How Costco became a staple of Asian America

Wendy Leung rarely saw durian in grocery stores growing up in Los Angeles, but the 45-year-old nonprofit worker found the fruit at her local Costco Wholesale in San Fernando Valley this April. Durian is used in Southeast Asian cuisines and is known for its strong scent. 

“When I saw it in Costco, it just made me laugh that durian has gone mainstream,” said Leung, who was born in Hong Kong. “I’ve definitely been noticing more Asian products at Costco lately.”

Asian Americans are the fastest-growing demographic in the U.S. They’re also a disproportionate number of Costco’s customers. Asians comprise about 7% of the U.S. population, but make up 11.9% of Costco shoppers, according to market research firm Numerator.

Costco’s dominance among Asian American consumers bodes well for the warehouse retailer’s longer-term growth trajectory — and carries implications for other retailers as the industry evolves alongside a diversifying United States.

“There’s opportunity to take what were once held as niche or minority markets and put them central to U.S. trends,” said Kymberly Graham, head of diversity initiatives at consumer intelligence firm NielsenIQ.

“For Asian Americans, their rate of population acceleration certainly lends to this idea that … they’re going to be creating major market shifts. If their needs are being served, it inherently becomes very profitable for anyone that’s serving them,” Graham said.

The rapid growth and purchasing power of Asian Americans make the group a formidable consumer base for retailers. The Asian population in the U.S. jumped 81% from 2000 to 2019, compared with the overall population’s 16% growth, according to the Pew Research Center. Asian Americans have the highest median household income in the U.S. — though the demographic also has the greatest intragroup economic disparity in the country.

The untapped sales potential of Asian American consumers tallies to $13 billion, according to NielsenIQ.

On average, Asian Americans exhibit some shopping habits that differ from those of other consumers, NielsenIQ found. Households of Asian descent tend to be larger than those of the overall U.S. population. Asian Americans are more likely to buy in bulk and seek bargains. As a result, Asian consumers are more than twice as likely to shop at warehouse clubs than the average U.S. consumer.

Costco declined to comment directly on inventory and consumer strategy as it relates to Asian shoppers. “Regardless of the products we sell, Costco’s buying philosophy is the same: Research the marketplace, determine the variety of products our members are interested in, and negotiate an exceptional value on quality products and services,” Costco management told CNBC in an email.

The warehouse retailer famously does not spend any money on advertising, but word of mouth can cultivate brand affinity among different communities,…