How Costco became a key element of Asian America

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

“When I saw it on Costco, it made me laugh that durian became 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. It is also a disproportionate number of Costco customers. Asians make up about 7% of the US population, but make up 11.9% of Costco buyers, 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 has implications for other retailers as the industry evolves as the United States diversifies.

“There is an opportunity to take advantage of what was once considered niche or minority markets and put them at the heart of US trends,” said Kymberly Graham, head of diversity initiatives at NielsenIQ.

“For Asian Americans, the rate at which their populations are accelerating certainly gives them the idea that … they will make a big difference in the market. If their needs are met, it is inherently very profitable for 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% from 2000 to 2019, compared to a 16% increase in the total population, according to the Pew Research Center. Asian Americans have the highest median household income in the US – although demographics also have the highest economic inequality within the group in the country.

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

On average, Asian Americans have some shopping habits that differ from those of other consumers, NielsenIQ found. Households of Asian descent tend to be larger than those of the total US population. Asian Americans are more likely to buy in bulk and look for opportunities. As a result, Asian consumers are more than twice as likely to shop in a warehouse club as the average US consumer.

Costco declined to comment directly on the stock and consumer strategy, as it relates to buyers from Asia. “Regardless of the products we sell, Costco’s purchasing philosophy is the same: Research the market, identify the variety of products our members are interested in, and negotiate great value for quality products and services,” said Costco’s management. to CNBC in an email.

The warehouse retailer is not known to spend money on advertising, but can cultivate brand-to-word affinity between different communities, said Marshal Cohen, chief industry analyst for market research firm NPD Group.

“Every time on a very blue moon you hear about a big retailer focusing on the Asian community,” Cohen said. “Word of mouth and community influence are spreading, and that’s what helps a business grow. So if a business like Costco serves the Asian community, they share it and it multiplies.”

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

“Almost all of my friends subscribe to Costco,” said Zhou, who works in information technology. “I like Costco because it has very good quality at a much lower price than other grocery stores.”

Zhou and other Costco shoppers have noted that their local stores have added specialized Asian items such as boba barbecue ice cream, lap cheong and oyster sauce to their rotating stock in recent years. He recalled seeing exhibitions for Chinese holidays at the Mid-Autumn Festival and Lunar New Year at Costco last year. Leung Warehouse in California sells poke bowls.

Asian American consumers can find food of their dispersion in local grocery stores and Asian supermarket chains such as H Mart, 99 Ranch Market and Patel Brothers. But seeing these products in one of the biggest retailers in the world is rare.

With a market value of $ 185 billion, Costco reported total revenue of $ 195.93 billion in 2021, up more than 17% from the previous year. The company is scheduled to present 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 friend spotted an Asian product on Costco that they would normally only see in an ethnic store, they would tell others in group chats on Chinese messaging app WeChat.

Jing Gao, founder of Fly By Jing hot sauce brand, is a big fan of Costco as a consumer, so when she was given the opportunity to speak to Costco buyers, she seized the opportunity.

“I’m obsessed with Costco. I go whenever I can,” said Gao. “There is just something great about the discovery … not knowing what offers you will find.”

Fly By Jing started as a consumer-only online business before expanding to retail stores such as Whole Foods, Target and now Costco. The brand launched its Sichuan chili product at Costco stores in Los Angeles and Hawaii 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 release Zhong pasta sauce on Costco as well, starting in Los Angeles later this year.

A video on Instagram announcing the release of Costco has been posted by Fly By Jing with the highest performance on the social networking platform. The video currently has about 85,000 views, almost 7,000 likes and almost 600 comments.

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

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

“I would like to congratulate Costco for thinking about what young people want, what is inside,” Leung said. “You begin to develop a faith.”