While everyone else is racing towards the digital world, one big retailer is standing firm in its bricks-and-mortar roots. At the Retail Congress Asia Pacific, Richard Chang, senior vice president of Costco Asia, proved the unwaning popularity of offline shopping through frenetic videos of Asian Costco shoppers in a frenzy, not unlike their counterparts in North America.
Costco Asia currently has 12 warehouses in Korea, 25 in Japan and 12 in Taiwan, and have recently partnered up with Alibaba to sell on Tmall. With 11 million paid cardholders, 2.8 are in Taiwan, 2.8 are in Korea and 5.5 are in Japan.
The operating philosophy remains the same worldwide for Costco: to offer the best value, limited SKUs, unique products and their Kirkland Signature brand. With that, 50 percent of all products are imported, catering to high-end members who spend an average of US$100 to US$175 per visit. Renewal rates are also impressive, hitting 85% in Asia.
When it comes to Costco’s bricks-and-mortar strategy, Chang explained that with 715 warehouses, there is a real need to differentiate from online.
“We view e-commerce as incremental sales, not taking away from brick-and-mortar,” he said. “Only 30 percent of SKUs are redundant. The other 70 percent, you have to go to the store for.”
The 3 Ts
Costco’s strategy for success comes down to three T’s: Taste, Touch and Take. For taste, it’s all about demos, road shows and wine tastings that promote word of mouth referrals, incremental sales and frequency of purchase.
For touch, Costco deliberately allows customers to touch merchandise so that they can get a sense of the quality of the product. The last ’T’ is take, as “nothing can substitute the feeling of walking out with merchandise,” according to Chang. All three ’T’s contribute to incremental sales and cannot be duplicated online.
A strong believer in brick-and-mortar, Chang hammered in the benefits of offline stores with a slide that showed the average number of items purchased in-store and online for Costco Asia: 10.4 items per transaction in store, compared to just 2.2 items online.
In conclusion, Chang said “online is here to stay, but brick-and-mortar have qualities that online does not have (yet). He advises offline retailers to create the 3Ts shopping experience to make your products come to life, and to capture the moment when shoppers enter your store.
Stay tuned for our exclusive video interview with Richard Chang on the site next week.