Why is Costco so profitable in Taichung? Executives say, "Opening up to 6 Costco stores is no problem"

Why is the most profitable Costco store in the world not in the United States, Japan, or South Korea, but in Nantun, Taichung? Today, there are reports that company executives have publicly stated: “With the population growth in Taichung, opening six stores is no problem.” This is also connected to payment methods.
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Table of Contents

• Decoding why Taichung is Costco’s global store king
• What exactly is the magic of Taichung?
• Costco’s “card-linked membership” payment strategy in Taiwan
• Costco’s expansion blueprint in Taichung
• The next step for Costco in Taiwan

Last month, Costco CEO Ron Vachris personally visited Taichung to survey new store locations. He quietly inspected the Nantun and Tainan stores. At the time, the official response was “just routine visits.” Yesterday, the Costco team also met with Taichung Mayor Lu Shiow-yen to lay the groundwork for future store expansion plans.

Decoding why Taichung is Costco’s global store king

How impressive is the Nantun store in Taichung? The following five sets of data are enough to astonish retail industry peers:

1. Worldwide No.1 in Profitability
Among nearly 900 Costco stores globally, the Nantun store in Taichung has ranked first in profit margin for consecutive years. Not second, not in the top five, but champion. Costco Asia-Pacific President Zhang Sihan has publicly confirmed this record.

2. Four stores in Taiwan among the top 10 globally
The top 10 most profitable Costco stores worldwide include four in Taiwan: Nantun (No. 1), Beitun (Taichung), Zhonghe (New Taipei), and Neihu (Taipei). The top five in Asia are also dominated by Taiwan, with three spots.

3. Single-store annual revenue exceeds 10 billion NTD
Both Nantun and Neihu stores have annual revenues surpassing 10 billion NTD. Converted, a single warehouse store’s annual income exceeds that of many listed companies. Taiwan’s 14 stores combined generate about 140 billion NTD annually, with profits over 5 billion NTD.

4. Highest per-visit spending in Taiwan retail
The average customer spend per visit at Taiwan Costco is about 3,000 NTD (roughly 100 USD), the highest among global retail channels. Every shopping cart out the door costs three kids’ worth of spending.

5. Member renewal rate of 95%, the highest in Asia
Taiwan’s nearly 4 million members have a renewal rate of 95%, far above the Asian average of 90%. Considering Taiwan’s population of 23 million, about one in six people is a Costco member.

What is the magic of Taichung?

Taichung’s ability to surpass New York, Tokyo, and Seoul as Costco’s global hub is driven by at least three factors:

First, continuous population dividend expansion.
Taichung’s population has exceeded 2.86 million, making it Taiwan’s second-largest city, and it continues to grow. Over the past decade, it has gained nearly 170,000 residents, many from Changhua and New Taipei. More importantly, the city’s demographic is mainly middle-class families, which is Costco’s most targeted customer group.

Second, Taiwan’s number one car ownership city.
Taichung has long ranked first in vehicle registrations nationwide. The warehouse-style retail model naturally relies on “driving and bulk purchasing,” and almost everyone in Taichung owns a car and has parking spaces, perfectly matching Costco’s “once a week, fill the trunk” shopping pattern. Compared to Taipei’s reliance on MRT and scooters, Taichung’s car culture makes Costco thrive.

Third, return of Taiwanese entrepreneurs driving high-end consumption.
In recent years, many Taiwanese entrepreneurs have returned to Taichung (especially around the Central Science Park and precision machinery zones), boosting demand for imported goods and high-quality lifestyle products. Costco’s focus on imported foods, its Kirkland private label, and high-priced appliances align well with this affluent, quality-conscious customer base.

Another interpretation is that Costco’s authentic American style, which is highly distinctive among large chain stores in Taiwan, appeals to certain local consumers’ emotional needs.

Costco’s “card-linked membership” payment strategy in Taiwan

Costco employs a “closed-loop payment system” (physical stores only accept a single co-branded card or cash), deeply binding member identity with “payment tools.” To access the store’s low prices, consumers must pay an annual fee first. Then, to enjoy checkout convenience (avoiding carrying large amounts of cash) and earn rewards, they are compelled to apply for co-branded cards. This creates a psychological “sunk cost” trap: since they’ve paid the fee and obtained the card, consumers are motivated to shop more frequently to “recoup” their investment.

This strategy gives Costco absolute bargaining power, as they regularly auction off “exclusive card rights,” prompting banks (such as Taipei Fubon Bank and Cathay United Bank) to pay hefty licensing fees and lower credit card processing fees to compete for this 3 million high-spending customers.

In digital transformation, Costco’s push for “Costco Pay” and digital membership cards has successfully digitized offline purchasing behavior. Even if consumers don’t carry wallets, as long as they have their phones, their purchase data and frequency can be precisely tracked. Whether more digital payment options and stablecoin payments will be supported in the future remains a direction that global retail giants are eager to explore.

Costco’s expansion blueprint in Taichung

Currently, Taichung has only two stores: Nantun and Beitun, both nearing saturation. During weekends, parking lots are crowded, and checkout lines can take 30 minutes. During Black Friday sales, queues stretch 300 meters.

The third store’s site has been confirmed at the old Jingji factory site in Dadu Mountain Science Park, near Taiwan Avenue, close to future BRT Line B9-B10 stations. The Taichung Urban Planning Committee approved the land change at the end of last year, pending approval from the Ministry of the Interior. The site covers about 3.21 hectares, planned for a three-story new store with a gas station.

But Costco’s ambitions go beyond that. According to today’s Liberty Times, a fourth store is already a priority target. Costco executives publicly stated:

“With the population growth in Taichung, opening six stores is no problem.”

With a population of 2.86 million and six stores, that’s roughly one Costco per 470,000 residents, surpassing the density in most U.S. states. This suggests Taichung could become one of the cities with the highest Costco store density worldwide.

The next step for Costco in Taiwan

Costco Asia-Pacific President Zhang Sihan has said that Taiwan’s long-term goal is to expand from the current 14 stores to 25. Besides the third and fourth stores in Taichung, planned projects include:

• Tainan Second Store: Located in the East District, covering 2.3 hectares, scheduled to open in 2028
• Kaohsiung Relocation: The first Costco in Taiwan, opened in 1997, will move to the Asia New Bay Area
• Other potential cities: Yilan, Hsinchu, and others are under ongoing evaluation

In 2022, Costco Taiwan was fully acquired by the US headquarters, purchasing the 45% stake from its joint venture partner, Dàtóng Group, for 1.05 billion USD, making it a wholly owned subsidiary. This bold move, which shocked the industry at the time, now appears to be a strategic step to fully control Taiwan’s “most lucrative market” and accelerate store expansion.

While Taiwan’s retail industry is still grappling with market consolidation and mergers, Costco remains unaffected, thriving more than ever. The headquarters’ next move is simple: open four more stores.