China Business

Don’t Quote Me on China Being Wrong for Costco

Costco in China

My friend and China due diligence expert, Jeremy Gordon, does occasional blog posts with titles that start out with Don’t Quote Me. I have always loved those posts and after seeing a great China quote in today’s Seattle Times [link no longer exists], I cannot resist doing my own.

The quote comes from an article on Costco President, Craig Jelinek. The article talks about how well Costco is doing in Asia and how many of its best performing stores are there. It then mentions how Costco is not in China and has no plans to go there:

Jelinek echoed Sinegal’s concerns about China, where Sinegal has said the company does not plan to open any time soon. Sinegal tells a story about Costco people scouting a site in China that already had a factory on it. When they asked what would happen to the factory, the Chinese officials said not to worry, it would be taken care of.

“I’m not convinced China is a good place to go do business at the moment,” Jelinek said.

Just as I recently defended Apple from criticisms it was moving too slow on China [link no longer exists], I will defend Costco for choosing not to do business in China at all. First off, Costco is a very well run business and I assume it knows its business far better than I do. Second, it very likely has good reasons for not wanting to go into China right now. It would appear it is choosing not to go into China because it believes it can do better by expanding its footprint in other Asian countries where it has already proven it can succeed. It also appears to believe that going into China will force it to compromise its Code of Ethics.

It appears Costco is not willing to compromise its global operations for one country — China.

Who can quarrel with that?

4 responses to “Don’t Quote Me on China Being Wrong for Costco”

  1. Slightly off topic, but I was at a supermarket the other day in Beijing and saw that they were selling a small variety of Kirkland products — that’s Costco’s house brand. These are often the cheapest products in Costco, so it was amusing to see that in the market here, they were being sold as high-end imports!
    Globalization is cool.

  2. Dan, I could not agree enough. Do not violate your own ethics when you come to China should be wirtten in stone somewhere. Thanks for the link to Costco’s code of ethics. Very motivating to me. I do think Costco could find a way into China and not violate their ethics if they really wanted to. So I think they must have other reasons in this case. However, I am inspired and so also say ,Thanks.

  3. This is interesting. For awhile I have thought that many foreign companies are in China simply because they couldn’t figure out how to explain to their shareholders why they weren’t there.
    Western companies that decide to do business in China have to make tradeoffs. The tradeoff may be as simple as having to change a business model, or it may be as complex as violating ethical principles or risking IP theft. My sense is that many are dealing with these more complex issues and just hoping their shareholders and/or the media don’t find out.
    Good for Costco in standing up for their ethical guidelines. I just wonder if their shareholders are ok with that.

  4. Dan,
    Thanks for the link.
    An interesting quote (wish I had beaten you to it!), and one that resonates. Investment in China is not right for everyone, and a lot of foreign retailers get it wrong anyway.
    In terms of risks, ethical ones are right up there, and are getting increasing attention. Some companies, like Costco, may choose to stay away, while others are doing more pre- and (importantly) post-investment due diligence / ethical compliance reviews. A positive trend I think.

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