But are Sam and Costco's warehouse style membership stores opening more and more?, Why is it difficult to do business in supermarkets and supermarkets. Opening | Members | Supermarket
The competition among a group of warehouse style member stores is intensifying in the Yangtze River Delta.
On June 20th, the Kaishike Ningbo store opened, and a few days before the opening, flow restrictions were implemented due to excessive customer traffic. This is the first store opened in Zhejiang by the largest US chain store store of membership warehouse, and the fourth store opened in Chinese Mainland after Shanghai and Suzhou. Next, Kaishike Hangzhou store will open this summer and plans to enter the Nanjing market next year.
Outdoor view of Kaishike Ningbo store. Respondents provide pictures
More competitors are watching closely. In April of this year, RT Mart opened its first "M Member Store" in Yangzhou, Jiangsu Province, and the next step is to enter Nanjing; Hema launched the warehouse style membership store brand "Hema X Membership Store" in 2020 and has established its first store in Shanghai. Currently, it has opened 9 stores and has established branches in four cities: Shanghai, Beijing, Nanjing, and Suzhou. As a leading player in the warehousing style membership store market, Sam's Club has recently accelerated its expansion speed. At present, Sam has opened 45 stores in 25 cities in China, of which 17 are located in the Yangtze River Delta. In addition, Sam's Shanghai Jiading store and Nanjing Pukou store are under construction, and contracts have been signed with Sam in Hefei, Anhui, Shaoxing, Jiaxing, Wenzhou, and other places in Zhejiang. In the future, new stores will be established.
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In recent years, warehouse style membership stores have continued to heat up. On the one hand, the overall retail industry is sluggish, and enterprises need to leverage new models to open up growth space; On the other hand, in the context of promoting stable consumption growth, local governments hope to introduce new business models to boost confidence and stimulate offline consumption. Many brands focus on the Yangtze River Delta region in their layout, eyeing its huge urban capacity and strong consumption potential, but this also makes competition in the region more intense.
Interior view of Kaishike Ningbo store. Respondents provide pictures
"The market is mature"
The model of warehouse style membership stores originated in the United States. In 1976, the United States gave birth to the world's first membership based warehousing store. In 1983, Sam and Kaike opened their first stores in the United States, making them one of the earlier group of membership stores. In China, as early as 1996, there was a wave of warehouse style membership stores. At that time, Sam had just entered China and his first store was located in Luohu District, Shenzhen. Its model was similar to that of Sam's today: a shopping mall covering tens of thousands of square meters, with over 4000 types of products, required a hefty membership fee. In an era when most people were still quite unfamiliar with the "paid membership system," Sam's revenue set a retail record in Shenzhen in the first three days of its opening. Subsequently, international retail enterprises such as Wankelong, Metro AG, and Plymouth entered the market in succession in the form of warehouse clubs, with the intention of taking a share. "When RT Mart first entered the Chinese market, it followed a membership system route," Lin Xiaohai, Executive Director and CEO of Gaoxin Retail, remembers. In 1998, RT Mart opened its first store in Zhabei District, Shanghai, with a first-day turnover of millions of yuan.
![But are Sam and Costco's warehouse style membership stores opening more and more?, Why is it difficult to do business in supermarkets and supermarkets. Opening | Members | Supermarket](https://a5qu.com/upload/images/403926f13db86e7a6ea291c83d20996e.jpeg)
However, this craze did not last long. After the novelty wears off, most people are not accustomed to this type of paid entry supermarket. For warehouse style member stores, the core of their profit model lies in attracting customers through high-quality and low-priced products, and membership fees are the main source of their profits. For example, in the 2020 fiscal year, the membership fee revenue of this company only accounted for 2.17%, but contributed 65.15% of the operating profit. "At that time, membership was basically a loss, with little profit," Lin Xiaohai told reporters. As a result, many retail brands either closed down due to poor operations or turned to shopping malls or hypermarkets.
