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when they opened in japan

How Costco succeeded in Japan: The story behind its 1999 market entry

16 Comments
By Patrick Parr

On April 23, 1999, Yoshiami Abe, a 74-year-old Fukuoka rice farmer, stood in suit and tie in front of a large Costco sign. As he greeted customers who’d come for Costco Japan’s grand opening, he couldn’t help but feel tormented that the warehouse had been constructed atop the 3.5 acres his family had taken care of for centuries. What had he become? Had he sold out his ancestors?

As he put it to Los Angeles Times journalist Mark Magnier: “My father and grandfather farmed these fields. The saddest part is that this land will never again be turned back to rice. But we didn’t really have any choice…Most of us farmers don’t have successors anymore.”

Abe wasn’t alone. In fact, Costco’s behemoth warehouse was just one piece of a much larger plan envisioned by Takashi Hirayama, the founder and president of Torius, a company that hoped to establish “American-style” malls outside of hyper-urban cities. Costco was just four of what totaled 63 acres of farmland across the Kasuya district of Fukuoka.

To Hirayama, his vision would only help a stalled and in-decline economy.

“With the collapse of the economy,” he told Magnier, “the conventional way of doing business in Japan doesn’t work anymore. Japanese consumers are defensive, tightfisted, and afraid of losing their jobs. This project is my response.”

Read our Executive Impact interview with Ken Theriault, then representative director and country manager for Costco Japan about its opening.

Costco’s lightning strike

Costcoheadquarters_CoolcaesarWikimedia-CC-BY-SA-4.0.jpg
Costco headquarters in Issaquah, Washington. Image: Coolcaesar/Wikimedia CC BY-SA 4.0

First opened in Seattle in September 1983 as Costco Wholesale Club by Jeff Brotman and Jim Sinegal, Costco’s creation began with a lightning strike. Literally.

While traveling by airplane to Seattle, Brotman was seated near Fred Paulsell, a venture capitalist. When lightning struck the plane, it was forced to land in San Francisco. It was in this chaotic life-or-death moment when Brotman raised the idea of “opening a chain of low-cost warehouse clubs.” Paulsell liked the idea, and, according to the Associated Press’s 2017 obituary of Brotman, Paulsell “ended up providing critical financing and advice for the startup.”

Their business plan appealed to the general customer immediately. To shop at Costco, you had to become a member, with business owners having to fork over $25 per year (back in ’83). The perks would be a broad range of items sold “at cost plus 5 percent to qualified consumers.” In those early years, Costco kept a moderately tight control over who was allowed to enter the store.

As explained in the Spokane Chronicle: “Consumers qualify for group membership by being a civilian employee of the government or through employment by a public school district, college or university. Also qualifying are employees of telephone, gas and electric companies and workers at savings-and-loan institutions, banks, hospitals, credit unions, airlines, and railroads.” Members could also purchase “an additional group membership card for his or her spouse.”

“We don’t want to be here as a Japanese museum of American goods, where people come and no one buys.” —Jim Sinegal, co-founder of Costco

Lightning strike aside, Brotman and Sinegal’s idea for Costco was not entirely original. The roots of the “warehouse club” model rest with businessman Sol Price, who launched the discount membership store FedMart in 1954, and then later the more influential Price Club in San Diego in 1976, initially targeting small business owners before branching out to the general customer.

In fact, one of the many reasons Costco started in Seattle was to stay out of the orbit of Price Club, who between 1976 and 1993 controlled the American Southwest market, while Costco took control of the Pacific Northwest. They merged in 1993, causing an uproar among their main competitors, such as Wal-Mart’s Sam’s Club — Sam Walton of Wal-Mart even conceded in his memoir that he lifted the idea of a warehouse business from Mr. Price — and Kmart’s lesser-known Pace stores.

With Costco now double in size, they looked to take their warehouse model to the Asian market. First was South Korea in 1994 and then Taiwan three years later.

Costco’s plan to enter Japan was announced in May 1998 after setting up a subsidiary, Costco Wholesale Japan Ltd. By the time of the announcement, Costco had already opened three stores in Asia — two in South Korea and one in Taiwan.

With Hirayama paving the way, Costco saw little risk in joining the Torius Group’s plan.

Adapting Costco to Japanese culture

Costco-GifuHashima_RenaikWikimedia-CC-BY-SA-4.0.jpg
A Costco in Hashima, Gifu Prefecture. Image: Renaik/Wikimedia CC BY-SA 4.0

In a 2009 interview with Melissa Allison of the Seattle Times, Costco co-founder Jim Sinegal went into a few challenges his company faced when first opening in Hisayama, Fukuoka Prefecture.

“We had to change some of our apparel. The sizing on men’s shirts in Japan, Korea and Taiwan is entirely different. Our Kirkland Signature shirt has an Asian cut to it, slimmer in the waist and smaller sizes.”

Sinegal also mentioned the challenges in stocking Japan’s major electronic brands at such a low price.

“Sony, Panasonic and Sharp — are reluctant to sell to us there because they want to protect the prices because these are very important markets for them.” Still, by choosing to stock a cheaper Chinese television, Vizio, Costco found ways to persuade those big electronics companies to provide them various products at wholesale prices.

