In early August, Hema quietly launched the "Moving Mountain Price" promotion in Shanghai, without much publicity, but it was popular because of a durian mille-feuille cake. The reason for the explosion is not how delicious the cake is, but the "price war" with Sam's Club is more interesting.
The "price war" that lasted for more than half a month began to spread from Shanghai to the national market this week, and the international retail giants and the new generation of domestic retailers came to a "head-to-head" showdown. From price to supply chain, Sam and Hema are fighting for membership behind the low price of Internet celebrity cake. Experts believe that the follow-up to this "price war" may open a new model of Chinese-style member supermarkets.
"Moving mountains" and "tug-of-war"
As early as a few years ago, Sam's 1kg durian mille-feuille cake has become a "net celebrity item" on Xiaohongshu, priced at 128 yuan all year round, until this month, Hema X member store suddenly reduced the price of the same specification cake to 99 yuan, Sam's durian mille-feuille on this basis reduced the price by 0.1 yuan to 98.9 yuan. Immediately afterwards, Hema dropped another 10 yuan, followed by Sam to 88 yuan..."You are 1 yuan cheaper, I will reduce 1 Mao", the price war went back and forth for several times, and finally, the price of 1 kg durian mille-feuille cake stopped at 85 yuan in Sam's, and the price of Hema X member store was 79 yuan.
Perhaps it is the "first victory" of durian mille-feuille, Hema has expanded the scope of "moving mountain prices" to more baking and cooked food fields, Swiss rolls, roast chicken, mochi and other Sam's Internet celebrity goods, can be found in Hema at low prices of the same model.
When Sam and Hema were "fighting" and consumers were "weeping", Meituan Grocery also suddenly joined the battle and launched the "tug-of-war price", a 400-gram durian mille-feuille direct half-price promotion, rubbing the heat of the "price war". Similar to Hema and Sam's, Meituan's "tug-of-war" products belong to its own brand, from its "Elephant Chef" brand, and the category is also mainly fresh.
"Freshippo's 'Moving Mountain Price' wants to remove Sam? Meituan's 'tug-of-war' price wants to pull out Hema? Many netizens did not forget to ridicule while "weeding wool": the real business war turned out to be so "simple".
This "price war" is hot on the Internet, what is the actual promotion effect? The reporter visited the Hema X member store and Sam's Club store located in Putuo Zhenru, and there was no crazy rush to buy at the scene, but in front of the counter of Internet celebrity goods such as durian mille-feuille and whole roast chicken, there were obviously more consumers who stopped to buy, and the supermarket also marked that each person was limited to 2 copies. Benefiting from the extremely high degree of topicality, the durian mille-feuille counter not only attracted some citizens to check in and take photos, but even attracted some anchors of "Pinsingle Purchase" to come to live broadcast.
Data obtained by the reporter from Hema shows that in the past month, the sales of durian mille-feuille cake increased by 11 times month-on-month, and also drove the sales of other products. Since the beginning of August, Shanghai residents have bought the largest number of antibiotic eggs, Hema daily fresh milk, fresh meat mooncakes, Kirin cream watermelon and Peruvian large blueberries, and from the perspective of sales growth, Häagen-Dazs chocolate ice cream, Hema mixed nuts, Swiss rolls and other goods have also achieved more than 6 times growth.
Starting this week, taking advantage of the "east wind" of durian mille-feuille, Freshippo, which has earned enough attention and sales, has promoted the "moving mountain price" to 15 cities across the country such as Guangzhou, Hangzhou, Shenzhen and Nanjing, and consumers can also get a free durian mille-feuille cake when they spend 499 yuan in stores.
In fact, this is not the first "business war" between Hema and Sam, as early as 2019, before the opening of the Hema X member store, Hema and Sam also caused a "live frozen dispute" on the seafood issue. The "one of the two" disputes among suppliers in 2021 has pushed the dispute between Sam's, Hema and Carrefour's member stores to the center of public opinion. Since then, domestic membership store competition has gradually moved towards the red sea.
The "ceiling" of the membership store
The "business war" that lasted for four or five years finally pointed the finger at the price, but the low price is not the end of the Sam's Hema dispute, and attracting and grabbing customers is the purpose of "moving mountains".
As early as 1996, the first Sam's Club store opened in Shenzhen, and it was not until Costco's first mainland store opened in Shanghai in 2019 that the membership supermarket ushered in the highlight of "full customer flow". After more than 20 years of development, domestic membership stores have formed three main forms: the first type is represented by Sam's and Costco, focusing on offline physical warehouse stores, mainly through membership fees to make profits; The second category is new retailers represented by Freshippo, which have the advantages of online and offline dual-channel operation by virtue of digitalization and multi-format integration; The third category is membership-based e-commerce represented by JD Plus members, with no physical stores.
