How can warehouse clubs get out of the "scale trap"?

Editor's introduction: Nowadays, the warehousing membership model has begun to rise in China, it has a very low gross profit, high turnover and membership fees to obtain profits, and many warehousing clubs have also appeared in China. This article discusses the development form of warehousing member stores in China from three aspects: the scene subscription era, traps and the game of new and old mechanisms.

The warehouse-style club track is about to change.

In the past few years, under the impact of e-commerce and community group buying on physical retail, some veteran supermarket players have been stuck in the decline in performance and have begun to enter the warehouse member stores to seek new growth, Hualian, Carrefour, Jiajiayue is a typical example, and their first warehouse member stores have completed their opening last year.

At the same time, the new players Hema and Fudi are not to be outdone, the former has opened 7 stores intensively in 8 months, mainly concentrated in the Yangtze River Delta region; the latter's second store has just landed in Shunyi, Beijing.

Warehousing club originated in the United States, different from traditional retail, the core is to earn the difference in goods, playing the role of consumer counterparty, warehousing club positioning itself as the user's "trustee", positioning the high consumer group, from the traditional retail commodity price difference model to the membership service model, through the ultimate low gross profit, high turnover and membership fee income to earn profits.

As far as the current competitive landscape is concerned, the domestic warehousing member track has entered the "Three Kingdoms Killing Era": foreign players represented by Costco and Sam, and new forces represented by Hema.

These three have their own advantages in the ability side, but in terms of Sam's "withdrawal tide" that was broken out some time ago, the arrogance of overseas forces and the rise of the national tide have created room for domestic players to develop, and Hou Yi (CEO of Hema) has also publicly said, "The essence of retail is to open a retail industry that needs stores." ”

In other words, in the future, whoever can create a membership store that understands Chinese consumers better will win, which will test the player's localization and differentiated operation ability. To this end, in this article we will focus on:

• How to judge the value curve of a warehouse club?
• How can warehouse clubs avoid the Internet-style "scale trap"?
• Try to explore the possibility of a warehouse club.

First, the era of scene subscription

From the perspective of warehousing membership alone, there is an essential difference between domestic and foreign.

Most of the warehouse clubs abroad were born in the 1990s: Costco and Sam were founded in 1983, and BJ's Wholesale was founded in 1984. At that time, the United States was in a serious stage of stagflation, high unemployment and inflation coexisted, in this context, consumers are mostly price-sensitive, a typical example, Costco did not carry the label of middle class and petty bourgeoisie in the early stage of development.

In contrast, in China, to some extent, the evolution and iteration of warehouse member stores are mostly based on the new retail format, and the dual-track paid membership and free membership mechanism have gradually evolved to single-track members.

Since the emergence of the new retail concept in 2016, the industry is experiencing three stages of development:

The first stage is to cover a specific market as a new channel form, whether it is the "Hema Fresh" of the Alibaba system or the Yonghui "super species" of the JD series, all of which appear in the form of covering the new market segment.

The second stage is the stage of comprehensively improving retail efficiency, and soon after the "Millet Home" was opened, it achieved more than 200,000 ping effects, which is almost a height that the traditional retail industry cannot reach.

The third stage is to meet the needs of consumers in the whole scene of the business form, compared to the traditional retail, the need to experience a scene revolution.

Returning to the warehouse club, what is reflected behind this is that the consumer market of the supermarket is changing from the past "product-centric" to "consumption scene-centric", and the fundamental of the single-track membership is that it is no longer like the traditional supermarket to rely on the difference in price to obtain profits, but in a strictly selected way to screen higher quality products, shorten the consumer decision-making time, the difference is that the domestic warehousing member store has more "localization upgrade" color.

If you look at it on the surface, you may think that the warehousing club is a gimmick, but in fact, it is the core of meeting the needs of consumers for cost-effective and offline scene experience, more like a scene subscription, and the player's moat barrier includes but is not limited to "select SKUs", "cost management", "supplier resource mobilization", "private brand construction" and other dimensions.

This also explains why it was not until last year that domestic warehouse member stores began to go out of the circle:

On the one hand, the old-fashioned business model of the old supermarket can no longer meet the new needs of first- and second-tier people;

On the other hand, the overseas forces represented by Sam are not familiar with the domestic retail format, showing a certain degree of dissatisfaction.

Here we want to mention the box horse, in fact, the time is pushed back to three years ago, the box horse may not be able to make a membership store.

In the past five years, Hema has built a domestic and global supply chain from scratch, and various types of polishing based on three meals a day and store operation experience in its own goods (PB), which are the ballast stones of Hema Running Pass member warehousing stores, and Hema has also changed from the past "single" fresh store model to today's "multi-format coordinated development model".

