Author: Lin Feng, editor: Zhao Xiaonan, from the title figure: Vision China

Costco settled its South China headquarters on Xinqu Avenue, Longhua District, Shenzhen, only 4.2 kilometers away from Sam’s Member Longhua Store. The latter is the only competitor of the former in China.

Since the opening of its first store in China in August 2019 in Shanghai, Costco has announced 5 new stores. Sam’s Club has also significantly accelerated its store layout this year, and it is expected to open 5 new stores this year.

The expansion of these two US membership-based super-brands in China is in full swing, while local companies are almost blank in this field.

Membership-based supermarkets work in China

In 1996, Wal-Mart’s Sam’s Club landed in Shenzhen, and the membership-based retail model officially entered the Chinese market. Customers need to purchase a membership card before they can enter the store for consumption. Since then, membership-based super brands such as Metro, Pricemart, and Wankelong have emerged one after another.

The membership-based business super model has been used in European and American countries for more than 10 years, mainly for middle-class families. But this model was not suitable for China at that time. In 1996, China’s per capita GDP was only 709 U.S. dollars, and the level of national consumption was low. Membership-based super-brands struggled in China.

In 2003, Wankelong changed its name to “Yichu Lianhua”, which is now “Cp Lotus”, and transformed into a hypermarket. In 2005, Pricemart withdrew from the Chinese market; in 2010, Metro finally gave up its membership system. The company’s Chinese business was sold to Beijing Wumart at the beginning of this year.

But not without success. Judging from the achievements of Sam’s Club and Costco, the membership-based business super model has been perfectly integrated into the Chinese market today and has achieved good results.

Currently, the number of members of Sam’s Club in China exceeds 3 million, and 28 stores have been opened. The Futian store in Shenzhen has been the sales champion of more than 800 Sam’s stores worldwide for 12 consecutive years. On the other hand, after Costco opened its Shanghai store, the number of store members exceeded 20 in only 2 months.Wan, this broke Costco’s 35-year record.

On the other hand, the number of middle-class families in China has maintained steady growth, which has promoted the development of “high-quality and low-priced” membership-based supermarkets to a certain extent. According to the “2019 Hurun Wealth Report”, the “middle class family” standard is to have assets of more than 3 million yuan. As of August 2018, the number of middle-class families in Mainland China has reached 33.2 million, of which more than 10 million are new middle-class families.

Although the membership-based hypermarket model has been verified in China, there are few Chinese companies in this field.

In fact, a small number of Chinese players have entered the membership-based super market before, but almost all of them ended up in a short period of time. In August 2015, Wumart’s Shangjia member store opened in Beijing. In just one year, Shangjia member store was transformed into a hypermarket of imported goods. In November 2015, Yonghui Supermarket opened its first member store in Shanghai. The store occupies an area of ​​only 200 square meters. Its scale is incomparable to other warehouse-style membership-based supermarkets. Soon after, this new format will be transformed into a “community fresh vegetable market” “.

For a long time, many local supermarkets in China have tried to introduce a paid membership card model, but this is just to classify supermarket customers into “members” and “non-members”, not a membership system in the true sense. Supermarket model.

In 2017, Good Neighbors Club launched a paid membership system of 240 yuan per year. Customers can choose whether to pay to become a member or not to enjoy corresponding benefits and rights. In 2018, Hema launched the “Hema X Member” with an annual fee of 188 yuan. Customers can also choose whether to pay to become a member to enjoy member exclusive prices, recharge cash back and other benefits. The paid membership system of Hema has been testing the water in stores nationwide for more than two years. It was only recently that Hema revealed that it will establish an X member store in Shanghai in the future, and customers can only enter the store to consume if they pay to become a member.

Why does China have no local membership-based super-brands

A question worthy of discussion is why Chinese companies lack the upsurge of membership-based supermarkets.

“For so many years, it has been relatively easy for Chinese retailers to make money. When making quick money is easy, few people are willing to make slow money. Will be determined to make slow money.” Retail industry expert Hu Chuncai said to the hinterland of the Great Bay. The membership-based supermarkets are precisely to make slow money.

For a long time, the Chinese market environment has been suitable for traditionalWith the development of stores, it is difficult for local membership-based super-brands to flex their muscles.

From the perspective of consumers, most households in China consume food and clothing. They have high price sensitivity and low brand loyalty. They do not have high requirements for product quality, which makes it difficult for them to accept members. Manufacturers super follow the retail model of paying for members first and then consuming goods.

