SEOUL, South Korea -- Price/Costco, San Diego, has entered into a licensing agreement to develop American-style membership warehouse clubs in South Korea.
owntown Seoul later this year.
Ted Wallace, an executive vice president who works out of the Price/Costco office in San Diego, told a U.S. newspaper that Price/Costco will furnish Shinsegae with the training, technical knowledge and products to open the warehouse. In return, Shinsegae will cover all start-up costs, provide warehouse personnel and receive "a significant percentage of the profits."
Wallace declined to be more specific about the financial terms of the agreement, though it is believed that Price/Costco will receive an up-front fee and the lesser share of whatever profits the venture generates. The decision to build additional
club stores in South Korea will be based on the success of the first store, he said.
The agreement is still subject to approval by the South Korean government. It was announced just prior to the opening of Price/Costco's inaugural club in the United Kingdom last Nov. 30.
Wallace said Price/Costco expects its South Korean venture to arouse much less resistance from the host retail community than was the case in the United Kingdom, where three leading food retailers unsuccessfully filed suit to prevent the club operator from doing business there.
"The Koreans are a very proud and independent people, but U.S. products are very popular there," said Wallace. "People know about us; it will be nice going into a country where we are welcome."
He added that South Korea, with a population of 45 million, including 12 million in the Seoul metropolitan area, is "one of the strongest and highest-income-per-capita countries in the Pacific Rim.
"This will be a test of the Pacific Rim, the fastest-growing area of the world," he continued.
"There is tremendous buying power. There is a large middle class that is growing in all of these countries."
Wallace said that the inaugural club will be called either Price Club or Price/Costco. The merchandise mix will include goods supplied by both partners, with Shinsegae supplying mostly food and electronics, and Price/Costco exporting apparel and home furnishings from the United States to South Korea.