Gaia Series 5: Popular Members Only Warehouse

Japan Hour

US-based large-volume retailer Costco is featured this week, starting from how it entered the Japanese market and how it sources products, to its expansion and the opening of its store in Tochigi.

This week, the spotlight is on US-based large-volume retailer Costco. It operates via a membership system. Its first store in Japan opened in Fukuoka in 1999 and it continued to expand after that. It now has more than 30 warehouse stores across Japan.

Large foreign-owned stores started opening branches in Japan in the second half of the 1990s. When the economic bubble burst around the year 2000, the price of land fell, thus presenting an opportunity for stores such as Carrefour and Costco to enter the market. What makes these stores stand out is that there are items that you can only buy in their stores. Furthermore, Costco is able to make profits despite its low prices because of the membership fees.

We first check out the Costco store in Makuhari in Mihama Ward, Chiba Prefecture. One of the unique features of Costco is its massive warehouse-like locations, with 4.6-metre-high shelves. The products are unloaded from trucks early in the morning and placed directly onto the shelves. There are thus no warehousing costs, reducing overall expenses. Between 3,500 and 4,000 products are sold here and popular items include dinner rolls, frozen shrimp and nectarines.

The staff work in the kitchen from early morning to evening to make fresh food. Almost 100 per cent of what they prepare is handmade. Most of the ingredients are purchased directly from the producers. One example is romaine lettuce which is used in Costco’s Caesar salad. It is bought in bulk from farmer Shigeyuki Baba, who has a huge lettuce field in Ibaraki Prefecture.

Costco also aims to offer large products at a low price for customers, so it would negotiate with each seller individually. For example, Ryohei Kamada, a buyer from Costco’s Department of Product Purchases, met with the Head of Sales for the Kao Group to request that company increase the size of its popular Attack Zero product. Meanwhile, another buyer from Costco's Department of Product Purchases, Kazuo Yamada, held a meeting with the President of Teshigawara Wheat Refinery to increase the volume of its oatmeal - it intends to sell two bags of the 2kg pack together as one item.

Previously, Costco branches were found in Gunma, Ibaraki and Saitama. Tochigi was the only prefecture in Kanto which had no branch. So the Mibu branch of Costco opened in late June 2023. It is located in Shimotsuga County, Tochigi. The floor space of the Mibu location spans 10,500 hectares. The first products started arriving at Costco’s Mibu Warehouse Store in Tochigi in early June.

On the day of the opening, a long queue of 400 people was seen at the entrance at 4.30am. So instead of opening at 8am, the store opened its doors before 6am. One of the exclusive products sold at the Tochigi store is Kanaya Hotel Bakery’s famous handmade cookies. Founded in 1873, Nikko Kanaya Hotel is Japan's oldest classic hotel. Other products exclusive to the Tochigi store include Utsunomiya meat gyoza and Tochigi-grown strawberry konjac jelly.

Tips:

1) Diamond rings are sold at Costco twice a year2) Do check out Kanaya Hotel Bakery’s famous cookies which are sold at Costco