As Clayton Christensen argues in The Innovator's Dilemma, "Behind the product mix is the value network, which determines what products and services a company must offer to solve customer problems, and as experience accumulates within a particular network, it is likely to form the capabilities, organization, and culture that meet the unique requirements of that value network." ”

Second, the temptation of the trap

The "boutique department store strategy" and the "hypermarket strategy" are two common retail business models in the past.

The former focuses on high gross profit and low turnover, while the latter is biased towards low gross profit and high turnover, both of which are competitive in the traditional retail era.

However, in the new era, the Internet and information technology have forced retail flows to begin to re-divide and coordinate, and the "differentiated operation" and "efficiency revolution" of warehousing and membership stores are about to erupt.

From the supply side point of view, the efficiency of warehousing clubs is determined by the operational level of retail streams composed of various retail activities, and retail flows can be divided into logistics, capital flow, information flow, business flow, order flow, payment flow and risk flow, etc., which are often completed by the division of labor and cooperation of retail channel members, which will be an extremely complex business system.

In this system, if you only think in the way of Internet thinking or the channel supply of traditional supermarkets, it is easy to fall into the trap of scale, that is, "Obviously doing a lot like Sam and Costco, why can't my membership growth go up?" ”

This misunderstanding principle is actually very simple, it mainly ignores the service essence of warehousing members, that is, to provide valuable consumption scenarios, and the embodiment of scene capabilities is by no means a simple reproduction of overseas targets, but to better understand the shopping preferences of regional consumers.

Costco, for example, entered the Taiwan market in 1997 with its first store in Kaohsiung City. However, due to different consumption habits, Costco's large-scale, membership-based consumption model was not favored by locals at first, and Kaohsiung Suffered losses for five consecutive years. Later, Costco actively made changes to cater to the needs of the local customer base, such as reducing salad acidity, reducing the calories of chicken sandwiches, etc. to cater to Taiwanese tastes, and the first store slowly turned a profit.

Coincidentally, the membership growth data of Hema X Member Store (new members increased by 120% from the previous month) also proved the importance of differentiated operations.

Taking Nanjing Yanziji Store as an example, the practice of Hema X Club is that in addition to SKU strict screening and private brand construction, it also joins hands with suppliers and supply chains on the commodity side to prepare for the spring vegetable season in March, because Nanjing people like to eat wild vegetables, similar to chrysanthemum brain, malantou, and goji berry head, which will also appear in the store.

Of course, those familiar with the procurement process and supply chain will know that this will be a great test of the flexible operation of the warehouse member store.

Third, the game of new and old mechanisms

"I defeated all my opponents, but I lost to the times." When Alibaba acquired Gaoxin Retail in 2018, RT-Mart founder Huang Mingduan said this when he resigned, and it is not difficult to imagine that in the warehousing member track, game and battle are inevitable.

China Merchants Securities once highlighted in the "Warehousing Club Series Report" that "the core of the warehousing club is to meet the needs of consumers for cost-effective products and offline scene experience, which is difficult to be replaced by e-commerce." Recently, many players have joined the warehouse club track intensively, referring to the overseas warehouse member store format and costco's development experience in Japan and Taiwan, the domestic warehouse club format is expected to enter a period of rapid development. ”

It's not hard to imagine that the golden age of warehousing member players has arrived.

For warehouse member players, choosing a clear strategy determines the future development direction of the enterprise, which is the starting point of retail logic. When we study the warehouse club, we are also inseparable from the discussion of retail logic (people, goods, fields), but it should be noted that players first need to put forward a clear strategy, followed by whether it has the corresponding ability to achieve the strategy, or how to make up for it in the later stage by developing its own capabilities.

In an interview, Hou Yi also admitted that "Hema has taken more detours in 2018 and 2019, one is to pay too much attention to localization and ignore differentiation and consumption upgrades, which is reflected in the previous focus on Internet thinking in the store, too much pursuit of balanced layout, more consideration of offline network coverage and the number of customers around the single store, consumers need consumption upgrades, rather than basic demand satisfaction." ”

At present, the future is a new era of retail game, the "new middle class" represented by the post-90s and Z generations has become the main force of the domestic consumer market, they are picky, have higher requirements for the quality of goods and services, and the creation and construction of personalized consumption scenarios, relying on burning money and capital can not be bought, and the focus of service output portfolio optimization will be how to pass the best products, in the best time and the best scenarios, to the most matching customers.

Author: Sang Mingqiang, public number: New Eyes

This article was originally published by @New Eye on Everyone is a Product Manager. Reproduction without permission is prohibited

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