From the perspective of suppliers, Chinese manufacturers have been mixed for a long time, and the quality of their products is uneven. Therefore, even today, traditional hypermarkets still squeeze suppliers to quickly reduce costs and attract customers through “low prices.”

On the other hand, when the membership system was born in the United States, consumers began to shop rationally. While pursuing cost-effectiveness, they also paid more attention to product quality. This placed higher requirements on manufacturers, suppliers, and retailers. Membership The Supermarket was born.

Membership fee is the main source of revenue for membership-based companies, and the core advantage of attracting customers to become paying members is to provide “high-quality and low-price” products. Behind this, it reflects the membership Manufacturer’s strong supply chain capabilities.

First of all, membership-based manufacturers have professional buyer capabilities and can select products that are more cost-effective.

Take Costco as an example. On the one hand, the store has long-term cooperation with mid- to high-end brands, such as Rolex, Hermes, Samsonite, etc., to ensure product quality. On the other hand, the SKU of the store is only one-tenth of that of the traditional store. One or two large-package products are on the shelves of the same brand and sold in the form of mass sales. Through strict SKU control and large-volume procurement methods, Costco has increased its bargaining space, and members can truly enjoy the “member exclusive value” and become long-term renewal users.

When Costco opened its first domestic store, the 53-degree Feitian Moutai with a market price of more than 3,000 yuan was priced at only 1,498 yuan. The direct consequence of “high-quality and low-price” products is that Costco stores are blocked by Chinese consumers.

The professional sourcing capabilities of membership-based supermarkets have not only been recognized by consumers, but also have given them a stronger voice when facing suppliers.

There is a product quality assurance agreement between Costco and the supplier. Once the supplier’s product has a problem, Costco will not continue to cooperate for at least 3 years. In addition, once the price provided by the supplier in other channels is lower than Costco, Costco will terminate the cooperation forever.

In addition to external brands, Sam’s Club and Costco have established their own brands “Member’s Mark” and “Kirkland Signature” respectively, which require time and money to develop and produce products.

In fact, it is far more difficult than imagined to build a membership-based superstore.

In Hu Chuncai’s view, Membership Supermarkets require companies to work hard for a long time. “Chinese companies can also become membership Supermarkets, but it will take at least 5 to 10 years to do well.”

Take Sam’s Club as an example, it usually takes 3 to 7 years to build a store. After entering Shenzhen, China and opening its first store in 1996, Sam’s Club has been in a long process of accumulation and adaptation for 16 years, and only 6 stores have been opened.

Compared with a family of three in China, there are more middle-class European and American families, and they are more accustomed to driving to the supermarket every week to make big purchases. Therefore, Membership manufacturers in the United States will sell large-package products in the form of mass sales to reduce the price of their products.

In order to meet members’ one-stop shopping needs for “clothing, food, housing, transportation”, membership-based manufacturers’ ultra-stores occupy a relatively large area and use storage shelves. For example, Sam’s Club generally covers an area of ​​about 20,000 square meters, with a floor height of 9 meters, and provides customers with about 1,000 parking spaces.

Most middle-class families in China live in first- and second-tier cities, and they shop more frequently each week. Therefore, membership-based supermarkets are bound to be built around middle-class families. In first- and second-tier cities, rent costs alone are a lot of money, including labor costs, marketing costs, logistics costs, etc.

Secondly, Chinese consumers’ shopping channels are also more scattered, downstairs convenience stores, mom-and-pop stores, small supermarkets near the community, traditional hypermarkets, etc. can all be their places to visit, they are loyal to the brand The degree is lower, and only when brands provide real value-for-money products like membership-based supermarkets, they will continue to consume.

The most important reason why Chinese companies do not have membership-based manufacturers is that they currently do not have global sourcing capabilities and professional brand capabilities. The goods sold on shelves are highly dependent on the supply of manufacturers, and there is no absolute initiative in front of suppliers. Right, it is impossible to truly provide consumers with genuine “high-quality and low-cost” products.

In 2015, China Economic Net reported that on the day when Wumart’s Shangjia member store opened, eight or nine suppliers announced the withdrawal of goods, and these suppliers also provided Sam’s Club forIn response, “A number of suppliers reported to Wumart’s purchases. Wal-Mart’s Sam’s Club has made an appointment with them and asked them to withdraw the products from Wumart’s Shangjia member stores, otherwise they will stop ordering.”

From this point of view, to build a membership-based supermarket is more important than the craftsmanship of “slow work and meticulous work”. Chinese companies do not lack professional skills, but need the determination to “make slow money”.