“Costco is one of the best retail channels to work with – not only
because of its huge member base, but also because we share
a common interest, and that is to bring the best possible products
to our consumers.” – Luis Ko, President, I-Mei Foods Costores, Costco sells memberships to its customers so
they can access the company’s warehouses. For a yearly
fee, customers can access a high volume of low-cost
goods, which means that marketing and merchandising
overheads as well as other handling fees are essentially
zero. While that model is relatively common now, at
the time Richard started with Costco it wasn’t
popular as a business model. In the US, where most
of the company’s warehouses are located, the concept
was hardly practised. The company had been in
operation for just 14 years at that point, and the
lack of advertising meant it depended on member
recommendations for an increase in membership
and sales. Naturally, that took time and patience.
“You can imagine when Costco was new in the
US and Canada, and then here, in Taiwan, where
people had no idea what it was. They couldn’t
fathom that you would have to pay a membership
fee upfront before you even shopped at the store.
So, that was an education in and of itself.”
The first five years for Costco in Taiwan
involved Richard educating the market about the
value of having to pay a membership fee upfront
before shopping. “People wanted to know the value
of shopping for a fee,” he explains. “We had to show
people that value; you can explain it until you’re
blue in the face, but until a customer comes into
the warehouse, sees the products, tastes the food and
wears the clothing, they won’t have that aha moment
when it makes sense to them.”
Part of the problem stemmed from a lack of
advertising (Costco rarely pays for advertising),
meaning that people generally have to go out of their
way to find stores. The main growth strategy the
company relies on is word-of-mouth marketing.
“To this day, our most effective advertising is
when someone comes to Costco, goes home and tells
their family members about their experience and has
them come and shop with us. When people didn’t
know who we were, they were confused. They would
tell us we should change the business model or that
we didn’t understand the Taiwanese and Chinese
markets,” he says. “We had to press to be given the
time to understand and grow in the market, because
we saw the exact same thing happen when we
opened stores in the UK. It takes time for people
to understand our business model.”“Until a customer
comes into the
warehouse, sees
the products,
tastes the food
and wears the
clothing, they
won’t have that
aha moment when
it makes sense
to them.”
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