved total revenue of $63.2 billion (approximately RMB 454.7 billion), an increase of 8.0% year-over-year; net profit was $1.9 billion (approximately RMB 13.66 billion), an increase of 13%. Diluted earnings per share were $4.28, which was $0.04 higher than expected.

Screenshot of the financial report

As a global leader in warehouse membership stores surpassing Sam's Club, membership income remains its most stable performance stabilizer. In this quarter, Costco's core membership fee income reached $1.24 billion, showing a significant increase compared to $1.12 billion in the same period last year.

In fiscal year 2024, Costco had 76.2 million global paid members, and with family-shared cardholders, the total number of cardholders worldwide reached 137 million. The renewal rate of members globally exceeded 90%. High renewal rates also mean that Costco has healthy continuous revenue: last year, its membership fee income reached $4.8 billion, while the retail segment net profit was approximately $2.5 billion.

Member development status Source: Financial Report

While the core business remains robust, Costco's e-commerce business growth has become a new highlight, increasing by nearly 16% year-over-year. In fact, Costco's e-commerce business started to recover last year, with negative growth in each quarter of the 2023 fiscal year.

Prior to this, its online e-commerce business had two main drawbacks. On one hand, for the online channel, Costco included shipping fees and handling charges in the total order amount, making the price advantage of online shopping less obvious. On the other hand, its delivery service had many restrictions on the products purchased. For example, same-day delivery required customers to sign for receipt in person; two-day delivery only delivered non-perishable food and household essentials; frozen service exclusively delivered perishable goods but required purchases over $100 to qualify for free shipping.

Costco delivery service rules

Costco's e-commerce performance rebounded key was the adjustment of the company's CEO and CFO positions from late 2023 to early 2024. Newly appointed CEO Ron Vachris and CFO Gary Millerchip abandoned Costco's previous obsession with low prices and focused instead on a series of technological transformations, with a focus on the e-commerce sector.

Firstly, they ensured efficient fast delivery services such as same-day and next-day delivery. Previously, Costco had always collaborated with third-party services like Instacart, and delivery efficiency was not a strong point of its e-commerce business. Secondly, they improved the pickup model, widely promoting the online purchase and offline pickup delivery model, and expanded the scope of this service to more categories. Additionally, Costco used technological innovation to optimize the consumer experience, thereby enhancing member loyalty, such as introducing membership card scanners in stores to simplify membership verification processes; upgrading the app to shorten loading times and optimize the interface; offering customized options to allow members to adjust account settings according to their preferences...

These transformation measures yielded immediate results, with Costco's e-commerce sales turning positive from the beginning of the 2024 fiscal year and achieving double-digit year-over-year growth since the second fiscal quarter.

However, it is worth noting that despite Costco's counter-cyclical growth against the backdrop of intensified global retail competition, its global success formula seems to have failed in China.

Public records show that Costco entered China in 2019 with the reputation of being the "upper limit of American retail." At the time, the opening of its first mainland store in Shanghai Minhang saw the sale of 160,000 membership cards in a single day, and the massive foot traffic reminiscent of the Spring Festival left a lasting impression. However, it soon hit a bottleneck, and after five years, Costco has only opened seven stores, all concentrated in the Yangtze River Delta and Pearl River Delta regions, leaving the northern market completely untouched. This distance from realizing its ambitious claim to "disrupt Chinese retail" is evident. Moreover, Costco's membership card renewal rate in the domestic market is only 62%, far below the global average of 90%, which seems to further prove the obstacles Costco faces in expanding in China.

At present, whether in terms of expansion speed, degree of localization, or research into Chinese consumption culture and habits, Costco appears to be lagging not only behind Sam's Club (Sam’s Club) but even failing to keep up with another German retail giant entering China at the same time — ALDI.

Sam's Club, which entered China as early as 1996, although it experienced a 20-year hibernation period, began to "accelerate" its development starting in 2016, taking actions such as raising membership fees, rapidly expanding stores, and strengthening online channels. Starting in 2020, Sam's Club entered the "high-speed growth phase," expanding at an average rate of 5-6 new stores per year. Now, thanks to its first-mover advantage, it has successfully penetrated into third-tier cities. The Wuhan store, which opened on May 28th, is the 56th Sam's Club store in China, and seven new stores are currently in critical preparation phases.

Sam's Club Source: Walmart China

This level of expansion efficiency is largely due to Sam's flexible store opening strategy: both self-built properties and leasing or renovating old stores to expand the network. For instance, the Shanghai Jufengyuan store was upgraded from the original Walmart hypermarket, significantly reducing consumer arrival costs. In contrast, Costco Asia President Zang Sihan continues to adhere to its standardized store model: a 20,000-square-meter superstore paired with a 30,000-square-meter parking lot, ensuring a configuration of 1,500 parking spaces. This "suburban megastore + self-built property" strategy, although reinforcing the "membership exclusivity" feeling, severely sacrifices convenience. The long distances not only exclude young people with busy lifestyles but also directly eliminate the possibility of consumption for households without cars.

Meanwhile, Sam's Club reshaped the online shopping experience through "Express Delivery" (free shipping for orders over 99 yuan) and "Citywide Delivery" (free shipping for orders over 299 yuan), resulting in a significant increase in membership numbers. Costco, on the other hand, continues to adhere to its "global uniform pricing" principle, requiring an additional 20 yuan delivery fee for online orders. Consumers in China, accustomed to the "free shipping culture" of e-commerce, have deeply ingrained aversion to delivery fees, creating a stark conflict between this American business logic and Chinese consumption habits. Although there are signs of improvement in its delivery strategy, it has clearly missed the opportunity to seize the market.

Sam's Club Source: Walmart China

Not long ago, on May 15th, Walmart released its first quarter financial report for fiscal year 2026 (as of April 30, 2025), with revenue of $165.6 billion, an increase of 2.5%; adjusted operating profit of $7.3 billion, an increase of 3%. Among them, Sam's Club once again set a new record, becoming the key engine driving the continuous growth of Walmart's China business. On April 9th, at the 2025 Walmart Investment Conference, Walmart China President and CEO Zhu Xiaojing revealed that in China, eight Sam's Club stores will break through the $500 million (approximately RMB 3.67 billion) sales threshold. At the earnings conference on May 15th, Walmart CFO John David Rainey also specifically mentioned, "In the past quarter, revenue from Sam's Club in China (membership fees) increased by more than 40% due to the continuous increase in membership numbers."

Aldi Source: Official WeChat

The German "budget supermarket" Aldi also entered China in 2019, choosing to embed stores into community core business districts, with a density layout covering 15,000 households within 500 meters. By running small community stores, it catered to the consumption habits of Chinese customers, achieving daily sales of millions through small 1,000-square-meter stores. This year, Aldi announced a major price cut in the first round of 2025, further solidifying its "low price" mindset, and also plans to use this opportunity to leave Shanghai and venture into new markets in the Yangtze River Delta.

Returning to Costco, its announcement in March showed that nine new stores for the 2025 fiscal year have been confirmed, with seven located in the U.S., one in Japan, and one in Australia, but none involving the Chinese market. The world's largest warehouse membership supermarket, Costco, remains stalled in Nanjing on the Chinese mainland.

In summary, the practices of Sam's Club and Aldi have validated the importance of localization adaptation. The challenges Costco faces in the Chinese market essentially stem from the intense collision between global standards and local demands. However, the rapid development of China's retail industry means that the lenient adaptation period enjoyed by Sam's Club in the past is unlikely to reappear. Thus, Costco has little time left for change.

Original source: https://www.toutiao.com/article/7512307546783678987/

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