Core Insights - Costco has quietly become a global apparel giant with sales reaching $9.7 billion in fiscal year 2025, surpassing major brands like Prada and Coach [3][4] - The company's apparel sales have grown by 40% from 2019 to 2024, with a compound annual growth rate (CAGR) of nearly 7%, while the overall clothing market in China and the U.S. has slowed down [3][4] - Costco's unique selling proposition lies in its ability to offer both affordable basics and luxury brands, appealing to a younger demographic that is increasingly skeptical of traditional luxury pricing [7][9] Apparel Strategy - Costco's clothing strategy focuses on selling basic items with a limited selection, maintaining only 4000 SKUs in total, which is significantly lower than traditional supermarkets [12] - The company employs a bundling sales approach to increase turnover and reduce costs, allowing for lower prices while still maintaining profitability [12][13] - Despite a lower gross margin of 14-15% in its apparel segment, Costco's massive sales volume allows it to outperform many fashion brands [13][14] Membership Model - Membership fees are the primary profit driver for Costco, contributing $5.32 billion in fiscal year 2025, which accounts for 65.7% of net profit [17][18] - The company has a high membership renewal rate of nearly 90%, indicating strong customer loyalty and satisfaction [20] - Costco's strategy of placing luxury items prominently and offering exclusive member benefits is designed to enhance customer retention and encourage repeat visits [18][22] Market Position - Costco's overall revenue for fiscal year 2025 reached $275.24 billion, positioning it among the top five global retailers [16] - The company's apparel business, while significant, is still considered a secondary operation compared to its core fast-moving consumer goods (FMCG) offerings [16][21] - The success of Costco's apparel segment in markets like China demonstrates the effectiveness of its business model in diverse regions [21][22]

Core Viewpoint - Costco is emerging as a significant player in the global apparel market, with its clothing sales reaching $9.7 billion (approximately 69.1 billion RMB) in the fiscal year 2025, surpassing major luxury brands and traditional retailers [6][36]. Group 1: Sales Performance and Growth - Costco's apparel sales have seen a cumulative growth of 40% from 2019 to 2024, with a compound annual growth rate (CAGR) of nearly 7%, while the overall clothing market in China and the U.S. has been growing at only 4.64% and 3% respectively [7][36]. - The company's clothing business is not only large but also maintains a high growth rate, distinguishing itself from competitors like Sam's Club, which only saw a 21% increase in the same period [7][36]. Group 2: Consumer Behavior and Market Positioning - Two main types of consumers shop for clothing at Costco: those seeking luxury items at discounted prices and those looking for basic, no-frills apparel from Costco's private label, Kirkland Signature [11][21]. - The appeal of Costco lies in its ability to offer luxury brands alongside affordable basics, resonating with younger consumers who are increasingly skeptical of traditional luxury pricing and branding [15][16]. Group 3: Business Model and Strategy - Costco operates on a simplified SKU model, offering only 4,000 total SKUs compared to traditional supermarkets' 20,000, which allows for lower costs and higher turnover rates [29][30]. - The company employs a bundling sales strategy to increase sales volume and reduce inventory turnover time, which further enhances its purchasing power [30][31]. - Costco's marketing expenses are minimal, with only 9% of its revenue allocated to market, sales, and management, allowing it to maintain low prices while still achieving significant sales [32]. Group 4: Membership and Profitability - Membership fees are the primary profit driver for Costco, accounting for 65.7% of its net profit in fiscal year 2025, highlighting the company's focus on member services rather than traditional retail profit margins [39][40]. - The company has achieved a global membership renewal rate of nearly 90%, indicating strong customer loyalty and satisfaction [40]. Group 5: Market Expansion and Future Outlook - Costco's expansion in China has been met with enthusiasm, with record-breaking membership sign-ups and sales growth in new stores, suggesting that its business model is adaptable and appealing in diverse markets [41][42].