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China 2.0

Costco Ambitions In China, Lessons For Foreign Retailers

E-commerce, local partnerships and logistics are among the keys to success for foreign retailers trying to tap into the massive Chinese consumer market.

Mountains of sales to be sorted
Mountains of sales to be sorted
Lao Yingying

BEIJING — U.S. warehouse retailer Costco continues to push its way into China, most recently by inking partnership deals with online Chinese retailers JD.com and Ymatou.com.

The agreements, which went into effect last month, are the latest in a series of ambitious moves by Costco, which made its successful debut in China last October by stationing itself on Alibaba's Tmall International, China's No. 1 e-commerce platform.

Costco's high-profile interest in China is no doubt being encouraged by the fast growing number of Chinese shoppers looking more and more to buy foreign goods directly online. China's Ministry of Commerce estimates that China had 20 million foreign website shoppers in 2014, up from 18 million a year before. Together they spent approximately 1 trillion RMB ($161 billion). By 2016, China's cross-border import and export volume is expected to grow to 6.5 trillion RMB ($1.047 trillion) with an annual growth rate above 30%.

Chinese authorities announced last August that they wanted to establish a new legal framework for cross-border commerce to include preferential tariffs, logistics, payment and foreign exchange. As such they are hoping to set up a favorable environment for boosting online retail development.

At the annual session of the National People's Congress, in March, Chinese Premier Li Keqiang introduced an Internet Plus strategy — a scheme aimed at promoting the Internet-powered sector so as to boost and transform China's economy, where growth has begun to slow. "I'm most willing to promote the new e-commerce...because they create employment and stimulate consumption," he said, referring to both Chinese and foreign-owned electronic vendors.

According to one analyst, while 2014 was the debut for many foreign retailers opening an online presence in China, 2015 will be their real breakout year. It has been reported that several e-commerce firms have experienced initial setbacks in the Chinese market, which makes choosing the right partner particularly crucial.

For Costco, an e-commerce giant like Alibaba is a safe bet as evidenced by the quasi-monopoly share enjoyed in the buying bonanza that took place last Nov. 11, Singles' Day, a Chinese holiday that has become the largest online shopping day in the world.

Some foreign retailers that tried to test the water in China by injecting capital into less famous Chinese online platforms have had disappointing results. Thee years ago, for example, Macy's invested $15 million in Jiapin.com, an online fashion vendor specialized in global luxury brands. As part of the deal it authorized the Chinese firm to be its exclusive partner in China. The relationship, however, appears to be plagued by problems. Three years on Jiapin has yet to display any Macy's goods on its site.

Macy's failure isn't an isolated case. A deal between Neiman Marcus, another U.S. upscale retailer, with Mei.com, a flash-sales retailer for designer fashion, also wound up as a fiasco. In both cases the U.S. companies found it very difficult to adapt to their Chinese partners' business management and operational approach.

Costco has opted to go with behemoths such as Tmall.com and JD.com as partners: with their overwhelming dominance in online traffic and accurate customer targeting that no foreign retailer can ever expect to match on their own in the Chinese online marketplace.

Fickle customers

Apart from choosing the right channel, foreign retailers keen to cash in on Chinese shoppers also need reliable logistics chains. That means having a regular express delivery force and a higher service standard for the growing market. Chinese shoppers are famous for being particularly discerning over the delivery of their purchases. So far most foreign retailers have failed to adapt to the particular shrewdness of Chinese shoppers.

Costco, for its part, has given its delivery task to SF Express, a Taiwanese transporter offering tailor-made services to overseas retailers for their business-to-consumer (B2C) market in China. Costco passes the merchandise to SF Express in Taiwan, where the U.S. retailer owns brick and mortar stores, while the latter handles customs clearance and domestic delivery. Up to now, SF Express is the only courier that offers such a full-range logistics service specialized in foreign commodities for China.

Other global couriers may have an advantage in that they have complete worldwide distribution networks and can move products around faster. But they tend to charge exorbitant rates and aren't specialized enough to meet the more particular needs of cross-border retailers.

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food / travel

Meet Blanca Alsogaray, The First Woman To Win Cuba's "Oscar Of Cigars"

For the first time, Cuba's prestigious annual cigar festival recognized a woman, Alsogaray, owner of an iconic cigar shop in Buenos Aires, as the top representative of this celebrated lifeline of the Cuban economy.

Photo of a woman smoking a cigar.

Alsogaray smoking a cigar at her shop in Buenos Aires

Mariana Iglesias

BUENOS AIRES — Cigars are traditionally reserved for a man's world. But this year, for the first time, a Latin American woman has won one of three awards given at the 23rd Habano Festival in Cuba.

Every year since 2000, the Festival has gathered the top players in the world of Cuban cigars including sellers, distributors, specialists and aficionados. A prize is given to an outstanding personality in one of three areas: production, communication and sales. The latter went to Blanca Alsogaray, owner of the Buenos Aires shop La Casa del Habano. She says these prizes are not unlike the "Oscars of cigars."

"It's a sexist world for sure, but I won," she said of a prize which was called "Habano Man" (Hombre habano) until this year, when the word was changed for her.

"It recognizes a lifetime's work, which I consider so important as Argentina isn't an easy place for business, and less so being a woman." She was competing with two men. "In truth," she added. "I really do deserve it."

Alsogaray opened her shop in 1993. At the time there were only two sellers anywhere of Cuba's premium, hand-rolled cigars, the other one being in Mexico. Now habanos are sold in 150 outlets worldwide. "I want to celebrate these 30 years, and the prize. We're going to have a big party," she said. The firm celebrated its 30th anniversary on May 16.

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