Professor Li Fei from the Marketing Department of the School of Economics and Management at Tsinghua University has conducted research and believes that the development of warehouse style membership stores requires soil, and the domestic membership store model was once ahead of its time. In foreign countries, membership stores are generated after the per capita gross domestic product reaches $10000; In addition, membership stores are mainly aimed at families who are usually busy with work and purchase sufficient quantities of goods at once, and these families usually travel by car. "For example, when Sam opened his first store in China, he prepared 400 parking spaces. However, at that time, there were only over 1 million private cars in China, and there were not so many cars to park in a shopping mall," said Li Fei. In 2019, China's per capita GDP exceeded $10000 for the first time, and the number of private cars owned exceeded 200 million. In the same year, the popularity of the warehouse style membership store track surged. In June 2019, Sam's Shanghai Qingpu Zhaoxiang store opened, which was Sam's second store in Shanghai and his second new store in Shanghai after 9 years. Two months later, the first store in Chinese Mainland was set up in Minhang District, Shanghai. On the opening day, there were so many people, even a rush to buy, that they had to suspend business for a time. Meanwhile, with the rise of social media platforms such as short videos, sharing and checking in on lifestyles are becoming increasingly popular, giving rise to a series of internet celebrity products. For example, Sam's popular single products such as Swiss rolls, rainbow potato chips, imported beef, etc., even if they are not Sam's members, many people have heard of them. This further drives the popularity of warehouse style membership stores.
"The market has matured, and consumers have gradually developed a habit of paying." Lin Xiaohai believes that warehouse style membership stores are the best time to enter. "As consumers become more mature, they become more aware of what value is, and we also have an advantage because consumers can appreciate and recognize the various high standards of products and services in our stores," said Zhang Sihan, President of Kaike Asia. He revealed to reporters that before the opening of the Pudong store, the performance of the Minhang store in all aspects remained in the top five in Asia and the top ten in the world; Especially during the two weeks before and after the Lunar New Year each year, the performance can reach the top in the world. Before the opening of the Ningbo store, the number of new member registrations had reached 62000, and it is expected to exceed 100000 by the end of the year.
Pudong store is the second store in Shanghai and the third store in Chinese Mainland. Photo by Zhu Lingjun
![But are Sam and Costco's warehouse style membership stores opening more and more?, Why is it difficult to do business in supermarkets and supermarkets. Opening | Members | Supermarket](https://a5qu.com/upload/images/333cafbcda3d3b6e58f7853dc2a1da4c.jpeg)
The tuition fees in the Yangtze River Delta region
At present, the Yangtze River Delta has gathered multiple warehousing style member stores such as Sam's, Kaike, Hema, and RT Mart. Experts have pointed out that the Yangtze River Delta has a more developed economy and higher per capita disposable income. Consumers sometimes have a higher pursuit of time than price and other factors. The warehouse style membership store model can filter out high-quality and cost-effective products, focusing on one-stop shopping, which is highly compatible with the Yangtze River Delta market.
On April 28th, the RT Mart M membership store opened in Yangzhou, with a glimpse inside. Respondents provide pictures
Winning this battle is actually not easy. Under fierce competition, the retention rate of members is often seen as the "life and death line", which is also the focus of various competitions. Zhang Sihan stated that the opening customers are not a traditional supermarket that "caters to everyone", and their main target audience is a group with strong desire to share and purchasing power. As of August 2020, the global membership of Kaishike has exceeded 100 million, and the overseas renewal rate has reached over 90%. However, since the first store opened in Chinese Mainland in 2019, the card renewal rate in mainland China is not high, once only 60%.
