On September 26 this year, Walmart's Sam's Club opened one of the world's largest stores in Shanghai, perfectly recreating the queues when Costco's first store entered China in 2019. Less than a month later, Carrefour also opened its first member store in the Chinese market.
However, on the first day of the store, carrefour member stores encountered the embarrassing situation of "some goods out of supply". In an interview, Carrefour revealed that this situation arose because competitors put pressure on suppliers, requiring suppliers to "choose one or the other" between Carrefour member stores and opponents.
The battle for consumers has begun.
When standing in the warehouse passage on the first floor of IKEA to take pictures gradually became obsolete, boys and girls dressed in fashion and makeup turned to the warehouse club represented by Sam's Club.
The girl wears a loose-fitting blazer and sunglasses, sometimes holding several huge bags of family potato chips, sometimes mentioning the net red roast chicken that is limited to one per person per day, and the companion holding the camera or mobile phone changes the angle and patiently looks for the most perfect composition.
The staff at Sam's Club had long been surprised by young people standing in the aisle fiddling with popular goods if no one was taking pictures, carrying professional photographic equipment and walking between shelves to record videos. Searching for "Sam" as a keyword on the Little Red Book, you can find more than 200,000 notes. In addition to the content of punching in and taking photos to this tour, most of the categories that are collected and done are more practical content such as shopping list sharing and snack evaluation.
The spacious and bright indoor space is quite similar to the IKEA pick-up area that was once the "internet celebrity photo background"
On the Little Red Book, some people will take photos and mark more than thirty goods they bought one by one, and write down their evaluation of each product in detail; there are also former clerks who share the small skills learned about the identification of letter marks on price tags learned in the previous work, "O is a product with high cost performance; special attention needs to be paid to C, as a clearance commodity, although it is close to the shelf life, the quality is still reliable."
There are also some notes, intimately shared with everyone if it is the first time to come to Sam's Club notes, including parking strategies, group spelling division, hot goods online booking, etc., in short, if it is the first time to know what is the most worth buying, "see where the most people go to go to the right place."
In fact, on social media and short video platforms, there are a lot of content and copywriting that can be seen at a glance as the marketing promotion of merchants; so in the face of young people who are crazy in the store and have little purchasing power, Sam's Club will probably only be secretly happy - some people spontaneously volunteer to take photos with store products to upload, but it is to promote the brand to become an Internet celebrity. The phenomenon that really gives businesses a headache but has no way to completely eliminate it is the phenomenon of pirated single-time cards that appear in China.
Taking Sam's Club as an example, the annual membership price in China is divided into two grades of 260 yuan and 680 yuan, and the model and pricing of the membership store were originally based on the unique middle-class family structure in the United States.
In the 1980s, when Sam founded, the most typical and spending middle-class families in the United States were like this: a large house with a storage room, a couple living in the suburbs of the city, two or more underage children, and a fixed purchase once a week. When the rate of food consumption on a family basis meets the large portion of goods at Sam's Club, the money for the annual membership card fee can quickly be "returned".
However, in China, the number of middle-class families who can afford the "visit the supermarket first to pay the entrance fee" model is not much; second, in the face of a box of more than 20 loaves of bread with a shelf life of three days, the repurchase frequency of most Chinese families is actually not so high.
Coupled with the fact that many people want to enter Sam just to take a group of Internet celebrity punch card photos, the "260 yuan membership card" is inevitably too expensive. In this way, from the APP to the registration process to the final checkout link, it is enough to appear as a fake "single card".
On shopping platforms such as Taobao and Idle Fish, as long as you search for "Sam's Single Card", you will find a single card ranging from 11 yuan to 13 yuan according to the strict inspection of the city where the store is located. For more than ten bucks, you can get a membership code that is no different from the genuine version, with a photo avatar of the customer, and download an app that is very similar to the Sam's Club app icon, making it easier to "fake the truth".
Such a "single card" allows customers to successfully pass the electronic membership card check at the entrance of sam's store for shopping, sometimes in the checkout process may be a little tricky, but there are also corresponding "warm tips" on the page that sells these "single cards": as long as you do not use the automatic checkout scan code, in the manual checkout channel will often be because of the number of people in a hurry and can successfully pass the customs clearance.
In fact, even if they are discovered by the clerk, they have no better way to deal with it, and in the end, they will not let the customers who use the "single card" pay for it. In order to cope with the repeated prohibition of "single card", Sam's Club is also constantly upgrading its own electronic membership card system, eliminating the previous static membership code, not allowing customers to only show screenshots, and upgrading to a dynamic code that will be updated every 60 seconds.
