How Costco Became an Asian American Staple

Wendy Leung rarely saw durians in grocery stores growing up in Los Angeles, but the 45-year-old nonprofit worker found the fruit in her local area. Wholesale Costco in the San Fernando Valley this April. Durian is used in Southeast Asian cuisines and is known for its intense aroma.

“When I saw it at Costco, I just laughed that durian has become a popular trend,” said Leung, who was born in Hong Kong. “I’ve definitely noticed more Asian products at Costco lately.”

Asian Americans are fastest growing demographics in the United States They are also a disproportionate number of Costco customers. Asians include about 7% of the US populationbut accounts for 11.9% of shoppers at Costco, 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 carries implications for other retailers as the industry grows with diversity. diversification of the United States.

“There is an opportunity to take what was once considered a niche or minority market and place them,” said Kymberly Graham, head of diversity initiatives at consumer intelligence firm NielsenIQ. central to US trends.

“For Asian Americans, their population growth definitely creates the idea that … they’re going to make big changes in the market. If their needs are met, it’s inherent. going to be very beneficial to anyone who serves them,” Graham said.

The rapid growth and purchasing power of Asian Americans make the group a formidable consumer base for retailers. The Asian population in the US grew by 81% between 2000 and 2019, compared with overall population growth of 16%, according to the report. Pew Research Center. Asian Americans have highest median household income in the US – although demographics also have the largest economic disparities between groups in the country.

According to NielsenIQ, the untapped sales potential of Asian Americans amounts to $13 billion.

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

Costco declined to comment directly on inventory and consumption strategy as it concerns Asian shoppers. “No matter what product we sell, Costco’s buying philosophy is the same: Research the market, identify the variety of products our members are interested in, and negotiate exceptional value.” on quality products and services,” Costco management told CNBC in an email.

Marshal Cohen, director of industry analysis at market research firm NPD Group, said the well-known warehouse retailer doesn’t spend money on advertising, but word of mouth can strengthen brand relationships between communities. difference.

“Every blue moon, you hear about a major retailer that focuses on the Asian community,” says Cohen. “Word of mouth and community influence spreads, and that’s what elevates the business. So if a business like Costco caters to the Asian community, they’ll share that and that will. multiply.”

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

“Almost all of my friends have a Costco membership,” said Zhou, who works in the information technology industry. “I like Costco because they have very good quality at a much lower price than other grocery stores.”

Zhou and other Costco shoppers note that their local stores have added Asian specialty items such as boba ice cream, cheongsam and oyster sauce to their rotating inventory in recent years. She recalls seeing performances catering to the Chinese Lunar New Year and Mid-Autumn Festival holidays at Costco over the past year. Leung’s warehouse in California sells poke bowls.

Asian-American consumers can find ethnic minority food products at local ethnic grocery stores and Asian supermarket chains such as H Mart, 99 Ranch Market, and Patel Brothers. . But seeing such products at one of the largest retailers in the world is rare.

With a market value of $185 billion, Costco reports $195.93 billion in total sales in 2021, up more than 17% year-over-year. The company is expected to report its latest results after the market close on Thursday. Its shares are down more than 20% so far this year.

Zhou said when she or a friend discover an Asian product at Costco that they normally only see at an ethnic store, they tell others about the product in group chats on the app. Chinese messaging app WeChat.

Fly By Jing started as a direct-to-consumer-only online business before expanding into retailers like Whole Foods, Target and now Costco. The brand launched Sichuan crispy chili at Costco stores in the Los Angeles and Hawaii regions in February. Just a few months later, Fly By Jing has expanded or is in the process of entering the Northeast, Bay Area, Pacific Northwest, San Diego and Texas markets. The company also plans to roll out Zhong dumpling sauce at Costco, starting in LA later this year.

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

“Obviously there is a lot of love for Costco,” Gao said.

One customer who purchased Fly By Jing at Costco was Leung.

“I’m going to give kudo to Costco for thinking about what young people want, what they have,” Leung said. “You begin to develop a loyalty.”