![But are Sam and Costco's warehouse style membership stores opening more and more?, Why is it difficult to do business in supermarkets and supermarkets. Opening | Members | Supermarket](https://a5qu.com/upload/images/df1285025a3b1cdb7a794c235ecf7c11.jpg)
In Zhang Sihan's view, this is the "tuition" paid by market opening customers to open the Chinese Mainland market, especially the Yangtze River Delta market. In recent years, market opening customers have put a lot of effort into localization. For example, in terms of product selection, currently half of the products of the opening customers are pure imported goods, and the other half are locally produced and improved products in China. "We have found that there is a higher demand for fresh produce in the mainland market. For example, beef, in other regions, most members may only buy one part, but mainland members may buy parts such as Xileng and Ribs, and we will also add more parts that domestic consumers like in the future." Zhang Sihan joked, "Everyone's purchasing power is too strong. We are planning to increase the size of carts in the mainland market, and the existing ones may not be enough."
Interior view of Kaishike Ningbo store. The respondents provided pictures, and all companies are making efforts in localization. Hema President Hou Yi stated that localized product development is Hema's differentiation advantage, and it will develop products that are more in line with the taste of domestic consumers. She Xianping, the product manager of RT Mart's M member store, once went to the Philippines to count bananas. "Once a banana is bumped, its appearance quality is greatly affected. We sell super sweet bananas from the Philippines in our store, and we ensure that there are several human touches from picking them from the tree to the middle of the store. We want to minimize this number and achieve the best quality," said She Xianping.
Competition has also extended from offline to online. For example, shortly after the landing of the RT Mart M membership store in Yangzhou, Sam's Club issued a notice to open Yangzhou fresh direct delivery, covering multiple categories such as seafood, fresh meat, bread, etc. The delivery service is provided by the Changzhou Sam's Club, which is one and a half hours drive from Yangzhou. In addition, although the Hangzhou branch of Kaishi Ke has not yet opened, delivery services have been opened early in an attempt to boost its presence in the online market. However, currently, Kaishi Ke has not opened "instant delivery" services in Ningbo and Hangzhou areas, only supporting express delivery, and does not have an advantage in terms of timeliness and price. Under heavy competition, some brands even resorted to price reduction tactics and engaged in a price war. For example, at the end of last year, Sam's Club announced a profit of 500 million yuan to give back to members, and made long-term price reductions for 10 products with the highest repurchase rate and penetration rate, including popular products such as lime juice, sweet potatoes, and Swiss rolls. In May of this year, when the Sam Putuo Zhenru store opened, Sam once again lowered prices on 10 products. Previously, Sam's pricing strategy sparked heated discussions. At that time, a certain cake from Sam was sold for 95 yuan in Shanghai and 165 yuan in other cities.
Pei Liang, President of the China Chain Store Association, believes that in recent years, the retail industry, especially traditional supermarkets, has not had a good time, and various retail brands need to use new models to open up growth space. The profit of traditional supermarkets mainly comes from collecting channel fees from suppliers, while member stores mainly profit by buying out the purchasing rights of goods and changing distribution models. They can directly purchase the world's most cost-effective products and manage their own inventory. At the same time, membership fees can effectively enrich the company's revenue, making it a good path for transformation. "Despite fierce competition, the Yangtze River Delta region is still a very incremental market for member stores. For consumers, competition drives member stores to provide more favorable prices and better services, which is also a good thing," said Pei Liang.
![But are Sam and Costco's warehouse style membership stores opening more and more?, Why is it difficult to do business in supermarkets and supermarkets. Opening | Members | Supermarket](https://a5qu.com/upload/images/8f9159ef2f34f9a752383c396f0cab5d.jpeg)
Interior view of Kaishike Ningbo store. Respondents provide pictures
Global Supply Chain
Before the opening of the Ningbo store, the reporter asked Zhang Sihan: "For the opening customers, why would they choose Ningbo?" Zhang Sihan listed a set of data. In 2022, among the top ten cities with per capita consumption in Chinese Mainland, the per capita expenditure of Ningbo residents reached 42997 yuan, ranking sixth from the tenth in the previous year; In the 2022 Yangtze River Delta Top 10 Cities Ranking, Ningbo ranks fifth only to Shanghai, Suzhou, Hangzhou, and Nanjing. In terms of GDP growth, Ningbo ranks first with an increase of over 100 billion yuan. "The huge urban capacity and strong local consumption potential will bring huge opportunities for the development of warehouse style membership stores," said Zhang Sihan. It is worth mentioning that the collaboration between the opening customers and Ningbo has a somewhat two-way flow. In the previous plan, the Ningbo store was originally a Zhejiang second store for opening customers. In June 2021, Kaishike signed investment cooperation agreements with the Yinzhou District Government of Ningbo City and the Xiaoshan Economic and Technological Development Zone of Hangzhou City. In September of the same year, Kaishi spent over 200 million yuan to acquire land in Xiaoshan, and one month later, they acquired land in Yinzhou for a price of 140 million yuan. However, in the subsequent landing and construction process, the Ningbo store was completed and opened before the Hangzhou store.