However, "the magic is one foot high, the road is one foot high", and the "single card" sellers on Taobao quickly discovered this change, and also synchronized the function of updating the dynamic code for 60 seconds.
The annual fee threshold of membership-based supermarkets has allowed them to successfully screen groups that can afford to continue to consume while losing many Chinese customers. By the end of 2020, Sam's Club had more than 3 million members in China.
The spacious, even huge shopping space, the wide variety of goods and the various discount activities held from time to time attract middle-class families in Chinese cities who are more generous, have certain requirements for quality, and want to feel that they are treated and valued.
A standard Sam's Club has a nine-meter-high floor and three-meter-wide aisles, and shopping in Sam's is like "walking into a palace" compared to an ordinary supermarket that maximizes indoor space and designs shelves to allow only one person to pass through in order to save costs.
The streamlined number of items allows Sam to firmly control the quality of the products in the store, and the amount of family decorations invisibly increases the unit price of the products purchased by customers. As a famous "thousand yuan store" that will spend at least one thousand yuan at a time, the entrance threshold for the annual membership fee is also filtered out in the first round to match the level of consumption in the store.
This membership fee makes the membership supermarket more responsible for quality control, and consumers can also establish trust in merchants because they have paid the "protection fee", and they do not have to bother to compare and identify between different brands.
In fact, some of the Internet celebrity explosive products in Sam's Club are not a strange category, and the unit price is not competitive with other supermarkets, but these beef rolls, mochi, Swiss rolls, roast chicken, etc. belonging to its own brand are very cost-effective compared with similar products in other supermarkets, and can only be bought by Sam. This also gives members a feeling that although they have spent hundreds of dollars to join the club, they can indeed get many benefits and benefits.
Interestingly, don't look at Sam's Club today, it has entered China as early as 1996, but has been unknown for more than 20 years. Metro also had a warehouse membership store that entered the Chinese market at the same time, but METRO cancelled its membership system in 2010 due to a serious decline in efficiency. Tesco, which entered China in 2007, lost the Chinese market in just seven years, selling 80% of its shares to its partner China Resources.
Metro and Tesco's failures are not hard to understand, and in China two decades ago, consumers were not used to shopping in large supermarkets, let alone warehouses that required membership cards to enter the supermarket. When METRO first entered China, only enterprises had the qualifications to apply for membership cards, and after four or five years, the restrictions on membership card processing were gradually opened, so that ordinary consumers also had the opportunity to enter METRO for consumption.
It is this short "wandering" that makes METRO lose the best opportunity to develop in China, and in a few years, Wal-Mart and Carrefour, which entered China at the same time as it, have taken advantage of the opportunity to open stores in major cities and occupy the already limited market.
On the other hand, METRO and Tesco did not focus on "high-end supermarket brands" at the beginning, but wanted to impact China's wholesale market and small commodity market. However, compared with the wholesale market rooted in second- and third-tier cities, METRO does not have a price advantage.
It was not until 2019 that the American warehouse supermarket brand Costco opened its first store in the mainland in Shanghai, which changed the situation of the warehouse member store in The domestic water and soil. In only two years since it landed in China, Costco has experienced extraordinary successful marketing events such as "explosive internet celebrity big bear" and "1499 yuan Feitian Moutai rush".
When Costco first opened in 2019, it was crowded
Even when the heat subsides and there are stores like Sam and Costco", Costco also uses network traffic and popularity to introduce a large number of localized products, cater to the preferences of Chinese more inclined to buy fresh food, and increase the proportion of Chinese domestic brands, so that the traffic of stores can remain at the level of crowds even on weekdays during the epidemic.
More importantly, the warehouse clubs represented by Sam and Costco have highly bound themselves to the "middle-class lifestyle" in recent years. Some people know that the blogger once calculated an account, and the annual consumption in the Sam's Club store exceeded 5,000 yuan, and this 260 yuan membership card was worth it.
If you apply for a membership of 680 yuan, you can also enjoy services such as oral care, and such a shopping experience is naturally impossible to go to other shopping malls and supermarkets. Gradually, when discussing the warehouse store model, "what to buy" became a less important matter.
Being able to go to a "thousand yuan store" from time to time to make elegant purchases, in addition to proving that you have a shop membership, in fact, at least means that you are willing to spend money on ingredients, have a car, and have ample food storage space at home. The "identity" of the regular customers of the "high-end warehouse member store" becomes a kind of code, so that people will quickly sketch the image of a typical middle-class family in their minds.
