As performance at major domestic hypermarkets remains sluggish, the membership discount store Costco is thriving alone. It is interpreted that the cost-effective strategy of 'buying cheap and selling cheap' is attracting consumers in this time of high inflation. However, with foreign substances found in food sold by Costco and the detection of E. coli, attention is focused on whether the popularity will continue into next year.
According to the audit report of Costco Korea on the 29th, Costco Korea recorded sales of 6.5301 trillion won from last September to the end of August (settlement of account-based corporation). In the past five years, Costco Korea's sales have steadily increased. From September 2019 to August 2020, sales were reported at 4.523 trillion won, followed by 5.3523 trillion won, 5.5354 trillion won, and 6.0678 trillion won each year.
The growth of Costco Korea stands out even more compared to other retail channels. According to traffic analysis based on major corporations and channels by Meritz Securities, the growth rate of visitors to Costco during the four weeks ending on the 22nd of last month was recorded at 11.1% year-on-year.
Other supermarkets and department stores, excluding Costco, recorded negative growth. Emart reported a 17% decrease in visitor traffic during the same period, while LOTTE HIMART and Homeplus declined by 1.1% and 4.5%, respectively. LOTTE Shopping fell by 15.3%, Shinsegae by 2.6%, and Hyundai Department Store by 8%.
In October and November, the growth rates of visitor traffic for Costco increased by 7.9% and 11.9%, respectively, compared to the previous year. In contrast, during the same period, Emart saw declines of 29.1% and 24%, while LOTTE HIMART dropped by 6.1% and 2.2%. Homeplus decreased by 5.1% and 0.2%.
Costco, which started operations in the United States in 1983, has more than 890 stores worldwide and 19 stores in South Korea. It operates on an annual membership basis, with a membership fee ranging from 33,000 won to 80,000 won in Korea.
Costco employs a 'buying cheap and selling cheap' strategy to lower prices. Unlike typical large supermarkets that display individual items on shelves, it sells products in boxes or bundles and allows consumers to buy large quantities of high-demand essentials to lower the unit price. This box display method minimizes the labor required for product display while maintaining profits through membership fees.
◇ High demand in recession, but... stingy with social contributions
Recently, especially due to rising ingredient prices leading to increased demand for home-cooked meals, there seems to be a surge of people flocking to Costco, a warehouse discount store. At the largest store, the Yangjae branch, customers often have to line up at the opening time of 8 a.m. on weekends to gain entry. Even before the opening hour, the parking lot is full, and customers can be seen lining up at every entrance connected to the store, each with a shopping cart.
Since products are sold in bulk, consumers sometimes find it inconvenient, thinking they 'have to buy too much.' However, as food prices rise, it has become common for singles or couples to gather and shop together at Costco. A housewife living in Gaepo-dong, Seoul, said, "Only one person in the group needs a membership card to enter, so I occasionally go shopping at Costco with a friend who lives alone," adding, "Since items are sold in bulk in boxes, we can split them after shopping together to buy goods cheaply."
Despite the soaring performance, controversies persist. In July, pieces of shotgun pellets were found in beef sold at Costco, and reclaimed alcoholic beverages were resold without inspection, resulting in the detection of E. coli. Criticism has also emerged regarding its stinginess in social contributions. This fiscal year, Costco Korea's donation amount is 1.22 billion won, which is less than 1% of the 15 billion won in dividends to be received by the U.S. headquarters this year.
Concerns have also been raised about the need to improve working conditions for employees at Costco. The Costco Korea labor union was established for the first time in October 2020, after 26 years of the company's entry into Korea. After four years of negotiations, an agreement on a collective bargaining agreement was reached in October, and the first collective bargaining agreement was signed on November 1.
In a related incident during negotiations in September of last year, Kim Dong-ho, who managed carts and parking at the Costco Hanam branch, tragically died in an industrial accident. The collective bargaining agreement reportedly includes provisions for employee rest areas and an annual total of 3,000 hours of labor time exemption for union activities.