Selling American sweets caused great consternation at the beginning of the launch.

“One of the things they told us when we went into business in Japan is that the taste for Japanese sweet goods is different,” admits Sinegal. “‘They’re not going to buy the bakery products you have.’ We almost changed…to a different product. We said no…we’re going test it and we’re going see how it works.”

Surprisingly, Costco’s baked goods, under their Kirkland label, have become a staple at Japanese supermarkets. Kirkland is the city where Costco’s second headquarters was located before moving to Issaquah. The name stuck because Sinegal said, bottom line, that Issaquah is hard for outsiders to pronounce.

Sinegal’s interview with the Seattle Times was 10 years after opening in Japan.

It’s worth noting that Sinegal was far more compliant to Japanese culture at the beginning of the company’s launch. At least 90% of goods inside the Fukuoka store were, as Mangier wrote back in 1999, “Japanese products suited to Japanese tastes.” Sinegal confirmed this hyper-local strategy. “We don’t want to be here as a Japanese museum of American goods, where people come and no one buys.”

Two years later, however, the company had returned to its American ways.

“Shopping at Costco is like taking a trip to America,” said one Japanese customer in Chiba — Costco’s second location in Japan — to Associated Press journalist Yuri Kageyama. “It’s big, you choose the items yourself, and it’s cheap.”

While market reports suggested that Costco should conform to Japanese buying habits, Sinegal had started to see that his company and others were, per Kageyama, “starting to shatter stereotypes about Japanese consumers: that they recoil at buying in bulk because they live in tiny homes, shun self-service because they have been pampered by sales clerks, and demand name brands.” Costco had proven this was far from the case.

As Sinegal said to Kageyama back in 2001: “They want value as much as customers around the world.”

Costco now

As of 2025, Costco has 36 warehouses across Japan.

As reported by Takehiro Higashi for the Kyodo News, there are certain fundamental conditions that must exist for Costco to consider a new location. First, there needs to be “a population of more than 500,000 within a radius of 10 kilometers.” Next, there needs to be enough space “for a parking lot that can accommodate more than 800 cars.”

As Japan’s population continues to shift toward more urban centers, it will be interesting to see if Costco adapts these conditions to suit the needs of more rural towns and villages suffering from a lack of buying options. The age-old question looms: would a massive retailer improve a small town’s quality of life or ruin it more? As Wal-Mart had done in several locations in the United States.

For Yoshiami Abe, it was necessary because of a lack of successors and a decline in interest in becoming a farmer.

As one mayor told Higashi in July 2024, after being granted anonymity: “We can't deny the unfavorable effects [Costco has] on local retailers. But if nothing is done, regional commerce will fail to survive due to depopulation.”

Next up in the series will be Apple’s entry into the Japanese market in 1983.

Other stories in "When They Opened in Japan"

Patrick Parr is professor of writing at Lakeland University Japan. His third book, Malcolm Before X, published by the University of Massachusetts Press, is now available. His previous book, One Week in America: The 1968 Notre Dame Literary Festival and a Changing Nation is available through AmazonKinokuniya and Kobo.

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16 Comments
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I remember when Costco first opened in Japan. An irate Japanese man whom I worked with said, "Costco will fail within a few months. We don't need that here. No one will ever go except maybe out of curiosity."

It's the same guy, by the way, who had earlier said iPhones would fail in Japan because Japanese cell phones were superior and what Apple was offering would never catch on. :)

-6 ( +11 / -17 )

Costco is a success in Japan and the reason for that is price.

Sure items must be bought in bulk but now the Japanese are very much more price conscious than several decades previously.

5 ( +6 / -1 )

I love going to Costco here. It's like being magically transported back to the US for an hour or two. We're looking forward to Nexco finally completing the Shin-Meishin expy, so it'll only take 15-20 minutes to get there vs the current 30-35.

I often order online, as well. It comes in handy for bulky and/or heavy goods, like toilet paper, paper towels, and giant bags of dog food.

Thank goodness for stores like Costco, Kaldi, Ikari, and Seijo IIshi, for making our lives here much more pleasant. Yamaya and Gyomu supa, too. Their quality is generally a little lower. But, the prices are lower, too. So, that's nice.

13 ( +13 / -0 )

Everyone I know goes to shop at Costco because it has food from everywhere. It is always very crowded though. Tesco (they chose a similar name), which is a supermarket from England failed because people prefer the American style supermarket.

5 ( +7 / -2 )

interesting that Costco succeeded, but Carrefours didn't.

1 ( +1 / -0 )

A number of customers buy in groups, splitting the large packages that Costco typically sell, between 3-4 families or neighbours, and fitting into the smaller fridges and cupboards that exist here. Smart moves!

3 ( +3 / -0 )

We like Costco a lot. Personally I think it has succeeded because its something different to regular food shopping. Carrefour and Walmart (Seiyu) are little different to Japanese supermarkets and don't have that plus alpha "treasure hunt" type feeling.

