Costco and Sam’s Club are a big hit in Mainland China

Consumers in China are flocking to big box stores in Mainland China operated by Costco Wholesale Corporation (NASDAQ:COST) and Sam’s Club (NYSE:WMT). The continued acceptance of the membership model has reset growth expectations in the region for the two U.S. retail giants.

The opening of Costco’s (COST) first store in southern China last week was reported to have attracted large crowds and an initial burst of strong sales. The warehouse club’s new outlet is located in Shenzhen, and is the company’s sixth store overall in China. The crowds to get into the new Costco (COST) were so large that local officials had to use crowd-control measures to handle the store traffic. Popular items sold on the first day at the new Costco (COST) store were reported to include fruits, bread, frozen meat, seafood, and Disney’s (DIS) Lotso bear from Toy Story 3.

The new Costco (COST) store is also attracting attention from Hong Kong residents who travel to mainland China on weekend getaway trips due to the ability to buy cheaper grocery products in bulk. The strength of the Hong Kong dollar is also a significant factor in Hongkongers making the trip. Meanwhile, Walmart (WMT) Sam’s Club outlets have been a popular destination for Hong Kong consumers ever since the pandemic, and is also a target of shopping agents who buy products in bulk and then resell them in Hong Kong.

During the last Costco Wholesale (COST) earnings call (transcript), management outlined that the company has to roll out new stores slowly in China due to the difficulty in staffing the store with experience managers. Walmart (WMT) is also expanding cautiously in China, but has determined that big box stores have more potential than smaller format stores. Walmart (WMT) is investing strategically in China to take advantage of the mindset of Chinese consumers, more than doubling the number of Sam’s Club stores in China since 2020.

For the early part of 2024, shares of Costco (COST) are up 3.5% and Walmart (WMT) is 2.3% higher to outpace the return of the broad stock market,