Creating a Win-Win Situation and New Value for the Retail Market

THL has been cooperating with Costco for more than 15 years. As the leading FMCG (Fast Moving Consumer Goods) vendor in Taiwan, THL not only identifies with Costco's business concepts, but also provides services beyond Costco's expectations.

At 9:30 in the morning, a long queue snaked its way outside the entrance of Costco Neihu Shop, which is yet to open for another half an hour later. Since Costco opened its first branch in Kaohsiung, Taiwan in 1997, long-queues are just part of the daily scene in Costco's 13 stores across the country.

Costco is the only wholesale company that charges a membership fee in Taiwan. So far, Costco Taiwan has more than 2.6 million members in Taiwan. On average, one in every nine people in Taiwan holds a Costco membership card, ranking as number one in Asia. One of the key success factors for Costco, precisely, is its insistence to select the best products. To attract consumers, most retailers offer at least 70,000 – 80,000 products. Costco, nevertheless, provides “no more than” 4000 products.

“Eighty Thousand” vs “Four Thousand” - Costco has created a fascinating shopping experience for the consumers despite the fact that it only offers 1/20 of the product types of its competitors. According to Richard Chang, Senior Vice President of Costco Asia, many customers who initially came for “one or two” items often found that “we couldn't stop buying until we have spent ten thousand or more.”

The secret for stimulating “Impulse Buying” of customers is that Costco adheres to three principles when selecting products, i.e., reputable brands, high quality, and reasonable price. These are key to build up the “added value” for customers and to induce a strong desire to purchase. Chang indicated that “meticulously selected products” reduced hesitation. Costco spends little in advertisement and packaging. “The reduced sales cost brings good prices.”

“ THL always takes the initiative to analyze and share in the advance. Besides supplying products, Taiwan THL also supports Costco’s learning and growth.”

Finding good products is a challenging process. The secret lies with the meticulous screening of suppliers. To ensure the high quality of each and every product, Chang established three major selection criteria. Firstly, the supplier needs to have proven performance record in the market. Secondly, the supplier, if engaged in the food business, should be approved by a reputed third-party international audit company (such as SGS) recognized by Costco. Finally, the supplier should be covered by a product liability insurance of at least USD 3 million.

“Not many suppliers can meet these criteria, through it is seemingly easy”, Chang added, “Not all the suppliers understand our philosophy. Providing cheap products is not the Costco way. We aim to create an enjoyable shopping experience with reasonable prices and high quality. Costco does not just sell products. We have to fulfill our responsibilities to our customers.”

THL has been working with Costco for more than 15 years. Talking about the reasons for selecting THL, Chang considered the company as a professional domestic supplier that is well established and thoroughly globalized. The Company, according to Chang, not only understands Costco’s business philosophy, but also provides far-more-than-expected services to Costco.

For Costco, THL is not merely a “supplier” now. It is an indispensable “business partner”. The fact that distinguishes THL from the other suppliers, Chang pointed out, is the sharing of information. For example, THL always has comprehensive thoughts on merchandise display design, pricing strategies, customer flow recommendations or even the trend of the consumer market. “THL always takes the initiative to analyze and share in advance. Besides supplying products, THL also supports Costco's learning and growth.”

Mutual support and mutual success are the keys to creating new value to both the distributor and the supplier. Chang reckons THL not only as a supplier, but a good partner of Costco in pursuing growth and success. Chang is impressed with the insightful understanding and grasp by THL of the consumer market, and believes that this is the “value” of the supplier. Similarly, Costco aspires to bring to its customers not just the products, but also pleasant shopping experiences, one after another.

“For Costco, THL is not merely a supplier now. It is an indispensable business partner ”.

In 2016, Costco started developing the Internet shopping, also through a membership system. Its online business covers 3C products, frozen food, snacks and electrical home appliances. Chang holds the opinion that we are now facing an era of Omni-channels Retailing. The boundary line between physical and virtual shops is gradually vanishing.

“I am not worried that the physical stores would be replaced by online shopping. Online stores have their position in the market. The shopping experience created by physical touch, however, is irreplaceable” Chang indicated that Internet consumers tend to purchase “Risk-free products” with reasonable brand loyalty in the past. In physical stores, on the other hands, consumers are able to physically touch the products when offered free food or free samples therein. This is an experience that can never be substituted by Internet shopping. Smiling, Chang said that Costco will further expand its customer base in the future through both physical and virtual stores.