Ningbo has already tasted the sweetness of warehouse style membership stores. In 2019, the first Sam's Club in Ningbo opened in Jiangbei District. In less than a year, the second Sam's Club in Ningbo has landed in Yinzhou District. After the opening of the two stores, their popularity has remained high, not only attracting locals but also driving people from surrounding cities to Ningbo for consumption and tourism. "The monthly turnover of Sam's Club is around 70 million yuan, and it can reach 150 million yuan during Chinese New Year and holidays, indicating that the consumption power of the entire Ningbo is quite strong." Analysis by Cai Yanfeng, Chief Economist of the Yinzhou District Bureau of Commerce in Ningbo. In recent years, in the context of promoting stable consumption growth, Ningbo has launched multiple policies and measures, striving to approach the international consumption center city. In February of this year, Ningbo issued the "Implementation Plan for Promoting Stable Growth of Consumption through Double Promotion and Double Prosperity", which plans to distribute consumption vouchers and organize various consumption promotion activities to ensure that the total retail sales of consumer goods, local product sales, and digital consumption scale all exceed 500 billion yuan. Among them, activating offline consumption scenarios is an important part. Cai Yanfeng pointed out that differentiation is very important. In the long run, the commercial atmosphere of the city should be strong, allowing various convenience stores and supermarkets to bloom everywhere, as well as large warehouse style member stores such as opening customers and Sam's Club, as well as commercial complexes such as shopping malls and characteristic blocks, to provide differentiated and diversified consumption choices for people with different needs.
![But are Sam and Costco's warehouse style membership stores opening more and more?, Why is it difficult to do business in supermarkets and supermarkets. Opening | Members | Supermarket](https://a5qu.com/upload/images/a5cb7ec44128b65f22c04d21c6064dac.jpeg)
The arrival of market opening customers in Ningbo may not only drive consumption. When the reporter visited the store in Ningbo, he found that there were many new products added, such as plush teddy bears, specialty small appliances, and food, all of which were supplied by local enterprises in Ningbo. Zhang Sihan told reporters that this is the first step of the plan. Next, they hope to leverage the global layout of the opening customers to promote these new selected products. From the perspective of Ningbo, this may be a win-win cooperation. On the one hand, local enterprises have obtained stable orders by joining the supply chain of market opening customers and leveraging their well-established sales network to enter the global market. On the other hand, Ningbo is a major manufacturing city with a group of industrial and consumer goods production enterprises. Through cooperation with market opening customers, Sam's Club, and others, the local area can further integrate resources and promote the upgrading and development of the industrial chain.
Take a glance inside the Pudong opening store. Photo by Zhu Lingjun
However, warehouse style membership stores are not a panacea. In April this year, Carrefour closed two member stores in succession, Chengshan Road store and Zhongshan Park store in Shanghai, of which Zhongshan Park store opened in September last year. This somewhat makes its previous slogan of "renovating and upgrading 100 paid membership stores within 3 years" awkward. At the same time, the trend of consumption development in recent years has also put forward higher requirements for the investment promotion work of local governments. "We can't introduce any project as soon as it is hot, nor can we take fixed assets investment, annual sales, etc. as the only standard. We should take the local actual situation and consumer demand as the guide to go forward in the long run." Cai Yanfeng said.