Costco
Costco Brings Its Business Model to Japan
it will open its fourth warehouse, in Amagasaki,
Targets the Universal Appeal of Value
near Osaka.
Mike Sinegal has had to
confront all the stereotypes
At its warehouses in Japan, Costco sells
about the "uniqueness" of
everything "from computers and diamond rings
the
to fresh fish and rice," according to Sinegal.
Japanese
market.
Sinegal, the president of
Certain
Costco Wholesale Japan,
accommodate Japanese preferences. "Our fish
has
that
selection is wider in Japan, and we also sell
Japanese customers won't
green tea and seaweed in Japan, both of which
buy goods in bulk sizes,
are rarely offered in our warehouses in North
and that they expect to be
America," says Sinegal. And, contrary to the
coddled by a bowing sales
naysayers, Costco Japan also sells a large
staff. He was even told that
quantity of Tide detergent. Approximately 60% of
they wouldn't buy Tide laundry detergent. But,
Costco Japan's merchandise is from domestic
despite initial skepticism within the industry in
sources, and the remaining 40% is imported.
been
told
concessions
have
been
made
to
Japan, Costco did not alter its basic business
model when the company decided to do
Costco's entry into Japan has coincided with one
business in Japan. Rather than customize
of the bleakest periods ever for retailers in Japan.
Costco's
Japanese
While tough economic times may have made
conventions, Sinegal has focused on appealing
Japanese consumers more cost-conscious, "I do
to
the
format
to
universal
conform
desire
to
consumers
not think that the recession has worked to
everywhere: to get quality goods at exceptionally
of
Costco's advantage," says Sinegal. "Costco's
low prices.
business thrives best in a healthy, growing
economy. So we prefer to see Japan's economy
Even within the U.S. market, Costco's business
get back on the track of strong growth."
model is unique. Costco, headquartered in
Issaquah, Washington, refers to its stores as
What attracted Costco to Japan in the first
"warehouses." Its customers are "members,"
place? Sinegal notes that Japan's demographics
who pay a modest annual fee for shopping
matched Costco's profile of "high average
privileges. And it tries to cut out the middlemen,
household income, high population density in
purchasing the vast majority of its merchandise
many different urban areas, and lots and lots of
directly from manufacturers and passing on the
small business owners." Sinegal explains that,
resulting savings to its members.
both in Japan and worldwide, small businesses
represent Costco's most important membership
In 1999, Costco opened its first warehouse in
segment. "We strive to serve the small business
Japan, in Hisayama, located outside of the city of
member by providing for the business owner's
Fukuoka. The size of the Hisayama warehouse
business needs as well as the owner's family
is 135,000 square feet, the average size of
and personal shopping needs."
Costco's
warehouses
in
the
U.S.
Costco
subsequently opened warehouses in two new
In some other foreign locations, such as Mexico
locations: in 2000 in Makuhari, Chiba, and in
and Taiwan, Costco has teamed up with local
2002 in Tamasakai, outside of Tokyo. This spring
partners in joint ventures, but Costco Japan is a
Japan External Trade Organization
Copyright (C) 2003 JETRO. All rights reserved.
wholly owned subsidiary of the U.S. parent.
Originally, however, Costco sought out potential
Japanese partners. "We were very interested in
establishing Costco Japan as a joint-venture with
a Japanese partner," explains Sinegal, "and
spent years searching for a good partner.
Unfortunately, after a long search, we could find
no appropriate Japanese company that had
confidence that Costco's basic business model
would succeed in Japan." Adds Sinegal, "In
retrospect, we believe going alone was the best
decision for our business success in Japan."
Japan External Trade Organization
Copyright (C) 2003 JETRO. All rights reserved.