At present, Sam still holds the top position in domestic membership-based supermarkets (except membership-based e-commerce). According to data from Sam's parent company Wal-Mart, the number of paid members in China has been announced to exceed 4 million in November last year, and as of June this year, Sam's has more than 40 offline stores across the country, and still maintains a fast store opening speed, following the opening of 6 new stores last year, it plans to open 4 more this year. In contrast, Hema X member stores have only 9 stores nationwide and nearly 3 million paid members. The number of Costco stores is even lower, and on August 26, it will welcome its fifth store in the country.
According to data from the third-party platform Yuehu iAPP, in June this year, the user overlap rate between Sam and Hema (including Hema Xiansheng, X member stores and other formats) was as high as 43.1%, and Sam's penetration rate of the whole network was about 2% lower than that of Hema and about 13 million fewer monthly active users than Hema .
Comparing the two sets of data, it is not difficult to find that the number of Sam's stores and members far exceeds that of Hema X member stores, but the user stickiness is not as good as that of Hema X, and more importantly, the user groups of the two are highly overlapping, equivalent to more than 40% of Sam's paid members are also Hema users. As the head of Freshippo, Hou Yi has long predicted this: Hema X member store and Sam's and Costco face the same customer group - urban middle-class and above consumer groups, "These people either buy in Hema or buy in Sam, which is our challenge today." ”
When interviewing a number of consumers, the reporter found that although the development momentum of domestic membership supermarkets is strong, it is also accompanied by the loss of a certain number of members. Mr. Gu, who lives in Songjiang, once purchased two membership cards, Costco and Sam's, but finally gave up Sam's membership due to the limited need to balance both purchases during the one-year validity period. Mr. Feng, who lives in Putuo, had a bad shopping experience at the Hema X member store and turned to Sam's Club not far away.
In addition, the downward trend of the global economy has also cast a shadow on the retail industry, and membership-based supermarkets whose unit prices far exceed those of ordinary supermarkets are the first to feel the chill. Taking Costco as an example, total revenue in the fiscal third quarter was $53.648 billion, up 1.9% from the same period last year, but missed market expectations of $54.66 billion, and net income attributable to the company was $1.302 billion, down 3.8% from the same period last year.
Whether it is revenue or the number of members, the "ceiling" of membership-based supermarkets is a "sword of Damocles" hanging over the heads of Hema and Sam.
Benign "price war"
"This 'price war' is a little different, the previous price was the 'distribution channel', the purchase price is very transparent, and the price war often falls into the vicious competition of 'you die and I live'." Lao Shuling, director of the e-commerce research center of Shanghai University of Finance and Economics, said that the main focus of this price war is self-operated products, such as durian mille-feuille cake is Sam's and Hema bakery products, with independent pricing power, can control costs well, can force merchants to improve production efficiency, "This price war did not reduce the quality of goods, nor did the original price directly cut the malicious price reduction." ”
Under the balance of low prices and profits, the importance of supply chains has become more and more prominent. Hou Yi has calculated an account: there is a 5-10 times price difference between domestic retail prices and production costs, mainly spent on sales channels, logistics costs, marketing and many other factors, if the price difference can be narrowed by optimizing the supply chain, retailers can not only ensure profits but also compress costs to benefit consumers.
Taking the price of roses in Qixi as an example, except for the slight increase of individual varieties of roses affected by the place of origin, the overall price of flowers sold in Qixi Hema this year is lower than last year, which is basically the same as the weekday price, and the "moving mountain price" roses in Shanghai are even only 19.9 / bunch, far lower than the high price of 100 yuan in the past. Qixi dares to sell affordable roses, from more than 40 flower direct procurement bases across the country, through order cooperation, on the one hand, to reduce costs by disintermediation, on the other hand, from the source to the store of the whole link, to improve the quality control of goods.
Sam is the "master" of the supply chain, relying on a perfect membership system, successfully operating its own brand Member's Mark, and then relying on Wal-Mart's perennial suppliers and foundries, and finally retaining millions of paying users with cheap enough own goods.
