How Costco became a staple in Asian America

Durian at a Costco Wholesale store in Woodland Hills, California. April 24, 2022.

Wendy Leung

Wendy Leung rarely saw durian in grocery stores growing up in Los Angeles, but the 45-year-old nonprofit worker found the fruit at her local Costco Wholesale in San Fernando Valley in April. Durian is used in Southeast Asian cuisines and is known for its strong fragrance.

“When I saw it at Costco, it made me laugh that durian had become mainstream,” said Leung, who was born in Hong Kong. “I’ve definitely noticed more Asian products at Costco lately.”

Asian Americans are the fastest growing demographic group in the United States. They also represent a disproportionate number of Costco customers. Asians make up about 7% of the US population, but 11.9% of Costco shoppers, according to market research firm Numerator.

Costco’s dominance among Asian American consumers bodes well for the warehouse retailer’s long-term growth trajectory – and has implications for other retailers as the industry evolves alongside diversification. the United States.

“It’s possible to take what were once considered niche or minority markets and put them at the heart of American trends,” said Kymberly Graham, head of diversity initiatives at consumer insights firm NielsenIQ.

“For Asian Americans, their rate of population acceleration certainly lends to this idea that they are going to create major shifts in the marketplace. If their needs are met, it becomes inherently very profitable for whoever serves them” , Graham mentioned.

A $13 billion opportunity

The rapid growth and purchasing power of Asian Americans makes the group a formidable consumer base for retailers. The Asian population in the United States jumped 81% from 2000 to 2019, compared to a 16% growth in the overall population, according to the Pew Research Center. Asian Americans have the highest median household income in the United States – although demographics also have the greatest within-group economic disparity in the country.

The untapped sales potential of Asian American consumers is $13 billion, according to NielsenIQ.

On average, Asian Americans exhibit shopping habits that differ from those of other consumers, NielsenIQ found. Households of Asian origin tend to be larger than those of the general American population. Asian Americans are more likely to buy in bulk and seek out bargains. As a result, Asian consumers are more than twice as likely to shop at warehouse clubs as the average US consumer.

Costco declined to comment directly on inventory and consumer strategy regarding Asian shoppers. “No matter what products we sell, Costco’s buying philosophy is the same: research the market, determine the variety of products that interest our members, and negotiate exceptional value on quality products and services,” said Costco management to CNBC in an email.

The warehouse retailer is known for not spending money on advertising, but word of mouth can cultivate brand affinity across different communities, said Marshal Cohen, chief industry analyst for the company. NPD Group market research.

“Any time in a very blue moon would you hear about a major retailer focused on the Asian community,” Cohen said. “Word of mouth and community influence spreads, and that’s what helps elevate a business. So if a business like Costco caters to the Asian community, they share it and it multiplies. “

Cindy Zhou, 50, first heard about Costco from a friend who is also an immigrant from China. Zhou became a Costco member around 2013 and now shops weekly for food, household products and gas at her local warehouse in Greater Cleveland.

“Almost all of my friends are Costco members,” said Zhou, who works in information technology. “I like Costco because they have really good quality at a much lower price than other grocery stores.”

Zhou and other Costco shoppers noted that their local stores have added specialty Asian items such as boba ice cream bars, lap cheong and oyster sauce to their rotating inventory in recent years. She recalls seeing exhibits for the Chinese holiday, Mid-Autumn Festival and Lunar New Year at Costco last year. Leung’s warehouse in California sells poke bowls.

Asian American consumers can find food products from their diaspora at local ethnic grocers and Asian supermarket chains such as H Mart, 99 Ranch Market and Patel Brothers. But seeing these products at one of the biggest retailers in the world is rare.

With a market value of $185 billion, Costco reported total revenue of $195.93 billion in 2021, up more than 17% from the prior year. The company is expected to release its latest results after the market closes on Thursday. Its shares are down more than 20% so far this year.

Zhou said when she or a friend spots an Asian product at Costco that they would normally only see in an ethnic store, they tell others about it in group chats on the Chinese messaging app WeChat.

“Lots of Costco Love”

Jing Gao, founder of hot sauce brand Fly By Jing, is a huge Costco fan as a consumer, so when she had the opportunity to pitch to Costco shoppers, she jumped at the chance.

“I’m obsessed with Costco. I go there every chance I get,” Gao said. “There’s just something great about discovery… not knowing what deals you’re going to find.”

Fly By Jing at Costco Wholesale

Fly by Jing

Fly By Jing started as an online-only direct-to-consumer business before expanding to retailers such as Whole Foods, Target and now Costco. The brand launched its Sichuan chili crisp product at Costco stores in the Los Angeles and Hawaii area in February. A few months later, Fly By Jing has already expanded or is in the process of entering the Northeast, Bay Area, Pacific Northwest, San Diego and Texas markets. The company also plans to roll out its Zhong dumpling sauce at Costco, starting in Los Angeles later this year.

An Instagram video announcing the launch of Costco became Fly By Jing’s top-performing post on the social media platform. The video currently has around 85,000 views, nearly 7,000 likes, and nearly 600 comments.

“Obviously there’s a lot of love for Costco,” Gao said.

A customer who purchased Fly By Jing from Costco is Leung.

“I would commend Costco for thinking about what young people want, what’s in it,” Leung said. “You start to develop loyalty.”

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