Costco opened in Taiwan but is “scared” of China.

While Costco makes slow but steady progress with its first Australian store in Melbourne, the big US warehouse club retailer has revealed some of the obstacles it faces in expanding its store network internationally.
 
About a quarter of Costco's business comes from its overseas stores, and within 10 to 15 years, the company plans to double its international business, according to Costco senior vice president for international relations Jim Murphy.

Huge challenges and potential 
The challenges are "huge”, but so is the potential, added Murphy.

As for obstacles, take China, where Costco has no stores.

"China scares us, quite frankly, on the corruption side and on the (law) enforcement side," he said.

However, Costco is strong in neighbouring Taiwan. At some point, management teams that have been trained there may staff a Costco in China, but not anytime soon, Murphy said.

Western Europe has a "strong lobby" against big-box stores, so Costco pitches to wholesalers rather than individuals, and that seems to work, he said.

It's tough to find 30 acres for an American-style Costco in Europe and Asia, so Costcos there often have much less parking and buildings with multiple floors. Some have the merchandise in basements and subbasements, with parking at the ground-floor level and on upper floors, he explained.

Some countries have restrictions on how much Costco can import from the United States, forcing Costco buyers to look to local suppliers.

Local managers preferred 
Costco doesn't have many ex-pats as managers, but instead prefers to train locals (the head of Costco Australia is Patrick Noone, a US-trained Australian).

"The overall plan is to localise the management," Murphy told a presentation sponsored by the Pacific Northwest International Trade Alliance earlier this month.

International stores love the feel and smell of American products, he said. In Japan, Costco's number one-selling product in Japan is Downy Fabric Softener. “Japanese people think the product has the smell of America,” he said.