Continue to optimize the supply chain, appropriately reduce prices and profits, in exchange for the brand loyalty of members, and eventually expand their own member pool, in turn strengthen their own supply chain... According to Lao Lingling's observation, this "price war" between Hema and Sam is a controllable benign competition, especially in Shanghai, the "new retail test field", and the competition model of the two membership manufacturers exceeding the benchmark also has strong guiding significance for the promotion and replication of the national market.
In addition to being cheap enough, "no one has me" Internet celebrity items are also an important factor in testing the supply chain. In Hou Yi's view, consumers will not buy all products on one retail platform, there is no one-stop shopping, so there must be explosive products that impress consumers, discount promotion is not simply low price, discount is "differentiated commodity competition, vertical supply chain, ultimate operating costs".
For example, at the beginning of Sam's launch of durian mille-feuille cake, this cake was not common in the market, so it attracted many citizens to snap up and became "Sam's must-buy Top 10" in the mouths of netizens. From the initial benchmarking of Sam and Costco, Hema X member stores copied their own products, and now they have successively launched innovative products such as custard flowing eight treasure rice and pickled tuk fresh green ballage, which have also been recognized by the market.
The "latecomers" in the supply chain are now catching up, making the "predecessors" feel pressure. A Reuters report quoted Walmart China CEO Zhu Xiaojing as saying that Freshippo has "outstanding advantages in the food supply chain" and has become Sam's Club the only competitor in China.
The Chinese model of membership stores
In the process of observing the growth of membership-based retail in China, Lao Shuiling has his own views: "Since membership stores entered China as imported products, the domestic retail industry may wish to redefine the 'Chinese-style membership store supermarket model' through Chinese business practices after learning and exploring for several years." ”
Twenty or thirty years ago, Walmart's CPFR (Collaborative Supply Chain Inventory Management) was embraced by major business schools, a system that allowed retailers to help manufacturers manage inventory, and even the sales data of a pair of jeans could be transmitted to the manufacturer in a timely manner, which could reduce inventory overstock and be more responsive to the market. Today, the retail supply chain has undergone earth-shaking changes, the digital management of the domestic retail industry is completely comparable to the CPFR, and the supply chain has been traced back from the tertiary industry to the secondary industry and even the primary industry, combining the consumer Internet and the industrial Internet, this road is even further than Sam and others, so it is comparable to the international retail giants in terms of fresh food.
In recent years, retail giants including Sam's have also launched an "offline + online" service model, which is an innovation based on China's Internet development, which also reflects that the development conditions and foundation of China's retail have been at the forefront of the world.
In addition, at the beginning of the birth of warehouse-type membership stores, middle-class American families drove to the suburbs on weekends to purchase goods for a week, so they needed large-packaged, mass-sold goods to seek cheaper prices, while most families in China did not have this condition, large-packaged goods and long-distance shopping did not meet the needs of domestic consumers, and many online single-order purchasing was extremely popular, reflecting the alternative tolerance of the Chinese market for membership. "In China, large packaging can be appropriately reduced, and the location of stores is closer to the urban area." Lo believes that the significance of Chinese membership stores may lie in the stratification and screening of consumers, and merchants can use more accurate consumer group portraits to launch more suitable products, rather than blindly seeking big and low prices. Taking Hema as an example, the best quality of the goods purchased centrally is supplied to X member stores, the next best is given to Hema fresh food stores, and the rest is given to Hema Neighborhood and Hema Outlet to meet the consumption needs of different groups of people.
"In terms of fresh food, domestic retailers such as Hema are very competitive, but they still face challenges in other areas." Lao Shuling told reporters that member stores usually have 3,000-4,000 SKUs (minimum stock units), fresh food is only a small part, and home furnishing and other common categories, Sam and Costco still have great advantages. She also recalled a past story: on the day of the opening of the first store of the Hema X member store, Hou Yi repeatedly told the clerk to go to Costco to "study hard" when he was in the home section when he was touring the store, and now three years later, Hema is still facing development shortcomings in terms of more profitable home furnishing.
At the same time, the construction of a global supply chain is also an unavoidable problem for Chinese member stores. Both Sam and Costco have established a global procurement and sales system, so that the procurement of goods has sufficient competitiveness, and the price of goods has the ultimate cost-effective ability. In response to the "price war" with Sam, Hema also showed his ambition: "We have been working hard, constantly innovating and changing, and humbly learning from our international retail predecessors. Maybe we are still young now, but there will be opportunities to catch up in the future, and Chinese retail will eventually come out of a business model with Chinese characteristics and international advanced retail experience. ”
Column editor-in-chief: Li Ye Title image source: Tuworm Image editor: Xu Jiamin
Source: Author: Zha Rui