Costco Spent 25 Years in Korea to Learn How to Win China in Five.

On the morning of August 27, 2019, Costco opened its first store on the Chinese mainland, in Shanghai's Minhang district, and had to shut it again before lunch. The crowds were so dense the surrounding neighborhood seized into gridlock; signs warned shoppers of three-hour waits just to park. The next day, Costco rationed entry to 2,000 people at a time.⁵ The footage looked like proof that Costco had cracked China on day one. It was actually the harvest of a quieter, slower thing — a decade and a half of practice that had happened 500 miles to the east, in Korea.

The official story is that Costco runs one warehouse model and exports it intact, bending only the sushi counter and the parking lot for local taste. That's the brochure. The real story is that Costco runs two completely different bets in Asia, and only one of them is the destination.

Here is the thesis a smart friend can repeat at dinner: Costco's Korean business is a thirty-year training ground that taught it how to run a warehouse club in Asia — and now Costco is taking the graduates of that school and pointing them at China, the market it actually intends to win.

Korea was rented before it was owned

Almost everyone gets the Korea origin story wrong, and the error matters. The popular version says Costco "entered Korea in 1994" and built from there. It didn't own anything in 1994. Since 1993, the Korean operation was run by Shinsegae under a license agreement: Shinsegae covered the start-up costs, staffed the warehouses, and kept a significant share of the profit, while Costco supplied the training, the technical know-how, and the products.⁴ That is not an expansion — it is an apprenticeship, with the partner paying the tuition. Only in May 1998, after the model had been proven on someone else's balance sheet, did Costco form a joint venture to acquire the operation, taking 93.75% to Shinsegae's 6.25%.³

Read that structure as a strategy and the genius shows. Costco entered an unfamiliar market with almost no capital at risk, let a local heavyweight absorb the cost of learning what Korean shoppers would tolerate, and bought the whole thing outright only once the answer was clear. The license was the option; the 1998 JV was Costco exercising it. The slow path wasn't timidity. It was a company refusing to pay for certainty until it had certainty.

The school that became the best store in the country

The apprenticeship paid off spectacularly. By fiscal 2024, Costco Korea was doing 6.53 trillion won — roughly $4.7 billion — in sales, up 7.6% on the year, with operating profit climbing 15.8%.⁷ The efficiency number is the one that stops you: average sales per store hit 343.6 billion won, four to five times that of Korean big-box rivals, and Costco's 19 Korean warehouses out-sold Lotte Mart's 111 stores.⁷ Nineteen beating one hundred and eleven is not a retailer competing. It is a retailer playing a different game on the same field.

And yet — this is the turn — the same trade reporting that documents the dominance also warns that Korea is brushing up against a low-growth trap. Costco built roughly 19 Korean locations over thirty years;¹ the market is, by the numbers, close to saturated. There is only so much shelf to win in a country where 19 stores already beat 111.⁸ A school can produce a valedictorian and still be a school. Korea is the valedictorian.

Why China is the opposite bet, deliberately

China inverts every move Costco made in Korea. There was no slow license this time on the ground — Costco first tested the water digitally, opening a Tmall store on Alibaba's marketplace in 2014, five years before laying a single brick.⁶ When it finally opened in Shanghai in 2019, it did so wholly-owned and at a pace that makes the Korean timeline look geological: where Korea took thirty years to reach roughly 19 stores,¹ China reached 7 wholly-owned warehouses in under six years — a pace that makes the Korean timeline look geological.¹⁸ Costco didn't repeat the apprenticeship in China because it had already served the apprenticeship in Korea. The tuition was paid once.

The clearest tell is the people. Costco relocated core Korean staff to China to open the new stores.⁸ You don't move your most experienced operators toward the market you consider mature; you move them toward the one you're betting the future on. The talent transfer is the strategy made physical — Seoul exports operators the way it once imported a model. And the scoreboard followed the staff: by 2023, trade reporting indicated the Shanghai store had overtaken Seoul's long-reigning Yangjae warehouse — which had held the global #1 sales rank for roughly two decades — at least over peak trading periods.¹¹ The student had not just caught the teacher; it was competing for the top of the class.

The one thing that never bends

What does Costco actually localize? The building, not the business model. In Asia, where urban land is scarce and brutally expensive, Costco abandoned the flat American box and builds upward — multilevel warehouses with moving ramps to carry carts between floors, extra parking, and engineered crowd-capacity controls, all executed with the architecture firm MG2. Departments flex for taste: robust sushi sections in Japan, K-beauty aisles in Korea.⁹ But notice what stays frozen across every market and every floor plan: the membership fee, the treasure-hunt assortment, the deliberately thin product range, the near-break-even markup. The building adapts so the model doesn't have to. Localization is what Costco does to the wrapper precisely so it never has to touch the engine.

Isn't this just hindsight dressed as design?

The fair objection is that this is too tidy. Costco didn't necessarily sit in 1993 and plan a thirty-year curriculum culminating in China; companies stumble into sequences that only look intentional once they work, and it's easy to narrate luck as foresight. That's true, and it's the honest limit of the read. But intent isn't required for the pattern to be load-bearing — what matters is that Costco is behaving as if Korea is the training ground now, whatever it believed in 1993. The capital-light license, the wait-for-proof JV, the digital toe-dip in China, and above all the physical relocation of experienced Korean operators eastward are not the moves of a company that thinks its two Asian markets are equals. You don't ship your best teachers to the campus you consider finished. The sequence may have been discovered rather than designed — but Costco is now running it on purpose.

The Shanghai gridlock of 2019 wasn't the birth of Costco's China strategy. It was a graduation ceremony — the moment the lessons learned slowly in Seoul arrived all at once somewhere far larger. Costco spent twenty-five careful years in Korea building the most efficient warehouse club in the country, and the payoff wasn't Korea. The payoff was knowing exactly what to do the day the doors opened in Shanghai. The genius was never one model exported intact. It was the discipline to treat the first market as tuition — and the nerve to send the graduates somewhere bigger.