On Tuesday, Costco Wholesale Corporation (NASDAQ:COST) opened its first outlet in China, and it was immediately overrun with customers. Customers were scrambling for the discounted products and even had to wait long hours to pay for them.
The opening of the store comes at a time when the US-China is locked in a trade war. President Trump recently threatened China with additional levies on Chinese goods.
Costco overwhelmed with customers
The US wholesale chain was forced to close the store early and suspend operations citing heavy traffic in Shanghai and huge customer overflow. The number of people was so huge such that people were even waiting up to three hours to get to the parking lot. The frenzy experienced shows that even though the economy is slowing, there is still demand low ticket items.
Costco represents value, and with the huge numbers witnessed, it shows that there is still demand despite the slowing of the Chinese economy. However, the first-day success doesn’t mean that Costco will be successful in the long run. There are western grocery stores and retailers that have had troubles in china, including Carrefour, which sold a huge stake of its China operations. The question is whether Costco will be able to sustain competition in china and continue to grow.
Frenzy shows you cannot decouple the US-China economies
This is not the first time Costco is doing business in China because it has been selling online in China for several years. Therefore there is some brand recognition. It was interesting to see the huge crowds of customers bustle to get American goods amid the ongoing trade war.
An editorial from the Global Times indicates that the huge success of Costco shows that it is not easy to dissociate the US and China economies. The interest shown by the big American corporations demonstrates that they cannot resist the massive Chinese market.
Costco’s success is a demonstration of how there is room for dissociation. Therefore the company is in the middle of the geopolitical trade war as a sign of hope.