Costco Wholesale has struck a deal with a unit of Internet retail giant Alibaba Group to open an online store serving customers in mainland China, its first dip into that burgeoning market.
The warehouse club will sell its private label Kirkland Signature products and other items through Tmall Global, an Alibaba Group platform that lets foreign retailers sell items to Chinese customers without setting up a physical presence in China.
The unorthodox arrangement is an example of two trends at Costco — its slow but sure embrace of international operations, which now account for about a third of its business, and its tinkering with the promise of online growth.
On the company’s conference calls, analysts often ask when the company, which has 10 warehouses in Taiwan, will open in mainland China. Executives respond that they are focusing on first figuring out markets such as Spain and on waiting for the right opportunity.
The partnership with Tmall, which Alibaba says will quench Chinese shoppers’ thirst for foreign brands, could be a good start. But it’s quite different from its standard business model: An Alibaba spokeswoman said that shoppers using the service won’t need a Costco membership. Costco relies on member fees for much of its profit.