UPDATE 2-Costco to enter China through Alibaba's Tmall

Tue Oct 14, 2014 12:37pm EDT
 
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(Adds analysts' comments, updates shares)

By Sruthi Ramakrishnan

Oct 14 (Reuters) - U.S. retailer Costco Wholesale Corp plans to open an online store in China using Alibaba Group Holding Ltd's fast-growing Tmall online marketplace, entering the country's booming e-commerce market to combat slowing sales at home.

The warehouse club operator said the online store would sell branded products, which would initially comprise food and healthcare goods, and store-branded products under its Kirkland Signature private label.

"This low capital entry will give Costco a good look at the Chinese opportunity with nominal capital investment," Janney Capital Markets analyst David Strasser wrote in a note.

Alibaba's Tmall offers virtual store fronts and payment portals to merchants. Several western retailers, including Zara owner Inditex, Britain's Burberry and ASOS , have joined TMall this year as they look to boost their presence in China.

Costco said Tmall Global's warehouse stores would help it cut logistics costs and delivery time.

"Costco sees tremendous growth opportunities in China, especially in light of Chinese consumers' increasing appetite for imported products," Executive Vice President Jim Murphy said in a statement on Tuesday.

The move is part of Costco's push to grow its online business. Most U.S. retailers are struggling with falling store traffic as shoppers make more purchases online.   Continued...