Sam speeds up the opening of stores, can the warehouse membership format improve for a long time?

Reporting by Zhong Chuhan and Jiang Zheng from Shanghai

Recently, China’s first Sam’s flagship store was officially opened in Waigaoqiao, Shanghai. On the eve of opening, as Sam’s largest flagship store, its various products and experience projects with explosive attributes have received a lot of attention.

At the same time, Sam is accelerating the pace of opening stores in China. In addition to Sam’s, with the improvement of Chinese consumers’ purchasing power and the gradual maturity of the market environment, since 2019, Costco and domestic new retail company Hema have opened warehouse membership stores in China.

In the warehouse membership store model, enterprises have the advantages of product differentiation and high-quality cost performance, but in the market environment of e-commerce development, this model still faces challenges. Lai Yang, president of Beijing Jingshang Strategic Research Institute, told the “China Business News” reporter: “Warehouse membership stores are a supermarket format that retail enterprises are exploring and transforming under the increasingly difficult operation of hypermarket formats, but as the network competitive advantage of fresh food becomes more and more obvious, it is not easy for warehouse membership stores to survive for a long time. ”

Parsing Sam’s pattern

On September 28, the reporter came to Sam’s flagship store, which had just opened for three days, and the popularity of the flagship store was still high, and many consumers were applying to join the membership outside the store. In Sam’s flagship store, the 1.5-meter-high potato chip gift box, the 4.5-kilogram Mondelēz giant triangle chocolate, and dynamic dinosaur dolls have also become check-in areas for consumers.

It is understood that the Shanghai flagship store is Sam’s third store in Shanghai and the 34th store opened in the country. Regarding Sam’s flagship store, Wen Zhihong, partner and head of chain operation of Hejun Consulting, told reporters: “Wal-Mart’s opening of such a large Sam’s flagship store in Shanghai shows Wal-Mart’s great determination to develop membership stores in China. In addition, the flagship store has many functions, mode design and many experience projects, which will also play a certain demonstration effect. ”

According to Sam’s flagship store, beef and other fresh and cake categories have always been hot categories in Sam’s Store. The reporter also noticed in the flagship store that compared with other areas, the fresh and cooked food areas have significantly more traffic.

Lai Yang also told reporters: “Sam’s Club’s large number of imported beef and some high-quality ingredients are loved by consumers. Consumption is escalating, and now consumers have changed from buying cheap fresh food in the past to pursuing the quality of fresh food. The willingness of the middle class to upgrade consumption in this regard has increased significantly, while these consumers still recognize some traditional channels and are largely inclined to spend in physical shopping malls, with some well-known sellers being their first choice. ”

In addition, the reporter noticed that the price of some categories of Sam’s own brand products is relatively low, such as according to Sam’s APP information, Sam’s own brand Member’s Mark red grape juice 100% fresh fruit juice (1 liter ?6) costs 59.8 yuan. The reporter also noticed some recommended special products in Sam’s flagship store, such as Friefons Cleansing Cream 100g?2 priced at 175.5 yuan, with an average price of 87.75 yuan per stick, and in Tmall flagship stores and beauty retail stores such as Watsons, the price of a single stick is about 150 yuan. The price of the Samsonite 21+27-inch trolley case set is about 40% lower than the price of Tmall and other channels.

The relatively preferential pricing strategy is related to the business model of warehouse membership stores, Sam’s, Costco and other warehouse membership stores mainly earn profits by collecting membership fees (Sam’s individual membership in China is 260 yuan / year), while in terms of goods, they minimize the gross profit margin of goods sales and provide membership value for consumers. Costco’s financial data, which shares Sam’s, is a good illustration of this pattern. In fiscal 2019, Costco’s net profit was $3.66 billion, compared to its membership fee income of $3.35 billion in the same period, which shows that membership fees are its main way of earning profits.

