Costco Japan: Wholesale Success in a Country of Small Households

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Introduction

Whether you’re seeking a massive pack of toilet paper or a budget-friendly hotdog, Costco is the place to go for many in the US… and now in over a dozen countries around the world!

What can we attribute this global success to?

In Japan, Costco is extremely popular. This might be strange considering how Japanese people tend to live in small homes and often travel via public transportation.

How is Costco succeeding in a market with so many cultural hurdles to overcome?

Let’s take a look at this market entry success story!

Background of Costco’s Market Entry in Japan

When I taught English in Japan through the Japan Exchange and Teaching (JET) program, I remember one of the first assignments I gave my students was to tell me something fun they did over the summer vacation. Surprisingly, many mentioned their exciting trips to Costco.

The larger packaging, English signage, and offerings of foreign products all come together to make a trip to Costco an exciting experience. For many people, it simulates the experience of visiting a foreign country.

Costco opened its first store in Japan in 1999, now the number of Costco locations in Japan has grown to over 30 and counting. (Source.)

Each Costco location can draw visitors from hours away, willing to make the drive for the unique shopping experience and products many of which are only available at Costco.

Appealing to Local Tastes

When localizing to a new market, it’s important to consider the tastes of your new audience. Japan’s Costco locations feature many Japan-specific products, from skincare to sushi!

Costco Japan offers massive sushi platters like those shown in the photos below. These sushi platters are so popular that they are now also available in some Costco stores outside of Japan.

Costco Sushi offerings spotted at Costco Japan (photo by btrax Japan staff)

Costco products are a common sight at many Japanese parties and gatherings between friends and family.

A holiday platter and the complete Christmas party feast of Costco goodies (photo by btrax Japan staff)

“The rotisserie chicken at Costco is the closest thing we can get to a Christmas turkey in Japan. We left the house at 7 am on Christmas Eve to get to Costco by 8:30 am to try to get a chicken. They started handing out numbered tickets to avoid too much chaos,” said btrax staff Mana Hashimoto about a Christmas she spent in Japan.

Reaching New and Existing Costco Fans Across Japan

A few years ago when I lived in a rural town in Japan, I was several hours’ drive away from the closest Costco. Me and my fellow Costco fans were sad about this until we heard about a “Costco Fair” being held at our local supermarket.

It wasn’t just my small town but all over Japan, small Costco resale stores within local supermarkets started to pop up. These stores offer Costco’s private label Kirkland Signature brand items in smaller quantities without requiring a Costco membership. Usually, this would be on a special display at the grocery store with a limited number of items.

Here is an example of a flier for a “Costco Fair” at a Japanese grocery store, can you spot the Costco logo? (Image Source.)

This approach was initially born from COVID-19 pandemic restrictions when Costco members were limited to a fewer number of guests than before, and traveling farther to get to Costco became inadvisable. This move has been well-received by Japanese consumers, allowing them to access Costco products more conveniently and economically.

A Costco Fair typically sells Costco products at slightly higher prices, but it saves the consumers the annual membership fee and transportation costs of driving to a Costco.

This strategy has increased Costco’s market penetration in Japan and has helped local supermarkets compete with larger chains. The phenomenon began in major metropolitan areas and has since expanded, with significant sales growth and consumer interest, suggesting potential future growth for Costco in Japan. (Source.)

Costco Resellers

Due to the popularity of Costco products, there has been an emergence of “Costco resellers”. These shops adjust the portion of Costco products for the typical Japanese household. These shops are increasingly popular with Japanese shoppers.

No, these are not Costco black markets, these resellers are legal in Japan. Costco is a wholesaler, so, as a Costco business member, it is officially recognized that the customer can purchase products from Costco and resell them. (Source.)

Household items are re-portioned for people who want to buy in smaller quantities. (Image Source.)

These Costco resellers are a great alternative for people who live far from Costco locations or in smaller homes that don’t have space to buy in bulk.

Cocomart store front. (Image Source.)

One example of a Costco reseller shop is Cocomart.

Costco Muffins as they are sold at Costco in packs of 6 vs. repackaged at Cocomart into packs of 3. (Image Source.)

There are many different Costco reseller shops in Japan and they continue to pop up more and more.

Conclusion

In conclusion, Costco’s success in Japan is a remarkable example of a global brand effectively adapting to local market conditions. Despite the cultural and logistical challenges posed by Japan’s smaller households and reliance on public transportation, Costco has thrived by offering a unique shopping experience and catering to local tastes. Selling a mix of Japan-specific items and unique foreign products has made Costco a popular choice whether buyers are looking for familiar flavors or something different.

“Costco Fairs” and the rise of legal resellers have expanded Costco’s reach, making its products more accessible to a wider audience without the need for a membership or long travel distances. These strategies have not only increased Costco’s market penetration but also allowed local supermarkets to compete more effectively.

As Costco continues to innovate and adapt to the needs of Japanese consumers, its presence in the country is likely to grow, further solidifying its position as a beloved and essential retailer in Japan.