For the consumers of the warehouse club, it is not important how much money is saved each year, what is important is to spend 260 yuan to open a window into the middle class life, that is to say, to achieve self-anchoring of social classes with consumption.
What should the life you aspire to be like? Internet celebrities in the membership supermarket to follow the trend of punching cards also for the young people on the mobile phone end of the sample.
Ten years ago, the warehouse member stores that "crossed the ocean" to China have experienced a failure, so this year, why did Walmart and Carrefour start to make efforts in this field?
The reason is actually very simple, the hypermarkets represented by Walmart and Carrefour are experiencing an unprecedented crisis in China.
From 1996 to 2007, Walmart opened 100 stores in China, and in 2012 it turned into a wave of store closures, closing five stores that year, and rapid expansion turned into cautious contraction.
The decline has not been contained in time, 5 in 2012, 15 in 2013, 17 in 2014, 2016 to 2020, Wal-Mart closed 80 stores in 4 years, and 25 stores in one go this year. Two weeks ago, a Walmart email to suppliers showed that Walmart was moving its global supplier business unit from China to India.
A lot of data shows that the AMERICAN retailer giant is losing its own Chinese market.
Also facing the crisis is Walmart's longtime rival Carrefour, which in 2019 bought 80 percent of Carrefour's stake in China for $4.8 billion in cash, taking into account the foreign retail giant with more than 200 stores in 51 cities across the country.
The hypermarket model represented by Walmart and Carrefour was rejected by consumers from the day of the rise of online shopping. Wal-Mart, which "wins with more", has just entered China, and the single area of the shopping plaza is more than 10,000 square meters. However, no matter how big the store is, it is not comparable to the e-commerce platform, and it is an inevitable trend for a large number of affordable products to be sold on the main platform of e-commerce.
The rise of live streaming and community group buying has also hit hypermarkets, and when you can easily buy the same products at a lower price in the live broadcast room or on the group buying app, shopping in a large supermarket becomes an increasingly chicken thing.
Jumping out of the hypermarket model and opening a warehouse club represented by Sam and Costco has become an important way for hypermarkets to save themselves. Although most warehouse clubs are now only opening stores in first-tier and new first-tier cities, and sales are not worth mentioning compared with the parent company's hypermarkets, this new model has brought a glimmer of hope to the hypermarkets in the declining West Hills.
Unlike Wal-Mart and Carrefour, the core profit model of high-end warehousing clubs comes from the "renewal rate". Zhu Xiaojing, president and CEO of Walmart China, said in an interview that sam's essence is "trust": sam has forward-looking insight into consumer needs and can find the best products to satisfy members.
"Sam's core KPI is not sales, but the number of members and renewal rates, practicing the 'member first' commitment." The data also proves this: Costco's global renewal rate is 87%, the US and Canada is as high as 91%, and Sam China is above 80%.
To put it simply, Sam and Costco never need to crowd people and queue up in a long line, nor do they want to rely on "small profits and high sales" to achieve profitability, but hope to fix their core consumer groups through membership fees and precipitate stable and reliable consumption capabilities.
Roast chicken for $39 and Swiss rolls for $68 aren't expensive, but what Sam needs is to make them a regular spending expense for middle-class families.
So can the membership store represented by Sam's Club fundamentally save Wal-Mart and Carrefour?
In terms of the speed of store expansion, this conclusion seems to be quite reasonable. Sam, who entered China in 1996, has only opened 31 stores in 24 years, and 23 new stores are under construction and planning in the past two years, almost becoming the only format under Wal-Mart to maintain expansion.
But there is also a crisis in this, most of the products sold in warehouse member stores are large packages, but most Chinese families have only 2-3 people. A tiramisu cake for 8 people to share at Sam's price is only 89 yuan, which is indeed attractive enough, but if a family has only 3 people, then even if the price is dominant, consumers probably have to think twice before buying.
In order to compete for a limited middle-class consumer group, warehouse clubs have also worked hard enough to even "go down a crooked road", and the aforementioned "two-choice one" incident is a typical example.
Unlike high-end warehouse clubs, which have a deep historical foundation in the United States, whether Chinese consumers' enthusiasm for Sam's clubs is lasting or just out of freshness, we don't know. It's still too early to talk about their success and whether they can save the hypermarket model.
Resources:
CBN: Exclusive investigation | the member store war: Carrefour and Hema jointly denounced Sam for suspected "choosing one of the two", and Sam said that he paid attention to legal compliance
Tiger Sniff: Sam saves Walmart
Author: Bonsai & Echo
Edit: Echo
Image source Visual China
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