Some of Costco's early hit products are now ubiquitous, so maybe they were lucky to set up when they did. The first product that Japanese saw as a must buy was US sized bottles of usually strongly scented fabric softener. This was a hit because of price, the convenient large size for Japanese who run their washing machines all the time (no "weekly wash" here), and I suspect the strong fragrance appealing to Japanese women who think their husbands or sporty kids have BO. When we started going to Costco, every customer would buy fabric softener. It was like Uniqlo with their 1000 yen fleece boom. Just as Uniqlo no longer relies on fleeces, Costco no longer relies fabric softener, super plush toilet paper, or huge packs of kitchen roll.

Costco sushi is very good and way better than any 100 yen chain. I saw similar sushi platters in Aeon this past New Year and it was 6000 yen not 3600 like Costco. Their bakery stuff is also great, if fattening because you have to buy 12 croissants. These will still be cheaper than four or five croissants at a bakery like Donq. If you buy electrical goods at Costco, their warranty service is excellent. Over the years, lots of cheap stuff has disappeared and the weak yen has really cranked up Costco's prices, the bulgogi bake has gone from 400 yen to 880, but we still like shopping there.

3 ( +7 / -4 )

Tesco (they chose a similar name), which is a supermarket from England failed because people prefer the American style supermarket.

Tesco has been around since decades before Costco, and has had some success in Asia. Meanwhile, in Japan, Carrefour has failed and Walmart is divesting and likely to leave. Costco is American style wholesale shop, not a typical American style supermarket. Those are not all that different from supermarkets in Europe.

Simply, Costco provides higher quality goods at the best prices. The 250 yen hot dog and drink sets don't hurt either.

3 ( +3 / -0 )

Japantime

Everyone I know goes to shop at Costco because it has food from everywhere. It is always very crowded though.

I think most Japanese who shop there will tell you it's mostly because of US-sourced and/or US-style goods. Of course, the wide variety of international goods is also a selling point.

Tesco (they chose a similar name), which is a supermarket from England failed because people prefer the American style supermarket.

Costco is nothing like an American supermarket. It's a warehouse store, not a supermarket. Most large JP supa, such as Aeon, Life, etc, are more like American supermarkets than Costco is.

0 ( +1 / -1 )

I went there this afternoon for my semi-regular stock-up on big blocks of cheese and meat to freeze. Also the big bags of nuts are good value.

The main problem with Costco is having space at home to store the loot, especially when it comes to meat for freezing. Most Japanese homes lack the space for a separate chest freezer.

2 ( +2 / -0 )

I can get cheddar at a great price. One of the few places I can buy meat pies. Great for toilet paper, nuts, soy milk, booze, meat, grapes. They were even selling jet skies and tires at some point :-)) But, unfortunately, the bakery seems to stop making confectionary as soon as I fall in love with it. An assumption, but I'm guessing it stops selling stuff when it can't make enough profit on the product, which suggests a lack of loyalty to regular customers.

1 ( +1 / -0 )

Not an accurate article as it's missing one person who was responsible for making Costco Japan a success and that's it's first Country manager Ken Theriault and he is still running the company here.

0 ( +0 / -0 )

I went several times to new Costco in Shiga and every time I got frustrated buying especially fruits that are bad. I had to go back and return. A jar with jalapeno was sold to me opened and unsealed. The only thing I still buy in Costco is orange juice from Spain. I watch customers in Costco mostly coming by curiosity like visiting a museum. Even on weekends Costco in Shiga is not crowded. I saw Costco distributing leaflets "Refer a customer and you'll get 1000 yen". Seems Costco is trying to import bad quality from United States. You have to buy in huge quantity and bad quality. I noticed also that Costco sells always milk that is about 1-2-3 days away from expiring.

-3 ( +0 / -3 )

i was sucked into the costco cult for awhile. with only two people, the food was just too much and half would be thrown away. did the tp, paper towel, gas and water run for years.

returning to the u.s., i did it for only a short time, but after 25 years in japan, it was hard to get back into the culture of rudeness easily.

all the supermarkets near me now have costco staples at the same price per unit as costco, without needing a forklift. they got smart. and gas is now lower than costco from supermarket points earned.

and all without the parking headache. if you have a family of 4 or more, i can see the value of costco.

-3 ( +0 / -3 )

Costco succeeds because they treat their employees better, much better.

-2 ( +1 / -3 )

I went several times to new Costco in Shiga and every time I got frustrated buying especially fruits that are bad. I had to go back and return. 

The imported fruits can be hit and miss, but buying fruit anywhere requires a little diligence. The prices on blueberries and cherries are usually unbeatable. But look at them before buying. Cherries that are shiny and smooth looking are good, those with even slight dullness have likely been forced to be fumigated. Avoid buying when prices are especially high, because that usually means a bad harvest - in such conditions demand goes up even for lower quality produce. Conversely, check when prices are very low - it could just mean an abundant harvest, but it could also mean they are trying to move stuff quickly before it rots. For blueberries, check to see whether they look firm. Look at the bottom of the package (usually clear) to see if a lot of berries are smashed or if there is a hint of mold.

Or you could just pay twice the price and let the store do all that for you.

1 ( +1 / -0 )

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