The US discount retailer Costco made a blast when it opened its first flagship store in China this week. Business analyst Sara Hsu see it as a way to keep costs down when tariffs go up during the ongoing trade war, she tells the Vancouver Star. Solid sales to Chinese consumers could keep costs in check for US consumers too. If they succeed in China.
The Vancouver Star
Costco’s business model of offering discounted products in bulk could have enduring popularity in China, said Sara Hsu, CEO of the China Rising Capital Forecast research firm.
“People already got used to the idea from Pinduoduo, a Chinese app where people can get together in a group and buy in bulk and distribute the goods among friends. It’s really hot right now,” Hsu said.
In May, Costco executives had warned that costs for North American consumers could go up at its stores due to the ongoing trade war between the U.S. and China, with each side slapping down new tariffs.
“If Costco can make goods in China and sell them to domestic Chinese consumers, tariffs won’t apply, and that could offset loss of profit from tariffs on goods that have to be shipped out of China,” Hsu pointed out.
So rather than supporting a trade war, Chinese shoppers could end up keeping prices low in the United States — at least at one retailer. It’s a reminder that people in China are no different from consumers the world over in that their first loyalty is not to the state but the almighty yuan.
Are you looking for more stories by Sara Hsu? Do check out this list.