Recent attention on the dispute between two Costco entities has seen new developments, with negotiations underway. The Beijing-based entity has explicitly stated it will not abandon the Chinese market.
A new chapter has unfolded in the recent high-profile dispute between two COSTCO entities. On May 13th, a representative from Costco (Beijing) International Commercial Development Co., Ltd. (hereafter "Costco Beijing") exclusively disclosed to reporters that the company is currently in negotiations with Costco (China) Investment Co., Ltd. (hereafter "Costco China"). The two sides are aiming for a settlement. Costco Beijing will not give up on the Chinese market and plans to continue its development there in the future.
Have there been changes among shareholders? The dispute originated in April of this year. While Costco China had already opened seven stores in mainland China, Costco Beijing emerged in April. Costco China promptly issued a statement: "We have noticed a series of accounts on the internet misusing the 'Costco' registered trademark, company name, and related visual identifiers. These and other accounts misusing the 'Costco' name are not operated by our company or our affiliated companies. All information released by them has nothing to do with Costco. Any unauthorized use of the Costco registered trademark or company name, or the fabrication and dissemination of false information, constitutes a serious infringement of our company's legal rights and interests." Costco Beijing, in turn, announced at the end of April that it had filed a civil lawsuit against Costco China.
Recent investigations by reporters revealed that both Costco entities have certain business connections or consistencies with the listed company Costco Wholesale Corporation (COST.NASDAQ). (For details, see the previous report "Costco Beijing: Both COSTCOs are genuine, they can operate separately! Costco China: No comment for now").
Interestingly, the shareholder behind both Costco entities is named COSTCO WHOLESALE INTERNATIONAL, INC. Earlier information from Qichacha showed that COSTCO WHOLESALE INTERNATIONAL, INC. is registered in both the state of New York and the state of Nevada in the US, representing two separate legal entities with the same name. The COSTCO WHOLESALE INTERNATIONAL, INC. associated with Costco China was registered with a contact address in Nevada, while the one associated with Costco Beijing was registered in New York. On May 13th, a follow-up query on Qichacha revealed that the registration and contact address for the COSTCO WHOLESALE INTERNATIONAL, INC. associated with Costco China had changed from Nevada to New York. However, the registration information for Costco China on the National Enterprise Credit Information Publicity System remained unchanged.
Potential Settlement? The Membership Warehouse Market Heats Up On May 13th, the responsible person from Costco Beijing stated that the case has now entered the judicial process. "Both Costco entities are genuine. We are exercising our legitimate rights. Currently, the two sides are in consultation and negotiation, and there is potential for a settlement. Specific details are不便透露 (inconvenient to disclose)."
Regarding the above dispute, reporters contacted Costco China. As of the time of writing, Costco China had not responded. Previously, Costco China indicated to reporters that it would not provide further comment on the dispute for the time being.
It is worth noting that earlier public information on Costco Beijing's official platform showed plans to focus on six key regional cities: Beijing, Chengdu, Wuhan, Guangzhou, Tianjin, and Hefei. The plan involved investing in and constructing COSTCO WHOLESALE INTERNATIONAL, INC. membership warehouse supermarkets. Professional teams had already been stationed in these cities to carry out preliminary work such as store preparation and site selection. Currently, Costco Beijing's official platform has removed this related content. Meanwhile, the relevant statement on Costco China's official platform is also not publicly displayed.
So, how will the two Costco entities develop in the future? Will this dispute affect expansion plans? In response, the responsible person from Costco Beijing revealed that the current priority is handling the negotiation matters between the two parties. In the long term, the Chinese market holds significant potential, especially as the membership warehouse format is one of the most profitable in the physical retail sector. Therefore, they will not abandon the Chinese market and still plan to proceed with opening membership warehouse stores there. As for whether they will use the "COSTCO" brand for new stores, that will depend specifically on the outcome of the current negotiations and a comprehensive assessment. Costco China has not yet responded on this matter.
Reporters learned from interviews that currently, many hypermarkets and standard supermarkets are operating at a loss or with minimal profits. In contrast, membership warehouses are relatively more profitable. A well-operated membership warehouse of over 10,000 square meters can achieve an annual profit exceeding 100 million yuan, including profits from merchandise sales and membership card revenue. Recently, the appointment of former Sam's Club executive Andrew Miles as the Executive Chairman of the Metro Group is also seen by the industry as a move by Metro to strengthen its focus on the membership warehouse model.
"Regardless of how the dispute between the two Costco entities is resolved, the membership warehouse format is undoubtedly a 'strategic battleground' for future physical retailers. Besides the existing players like Sam's Club, COSTCO, Metro, and M Membership Store, it is estimated that new brands will emerge. Competition in the membership warehouse market will only intensify, which will significantly test the supply chain management and product development capabilities of major brands," said Shen Jun, an analyst specializing in long-term retail industry research.
Comments