On site visit to Costco’s first gas station in mainland China: 50% off oil prices, member store “cross-border coupons”

As traditional retail formats become increasingly difficult to operate, more businesses and capital will invest in member store formats, and future market competition will further intensify.

Member stores open their own gas stations and offer discounted prices to fuel their members, which is a business being carried out by retail giant Costco.

Recently, Costco’s first gas station in mainland China opened in Nanjing and is expected to open a supporting membership store on May 28th. First Financial Journalist visited Costco located on Jiyin Avenue in Jiangning District, Nanjing for on-site visits.

Filling up one tank of oil can save about 30 yuan

The reporter from First Financial News saw the words “self-service refueling” and “membership refueling” at the entrance of Costco Nanjing Gas Station, which is open from 8am to 10pm. The Costco gas station is indicated on the entrance sign in both Chinese and English.

It is worth noting that the gasoline prices currently offered by Costco gas stations are significantly lower than the market price. The reporter from First Financial News saw on site that the 92 octane gasoline at Costco gas station was 7.49 yuan/liter, the 95 octane gasoline was 7.95 yuan/liter, and the 98 octane gasoline was 8.99 yuan/liter. According to public information, the price of 92 octane gasoline in Jiangsu Province on the market is 8.16 yuan/liter, 95 octane gasoline is 8.68 yuan/liter, and 98 octane gasoline is 10.48 yuan/liter. This means that each liter of gasoline at Costco gas stations is 0.67 yuan to 1.49 yuan lower than the market price, with discounts ranging from 8.5% to 10% off.

Although it was not at full capacity, at around 11 noon and around 8 pm, First Financial reporters saw a continuous stream of vehicles entering Costco gas stations to refuel. “We only provide membership services. If you need to refuel, you must first become a member of Costco,” the gas station staff told reporters.

Afterwards, the reporter from First Financial interviewed several drivers randomly, and most of them expressed that it was very cost-effective. “At present, there is also a discount for Costco membership. The original price was 299 yuan, but now it is 199 yuan. If I fill up a box of gas, I can save about 30 yuan, and the membership fee will be saved soon.”

The gas station staff stated that this is a gas station opened by Costco itself, which can accommodate 24 vehicles to refuel at the same time and also supports self-service refueling. The fuel added by Costco’s gas station comes from Sinopec. The second phase of the gas station has also been completed and registered, and the nearby member store is about to open. As for whether the above discounted prices can continue, the staff stated that in principle, the discounted oil prices will always be maintained for members, unless the relevant departments clearly indicate that the discounted prices cannot be maintained, and of course, there may be normal fluctuations in oil prices.

It is understood that in 2018, the National Development and Reform Commission and the Ministry of Commerce issued the “Special Management Measures for Foreign Investment Access (Negative List) (2018 Edition)”, which removed the restrictions on the number and proportion of shares for the construction and operation of foreign-funded gas stations.

According to the National Enterprise Credit Information Publicity System, the business scope of Kaishike (Nanjing) Commercial Co., Ltd. includes retail business of refined oil products. At the Costco gas station, the reporter saw the approval certificate for the retail operation of refined oil from Kaishike (Nanjing) Commercial Co., Ltd.

“Although restrictions have been lifted, the cost advantage of foreign gas stations in China is not significant.” A former oil and gas analyst explained to a reporter from First Financial News, “Most of the finished oil from foreign gas stations is wholesale from ‘three barrels of oil’ and local refineries. Moreover, when gas stations were profitable in the past, there were relevant regulations that required the same foreign company to operate more than 30 gas stations in China and sell different types and brands of finished oil from multiple suppliers in a joint venture with the Chinese side without absolute control. After the market opens up later, there are not many wholly-owned gas stations with good geographical locations that foreign enterprises can actually expand.”

To mitigate the impact of geographical location, gas stations usually adopt discounted sales methods. A refined oil analyst from an energy consulting firm told First Financial reporters that discounts are relatively rare for gas stations with good location and high sales; However, gas stations with average locations, multiple competing sites in the surrounding area, and lower sales often have higher discounts and greater efforts. The First Financial News reporter noticed that Costco gas station is located on Jiyin Avenue in Jiangning District, Nanjing City, with a distance from the city center and relatively spacious surroundings.

A more competitive membership store market

In the industry’s view, there are problems with outdated models and homogenization of products in department stores and standard supermarkets. With the rise of rent and labor costs, these outdated retail formats are facing challenges.

According to statistics from the Retail Research Center of Lianshang Net, 21 department stores nationwide closed down in 2023, including Pacific Department Store, Yongwang, Parkson, Jiebai, Dayang Department Store, and New World Department Store. As of now in 2024, 10 old department stores have announced their closure, of which 5 have completely closed and exited, and the other 5 will be upgraded or completely demolished for renovation. Meanwhile, regional retail giant Bu Bu Gao was also in a difficult situation, closing over 100 stores last year, and Yonghui Supermarket suffered a total loss of 8 billion yuan for three consecutive years.

Compared to traditional department stores and standard supermarkets, membership stores are a potential retail format that has emerged in recent years.

Although the average order value of member stores is relatively high, they are known for their high cost-effectiveness and exclusive products, especially Costco and Sam’s Club, which have strong research and development capabilities for their own brands and customized exclusive products. Due to their advantages in large-scale procurement, Costco can obtain more customized products exclusively for Costco stores. In recent years, member stores have become the “best” in the retail industry, and they also have a fixed membership fee income, which provides a certain level of revenue guarantee.

Official information shows that Costco currently has over 870 stores worldwide with over 130 million members. The brand has a total of 6 open stores in the mainland Chinese market, distributed in Shanghai, Suzhou, Hangzhou, Ningbo, and Shenzhen. The upcoming Nanjing store is Costco’s 7th store in the mainland Chinese market. The integration and development of products, catering, gas stations, tires, optometry, and glasses business is Costco’s distinctive model. This Nanjing gas station is its first integrated service project to test the water and gas business in the mainland Chinese market.

“At present, the competition in the membership store market has shifted from site selection to supply chain, and there has even been a dispute between two major brands over suppliers. Last year, there was another Hema” mountain price “incident, which has” rolled “all the way to prices. This time Costco opened a gas station in Nanjing, it has also” rolled “into cross-border fields. The membership store format is very promising and has not yet reached saturation. However, as traditional retail formats become increasingly difficult to operate, more businesses and capital will invest in the membership store format, and future market competition will further intensify,” said Shen Jun, a senior retail industry analyst.