In fact, according to new retail expert Bao Yuezhong, compared with Costco, a warehouse membership retail brand that only entered the Chinese market in 2019, Sam’s Club, which has been working in the Chinese market for many years, has advantages in terms of goods and Costco. He told reporters: “Costco has more advantages in terms of global commodity organization capabilities, such as South American fruits, African products and some unique products in other places.” In this regard, Sam is still relatively localized, with more domestic goods. Now Costco’s commodity advantage is significantly higher than Sam’s. The strength of the global merchandise organization capabilities is the foundation for Costco’s future performance in the Chinese market. ”

A retail industry observer told reporters: “Costco is almost the only company that only does warehouse hypermarkets, and Sam is a system of Walmart. From a product point of view, Costco imports relatively more goods, and at the same time more large-package products, which is inherited from the United States. Compared to Costco, Sam’s localization is stronger. Sam’s supply chain is a lot in the country, and at the same time it is according to Walmart’s standards. At present, the two companies have not yet faced a direct war, and the future remains to be seen. ”

Hu Chuncai said: “Sam focuses on high quality and low price, and Costco focuses on famous products with low price. Sam’s advantage is backed by Wal-Mart, on this basis, the scale of goods, cost control, commodity quality, etc. have innate advantages. In addition to quality control and cost control, Costco’s advantages are also very good cooperation with many famous products and luxury goods, which is Costco’s biggest advantage. ”

Domestic warehousing membership format exploration

The reporter noticed that the pace of Sam’s store opening in the Chinese market is accelerating. In the Shanghai market, Sam’s currently has a total of 3 stores in Shanghai, two of which were opened in 2019 and later. According to Wal-Mart information, in addition to the Shanghai flagship store, Sam’s will also welcome the third store in Hangzhou and the second store in Wuhan, and by the end of 2022, there will be 40~45 stores opened and under construction across the country.

In this regard, Wen Zhihong said: “More than a decade ago, the retail format of charging customers membership fees did not have a market foundation and was not easy to be accepted by consumers. However, since 2019, the market environment has changed greatly. The consumption concept of the middle class has changed, and the market is much more mature than in the past. ”

Ding Liguo, an expert in the retail industry, told reporters: “The premise of the rapid development of Sam’s Club is that consumers must have high purchasing power. The three-child policy is a good thing for this format, and the state has taken various measures to encourage childbirth and is good for Sam’s development. Property taxes encourage the exchange of small houses for large ones, and almost every family has a private car, which is conducive to the development of warehouse membership stores. ”

In addition to Sam’s, other retail companies have also continued to deploy warehouse membership stores in the Chinese market this year. In 2019, Costco entered the Chinese market and opened its first store in Shanghai. In addition, many domestic retail companies are also trying the warehouse membership store model. In 2020, Hema opened an X member store. As early as 2015, Wumart opened a Shangjia membership store, but it failed just over a year later.

Ding Liguo said that the threshold for warehouse membership stores is very high, requiring a very strong and deeply excavated supply chain, and a business model that does not rely on channel fees. Regarding the failure of Wumart’s previous exploration, Ding Liguo said: “Warehouse membership stores do not charge channel fees, mainly rely on commodity price differences and membership fees to make profits, while hypermarkets’ profits are composed of commodity gross profit and channel fees, each accounting for half.” Wumart’s failure to succeed is mainly due to the lack of depth of the supply chain, the lack of distinctive characteristics, and the fact that the management team is familiar with the hypermarket model, and the specialization of warehouse membership store management is not enough. ”

Wen Zhihong believes that compared to Sam and Costco, the Hema X member store still lacks experience. Ding Liguo believes that “Freshippo’s advantage lies in distribution efficiency, but the supply chain and product characteristics are far inferior to Sam’s and Costco.” The success of the Hema Warehouse membership store will still encounter great challenges. ”

In Lai Yang’s view, with the development of e-commerce, the prospects of warehouse membership stores are not optimistic in China. “I think warehouse membership stores are a supermarket-type format that retail enterprises are exploring and transforming under the increasingly difficult operation of hypermarket formats. Although a considerable part of the middle class currently likes traditional channels to consume, and the quality of Sam’s products is recognized by them, as the competitive advantage of the fresh food network becomes more and more obvious in the future (richer ingredients and better quality), a large number of new generation consumers may switch to online consumption. Therefore, in the long run, it is very difficult for the business format to take root and survive for a long time. ”

The reporter noted that Sam has already launched an e-commerce business. According to Wal-Mart information, the “Extreme Speed” service covers cities with Sam’s stores, and Sam’s self-operated e-commerce services have expanded to most of the country.

Wen Zhihong believes: “Sam’s is not just an offline platform, the integration of online and offline mode is conducive to Sam’s extension and expansion of his business circle through the online platform. In this sense, it can resist the influence of e-commerce to a certain extent. However, the core competitiveness of warehouse membership stores is still in commodity differentiation and experiential services. ”

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