How Costco became a staple in Asian America

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

Wendy Leung

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

“When I saw it at Costco, it made me laugh that durian had gone 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 population in the United States, and they also represent a disproportionate number of Costco customers. Asians make up about 7% of the US population, but they make up 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 bears implications for other retailers as the industry develops alongside a diversified United States.

“There is an opportunity to seize what were previously seen as niche or minority markets and make them central to American trends,” said Kimberly Graham, head of diversity initiatives at consumer intelligence firm NielsenIQ.

“For Asian Americans, the rate of their population acceleration certainly lends to this idea…that they are going to make major market shifts. If their needs are met, it will inherently become very profitable for anyone who serves them,” Graham said.

A $13 billion opportunity

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

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

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

Costco declined to comment directly on inventory and consumer strategy as it relates to Asian shoppers. “No matter what products we sell, Costco’s buying philosophy is the same: researching the market, identifying the range of products our members are interested in, and negotiating exceptional value for quality products and services,” Costco management told CNBC in an email.

Marshall Cohen, chief industry analyst at market research firm NPD Group, said the warehouse retailer is known to spend no money on advertising, but word of mouth can grow brand affinity between different communities.

“Every time in a blue moon you’ll hear about a major retailer focusing on the Asian community,” Cohen said. “Word of mouth and community influence spreads, and that’s what helps raise the bar. So if a business like Costco serves the Asian community, they share that and multiply that.”

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

“Almost all of my friends have a Costco membership,” said Chu, who works in IT. “I like Costco because they have a very high quality and are at a much lower price than other grocery stores.”

Zhou and other Costco shoppers note 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 remembered seeing performances of Chinese holidays, Mid-Autumn Festival and Lunar New Year at Costco last year. Leung’s California warehouse sells poke bowls.

Asian American consumers can find food products for their diaspora at local ethnic grocery stores and Asian supermarket chains such as H Mart, 99 Ranch Market, and Patel Brothers. But it’s rare to see these products at one of the world’s largest retailers.

With a market capitalization of $185 billion, Costco reported $195.93 billion in total revenue in 2021, up more than 17% from the previous year. The company is due to announce its latest results after the market closes on Thursday. Its shares have fallen more than 20% so far this year.

Zhou said that when she or a boyfriend discovers an Asian product at Costco that they usually only see in an ethnic store, they tell others about it in group chats on Chinese messaging app WeChat.

Lots of love for Costco

Jing Zhao, founder of the hot sauce brand Fly By Jing, is a huge fan of Costco as a consumer, so when she had the opportunity to promote to Costco buyers, she jumped at the opportunity.

“I’m obsessed with Costco,” said Zhao. “I go any chance I get.” “There’s something wonderful about discovery… you don’t know what deals you’re going to find.”

Bujing fly at Costco Wholesale

fly jing

Fly By Jing started as a direct-to-consumer online trading company before expanding to retailers like Whole Foods, Target, and now Costco. The brand launched its Sichuan chili at Costco stores in the Los Angeles and Hawaiian 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 plans to roll out zong dumplings at Costco as well, starting in Los Angeles later this year.

An Instagram video announcing Costco’s launch has become the best Fly By Jing post on the social media platform. The video currently has nearly 85,000 views, nearly 7,000 likes, and nearly 600 comments.

“There is clearly a lot of love for Costco,” Gao said.

One customer who bought Fly By Jing at Costco is Leung.

“I would give kudos to Costco for thinking about what young people want, and what’s in it,” Leung said. “Begin to develop loyalty.”

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