How Costco became a staple of Asian America

Wendy Leung rarely saw durian in grocery stores growing up in Los Angeles, but the 45-year-old nonprofit found the fruit at her local Costco wholesaler in the San Fernando Valley this April. Durian is used in Southeast Asian cuisine and is known for its strong fragrance.

“When I saw it at Costco, it just made me laugh that durian went mainstream,” said Leung, who was born in Hong Kong. “I’ve definitely noticed more Asian products at Costco lately.”

Asian Americans are the fastest growing demographic in the United States. They’re also a disproportionate number of Costco’s customers. Asians make up about 7% of the US population but 11.9% of Costco shoppers, according to market research firm Numerator.

Costco’s dominance among Asian-American consumers bodes well for the warehouse retailer’s longer-term growth trajectory — and has implications for other retailers as the industry evolves alongside a diversified United States.

“There is an opportunity to take what were once considered niche or minority markets and put them at the center of US trends,” said Kymberly Graham, head of diversity initiatives at consumer intelligence firm NielsenIQ.

“For Asian Americans, their rate of population growth certainly contributes to this idea that … they will create major market shifts. When their needs are met, it inherently becomes very profitable for whoever serves them,” Graham said.

The rapid growth and purchasing power of Asian Americans makes the group a formidable consumer base for retailers. According to the Pew Research Center, the Asian population in the US increased 81% from 2000 to 2019, compared to a 16% growth in the overall population. Asian Americans have the highest median household income in the United States—although the demographic also has the largest intragroup economic disparities in the country.

According to NielsenIQ, the untapped sales potential of Asian-American consumers is $13 billion.

On average, Asian Americans exhibit some shopping habits that differ from other consumers, NielsenIQ found. Households of Asian descent tend to be larger than those of the US population as a whole. Asian Americans are more likely to buy in bulk and look for bargains. As a result, Asian consumers are more than twice as likely to shop at warehouse clubs as the average US consumer.

Costco declined to comment directly on inventory levels and consumer strategies related to Asian buyers. “Regardless of the products we sell, Costco’s purchasing philosophy is the same: research the market, determine the variety of products our members are interested in, and negotiate exceptional value for quality products and services,” said Costco CNBC management in an email.

The warehouse retailer notoriously doesn’t spend money on advertising, but word of mouth can drive brand affinity across communities, said Marshal Cohen, senior industry analyst at market research firm NPD Group.

“Every half hour you hear about a major retailer that focuses on the Asian community,” Cohen said. “Word of mouth and community influence spreads, and that helps add value to a company. So when a company like Costco serves the Asian community, they share that and that multiplies.”

Cindy Zhou, 50, first heard about Costco from a friend who is also an immigrant from China. Zhou became a Costco member around 2013 and now shops weekly for groceries, household products, and gas at her local warehouse in the greater Cleveland area.

“Almost all my friends have Costco memberships,” said Zhou, who works in information technology. “I like Costco because they have very good quality at a much lower price than other grocery stores.”

Zhou and other Costco shoppers noted that their local stores have added Asian specialties like boba ice cream bars, lap cheong and oyster sauce to their rotating inventory in recent years. She recalled seeing displays for the Chinese holidays Mid Autumn Festival and Lunar New Year at Costco last year. Leung’s warehouse in California sells poke bowls.

Asian American consumers can find grocery products from their diaspora at local ethnic grocers and Asian supermarket chains such as H Mart, 99 Ranch Market and Patel Brothers. But seeing these products at one of the world’s largest retailers is rare.

With a market value of $185 billion, Costco reported total revenue of $195.93 billion in 2021, up more than 17% year-over-year. The company is expected to release its latest results after the market close on Thursday. Its shares are down more than 20% so far this year.

Zhou said when she or a friend spot an Asian product at Costco that they would normally only see in an ethnic store, they tell others about it in group chats on Chinese messaging app WeChat.

Jing Gao, founder of hot sauce brand Fly By Jing, is a huge Costco fan as a consumer. So when she got the chance to reach out to Costco buyers, she jumped at the chance.

“I’m obsessed with Costco. I go every chance I get,” Gao said. “There’s just something great about exploring…not knowing what deals you’re going to find.”

Fly By Jing started out as an online-only direct-to-consumer business before expanding to retailers like Whole Foods, Target, and now Costco. The brand launched its Sichuan Chili Crisp product in Costco stores in the Los Angeles and Hawaii areas in February. Just months later, Fly By Jing has expanded or is in the process of entering markets in the Northeast, Bay Area, Pacific Northwest, San Diego and Texas. The company plans to introduce its zhong dumpling sauce to Costco as well, starting in LA later this year.

An Instagram video announcing the launch of Costco has become Fly By Jing’s top-performing post on the social media platform. The video currently has around 85,000 views, almost 7,000 likes and almost 600 comments.

“There’s clearly a lot of Costco love,” Gao said.

One customer who bought Fly By Jing from Costco is Leung.

“I would commend Costco for thinking about what young people want, what’s hot,” Leung said. “You’re starting to develop a loyalty.”