Costco to open first store in China tomorrow

A staff member checks items at a Costco store during a media day in Shanghai ahead of its official opening on Tuesday. (AFP)
Updated 26 August 2019

Costco to open first store in China tomorrow

  • Local competitors ‘stealing ground with popular homegrown retailers’

SHANGHAI: The US retail giant Costco is diving into the thorny area of food retail in China with its first store opening this week, but analysts warn it faces a tough ride as it looks to succeed where a series of international retailers have failed. The move also comes at a challenging time with Beijing and Washington engaged in a tense trade war that has seen them swap punitive tariffs on hundreds of billions of dollars of two-way trade.
China has proved a brutal battleground for overseas food retailers in recent years, with many failing to understand consumer habits and tastes as well as local competitors building a stronger presence.
In June, French supermarket giant Carref

BACKGROUND

China has proved a brutal battleground for overseas food retailers in recent years, with many failing to understand consumer habits and tastes as well as local competitors building a stronger presence.

our agreed to sell 80 percent of its China business to domestic giant Suning after repeated losses.
And German wholesaler Metro is in the process of selling its operations to a local bidder and British grocery giant Tesco pulled out of the Chinese market in 2014.
“The Chinese market is very complicated and requires retailers to innovate and localize,” said Jason Yu, general manager of Kantar Worldpanel China.
But Costco thinks it can avoid the malaise that has plagued others with its “no-frills approach” and bulk-buy strategy.
The retailer will throw open its doors on Tuesday, five years after making its first online foray into China through Alibaba’s cross-border e-commerce platform Tmall Global.
Richard Zhang, Costco’s senior vice president for Asia, told AFP they had a “conservative” goal to sign up at least 100,000 new members for the new store, which is in a suburban district of Shanghai with a 2 million-strong population.
And Zhang said they had taken time to make sure that consumers in China knew their brand and the market was mature enough.
Costco will be targeting China’s affluent growing middle class, who know the brand from international travels.
However, analysts warned that local competitors are stealing ground with popular homegrown retailers such as Alibaba’s bricks-and-mortar Hema stores integrating online and offline shopping.
“Local retailers are reaching out to customers via all distribution channels while foreign retailers are not so flexible to adapt to new situations,” said Yu.
“The old way of a large and all-inclusive hypermarket doesn’t work in China.”
Chih-yuan Wang, retail research director at Mintel China Reports, warned that many foreign retailers adapted too slowly and “still didn’t catch up with China’s rapid ecommerce craze where customers go shopping on mobile phones.”
“The cost of (later) building a home delivery service is very high and may affect Costco’s basic strategy to provide the lowest available prices,” he said.
Costco’s big rival, membership-based warehouse Sam’s Club from Walmart, has over two decades of history in China and is still on the expansion trail with plans to reach 40 stores by the end of next year.
But Zhang said the fact that Chinese consumers are already familiar with a membership supermarket model could work to Costco’s advantage.
“Chinese consumers are ready to pay for a membership card that grants them an exclusive privilege to buy at a warehouse store, it’s not a new concept in the country,” said Zhang. “A mature market saves us efforts in educating customers.”


Saudi-led group reinstated as builder of Bulgaria gas pipeline

Updated 16 September 2019

Saudi-led group reinstated as builder of Bulgaria gas pipeline

  • Bulgaria’s Supreme Administrative Court announced that the Saudi-led group’s main competitors for the project had dropped a legal challenge relating to the award
  • Bulgaria’s state gas operator Bulgartransgaz had initially chosen the Saudi-led group — made up of Saudi Arabia’s Arkad Engineering and a joint venture including Switzerland’s ABB

SOFIA: A Saudi-led consortium was definitively reinstated on Monday as the builder of a new gas pipeline through Bulgaria, intended to hook up to Gazprom’s TurkStream project.
Bulgaria’s Supreme Administrative Court announced Monday that the Saudi-led group’s main competitors for the project had dropped a legal challenge relating to the award.
The latest development brings to an end a long-running tussle between the Saudi-led consortium and its competitors for the project, a consortium of Luxembourg-based Completions Development, Italy’s Bonatti and Germany’s Max Streicher.
Bulgaria’s state gas operator Bulgartransgaz had initially chosen the Saudi-led group — made up of Saudi Arabia’s Arkad Engineering and a joint venture including Switzerland’s ABB — to build the 474-kilometer (294-mile) pipeline.
But Bulgartransgaz later decided to strike the winner off the tender for failing to supply documents needed to sign off the contract.
Instead it accepted the offer of the second-placed consortium led by Completions Development.
However, Bulgaria’s competition watchdog ruled in July that the operator should honor its previous commitments and sign a contract with the Saudi-led group.
The watchdog’s verdict was subject to a final appeal in the courts but the Supreme Administrative Court announced Monday that the appeal had been withdrawn, meaning that the Arkad-led group has now been definitively reinstated.
Bulgartransgaz is in a hurry to complete the pipeline as soon as possible in a bid to enable Russian gas giant Gazprom to hook it up to its TurkStream pipeline after it becomes operational at the end of this year.
Bulgaria, which is heavily dependent on Russian gas for its domestic needs, has been repeatedly criticized by both the EU and the United States for failing to diversify both its gas sources and its delivery routes.
The Balkan country hopes to start receiving Caspian Sea gas from Azerbaijan’s Shah Deniz field as well as liquefied natural gas from various sources via terminals in Greece through a 182-kilometer (113-mile) interconnector expected to be ready by the end of 2020.