Boston, MA 10/15/2014 (wallstreetpr) – Costco Wholesale Corporation (NASDAQ:COST) plans to enter Chinese e-commerce market in a strategic move to hedge slowing sales in the U.S. markets. The company will utilize Alibaba Group Holding Ltd (NYSE:BABA)’s Tmall online marketplace to enter the booming Chinese marketplace.
The company said that Tmall’s warehouse stores would enable it to save on delivery time and logistics expenses. Costco initially plans to sell its Kirkland Signature private label products and food and healthcare products. Leveraging Tmall network will allow Costco to enter China with nominal capital investment.
With mobile transition, Costco Wholesale Corporation (NASDAQ:COST) is struggling to defend its store traffic alike many other U.S. retailers. The company has reported slowing same-store sales growth over the past three years. Hence, it is looking forward to improving its online business.
Costco’s Executive VP, Jim Murphy, said that the Chinese consumers have more appetite for imported goods, and Costco sees tremendous growth opportunities there. Joseph Agnese, S&P Capital IQ analyst, also noted that Chinese marketplace has significant potential to grow over a period of five plus years. iResearch, a local consultancy firm in China, projects 45.8% increase in the online retail sales in China during 2014 to $446.6 billion.
Tmall.com and Overseas Presence
Tmall.com offers virtual store front and payment portals to several foreign retailers, including Burberry, ASOS and Inditex. Tmall will help connect Costco Wholesale Corporation (NASDAQ:COST) with its daily deals site Juhuasuan.com and consumer online marketplace Taobao.com.
Costco’s entry into Chinese e-commerce marketplace will add to its online business portfolio currently restricted to the U.S., U.K., Canada and Mexico. The wholesaler also operates about 39 shops in Asia across Japan, Taiwan and Korea through majority-owned subsidiaries. Costco Wholesale Corporation (NASDAQ:COST) is strategically mulling overseas expansion and has planned to open 14 of the 30 warehouses in international markets during FY14.