In 1976, Costco was born in the United States. Also in 1976, if U.S. residents were grouped into quintiles in descending order of income, the U.S. Gini coefficient ranged from 0.325 to 0.385, and the American “middle class” ushered in a golden age.
The "Yuppie Look" of American society is also a product of this environment. The so-called "Yuppie" refers to those who have received Buy email list higher education, have higher knowledge level and skills, and have obvious group characteristics such as dress, consumption behavior and lifestyle.
Costco and yuppie are still seen as an important aspect of the American spirit to this day. Of course, the socially progressive outlook of Costco and yuppie is also present on the west coast of the Pacific. Foreign media have coined a new word "Chuppies" (formed from "Chinese Yuppies") to describe a new generation of well-educated and well-earned young people in China.
Learning Costco is also a trend in today's Chinese retail market. Corresponding to Chuppies, there are a group of online Costco apprentices such as NetEase Koala Haigou and Xiaomi Mijia Youpin. Even in the US market, there is also Costco's e-commerce apprentice - Jet.com.
NetEase Kaola, Xiaomi Mijia Youpin, and Jet.com, which was acquired by Walmart, are inheriting Costco’s genes in different ways.
Costco's business model "three axes"
We have often seen market analysis of Costco's business model in the past. But most analysis focuses on Costco's low-price strategy.
Costco's low-price strategy is essentially a package of tactics. Its core lies in large-scale, low-SKU purchases, paid memberships and private brands.
1. Low price selection. Active SKU after repeated selection. Costco only offers about 4,000 active SKUs, including about 3,000 essentials and about 1,000 impulse-type consumables. Remember, Walmart has hundreds of thousands of SKUs. The advantage of the ultra-low SKU strategy is that it can increase consumer surplus and reduce transaction costs. Ultra-low SKUs only provide consumers with the best two or three "popular models", which will make purchases very concentrated.
2. Paid membership. Costco was born in the 1970s, when the middle class in the United States was the most prosperous. Costco members have a strong middle-class identity. Of course, this is just identification. In 2016, Costco’s net sales were $116.1 billion, and membership fees were $2.6 billion, which was equivalent to the net profit that year. Membership fees can play an important role in forming high viscosity.
3. Own brand. If low-cost selection and paid membership are just normal and learnable business logic, then Costco's own brand is the core competitive barrier. The most advantageous categories of Costco's own brand Kirkland are nuts, coffee, and energy bars. Costco's nut shelf has almost completely become Kirkland's world.
There is no doubt that the core of what NetEase Koala, Mijia Youpin, and Jet.com have learned is to select SKUs, to increase the sales volume of a single product, and to reduce costs through large-scale procurement. This core logic lies in the three companies. The patterns are all the same.
Lei Jun has mentioned in many public speeches before that his vision for Xiaomi is to be a Costco, selling cost-effective products made in China to consumers. Xiaomi customizes the products and only earns the difference in low profit margins. Yuan Foyu, general manager of NetEase's Marketing Department, also mentioned at the "Better Life Alliance" press conference on November 22 that NetEase Koala Overseas Shopping is an online Costco that grew up with the help of the Internet platform.
Even in the matter of membership, there are similarities. Of course, there are many differences in details, which are not listed for the time being, and will be discussed later.