Why Did Costco, Sam’s Club’s Rival, Suddenly Shut Down Its E-commerce Platform, and Why Did Chinese Brands Suffer the Consequences?
Hello everyone, I’m your financial analyst. Today, we’re going to discuss a retail event that may seem modest on the surface but is actually full of underlying tensions: the American retail giant Costco quietly shut down its e-commerce platform, Costco Next, which had been in operation for nearly nine years.
There was no press conference, no press release, and not even a formal farewell letter to suppliers. Links that used to direct customers to the brand’s stores now point to a customer service page, informing them, “For returns, please contact the brand directly; don’t come to us.”
This move caught many Chinese brands that have expanded into the U.S. market off guard. After all, Costco Next was an important channel for these brands to reach millions of high-net-worth members in North America.
Why would a platform that was still growing be shut down? What does this mean for Chinese businesses? And what plans does Costco have in the future? Let’s break down this situation in simple terms.
Understanding Costco Next
To understand why Costco decided to shut down Costco Next, we need to know what it was all about.
Costco’s core business model is based on a membership system. You pay a fee (several hundred dollars per year), and in return, you get a selection of “high-quality, essential” products. To maintain this quality, the number of products (SKU) in its physical stores is usually limited to around 4,000. The reason for this is that with fewer products, Costco can place larger orders with suppliers, negotiating lower prices and making the membership more attractive to customers, thus encouraging annual renewals.
However, members have diverse needs. If you want a specific model of bicycle or a niche outdoor power bank, it might not be available among the 4,000 products offered by Costco.
In 2017, Costco launched Costco Next with the following logic:
1. **Costco acts as the “curator”: It selects reputable brands like Anker, EcoFlow, and Barco.
2. **The brands act as the “ sellers”: Members see these products on the Costco website and place orders directly on the brands’ official websites.
3. The brands handle customer service: Shipping, after-sales, and returns are all handled by the brands themselves.
It was like Costco creating a “NetEase Yanxuan” (a popular Chinese shopping platform) for its members, focusing solely on product recommendations and traffic generation without getting involved with the actual products or payments. This is a typical “light-asset” business model.
Why the Shutdown?
The main reason for the shutdown was that Costco Next failed to maintain the trust of its members. Even though the platform was still growing (with sales in the third quarter of the 2025 fiscal year approaching those of the entire 2022 year), it damaged Costco’s most valuable asset: the trust of its members.
Costco members pay annually not just for products but also for the peace of mind and assurance that their purchases will be handled well. For example, if something goes wrong with a product purchased at a Costco store or online, Costco usually provides unconditional returns. However, with Costco Next, if there’s a problem with an Anker power bank or an EcoFlow product, members have to contact the brand directly. Since different brands have varying standards for after-sales service, shipping speeds, and customer service, this created a significant gap in the shopping experience.
From the members’ perspective, they thought, “I’m a Costco member; I bought this through Costco’s platform, so Costco should take responsibility.” In reality, they were told to contact the brand. This approach led to complaints on social media that Costco Next didn’t feel like the typical Costco experience, and some accused brands of taking advantage of Costco’s reputation to charge higher prices.
Once trust is eroded, a company’s brand strength is weakened. For a business that relies on trust, this kind of hidden cost can be devastating.
The Loss of Data
Another underlying issue was the loss of data. Under the Costco Next model, once members clicked through to the brand’s website, all their browsing, ordering, and repurchase activities were tracked by the brands. Costco only gained traffic but didn’t obtain valuable user data. It couldn’t use this information to improve product selection, pricing, or member engagement.
For Costco, which values its members as a core asset, traffic without corresponding data is essentially useless. Without this data, it couldn’t optimize its operations.
The Impact on Chinese Brands
For Chinese brands like Anker and EcoFlow, the shutdown of Costco Next was a setback. Costco Next provided a relatively easy way to enter the North American market: low entry barriers, strong brand recognition, and high conversion rates due to Costco’s reputation. Now, these brands must face more challenging options:
1. Direct negotiations: They need to negotiate directly with Costco to enter its supply chain or its own e-commerce platform, which involves stricter cost controls, more complex logistics, and lower profit margins.
2. Building their own channels: They can invest in Amazon or other platforms to build customer bases and strengthen their brands.
3. Finding new partners: They need to explore other membership-based or premium retail platforms to collaborate with.
In short, while Costco Next offered a convenient entry point, Chinese brands now have to find alternative ways to enter the U.S. market on their own.
Costco’s Next Step: Partnering with JD.com
Some people wonder if Costco’s decision to shut down Costco Next means it’s reducing its online presence. On the contrary, sales grew by 11.6% in the third quarter of the 2026 fiscal year, with e-commerce sales increasing by 21.5%. Costco is shifting to a more strategic approach, focusing on “heavy-asset cooperation” rather than relying solely on light-asset models.
Recently, Costco partnered exclusively with JD.com, making JD.com its official e-commerce partner in China. This partnership is strategic:
- Costco continues to select high-quality products and ensures their quality and competitive pricing.
- JD.com handles logistics: JD.com’s extensive warehouses and delivery network enable same-day or even hour-long deliveries.
- Consumers can buy Costco products without a membership card: This makes it easier for customers to try out products before deciding to join the membership.
This partnership allows Costco to leverage JD.com’s strengths in logistics and customer service while focusing on its core competencies.
Conclusion
The shutdown of Costco Next is not a sign of retreat but a strategic shift. It indicates that Costco is focusing on controlling the shopping experience and data more effectively. By partnering with JD.com, Costco is gaining a more sustainable and efficient way to grow its online business. For Chinese brands, it means they must adapt to more mature global competition. The ability to enter Costco’s supply chain or build stronger brands on platforms like Amazon will be crucial in the future.
Sam’s Club is already leading the way in China, and Costco is accelerating its efforts to catch up. The competition between these two retail giants in the membership-based market is just beginning. For consumers, the good news is that buying Costco products on JD.com will likely become faster and more convenient, and they can enjoy member discounts without having to sign up first.