Behind the differences in the layout of Sam's Club in the north and south: Many places are competing for stores, so why is it difficult to cultivate a "local Sam's Club"? | Dayu Finance
2024-08-07
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In early August, new news came from three Sam's Club stores: on the 1st, Walmart's official recruitment account released a special job fair for Sam's new store in Jinjiang, Quanzhou, Fujian; on the 2nd, the Qingdao Sam's Club project officially started construction in the Happy Coastal City area of Shibei District; on the 5th, Guangzhou Baiyun Urban Development Investment Group Co., Ltd. and Sam's (Shanghai) Investment Co., Ltd. officially signed a contract, and Sam's Club officially settled in Baiyun District.
This means that Fujian Province and Guangzhou City are about to welcome their third Sam's Club respectively, and the Qingdao Sam's Club is the first store in Shandong, which has experienced many twists and turns behind its launch.
Why is there such a huge difference in the number of Sam's Clubs in the south and north? Why are cities such as Qingdao, Xi'an, and Jinan vying for Sam's Club? Why have Chinese supermarkets failed to cultivate a "local Sam's Club"?
Sam's Club is more common in the south than in the north
In terms of the number of stores that have been opened, there is a huge difference in the number of stores in southern and northern cities. Walmart (China) Investment Co., Ltd. has 41 Sam's Club stores in southern cities, while there are only 7 in the north, a difference of almost 6 times.
Guangdong and Jiangsu, two economically developed provinces, are markets that Sam's Club attaches great importance to. There are eight Sam's Clubs in Guangdong and Jiangsu provinces respectively, of which four are in Shenzhen and three in Suzhou.
There are 6 Sam's Club stores in Shanghai and 5 Sam's Club stores in Zhejiang Province, 3 of which are located in Hangzhou.
There are 3 Sam's Clubs in Hubei Province and Fujian Province respectively, and 2 Sam's Clubs in Hunan Province, Sichuan Province and Chongqing City respectively.
In addition, there is one Sam's Club in Jiangxi Province and Guangxi Zhuang Autonomous Region, located in Nanchang and Nanning respectively.
The above 41 Sam's Clubs are located in 11 southern provinces. In contrast, the number of Sam's Clubs in the north is significantly smaller. There are 4 Sam's Clubs in Beijing, 1 Sam's Club each in Shenyang and Dalian in Liaoning Province, and 1 Sam's Club in Tianjin.
According to public information, it is expected that next year the Shanghai Pudong Jinqiao store, Yangzhou Hanjiang store, Xi'an Economic Development Zone store and Yanta store, Suzhou Zhangjiagang store, Wuxi Huishan store, Shenzhen Bao'an store, Jiaxing Economic Development Zone store, Hefei Economic Development Zone store, Tianjin Hongqiao store, Guangzhou Lingnan V Valley store and Zhongshan store will open; in 2026, the Foshan Shunde store and Shandong Qingdao store will open; in 2027, the Beijing Tongzhou store will open.
Of the 15 new stores to be opened in the next few years, only 5 stores are located in northern cities, accounting for one-third. This means that in three years, the number of Sam's Clubs in the south will exceed 50, while the number of Sam's Clubs in the north will only reach 12, further widening the gap.
Why do 21 cities in the South have 41 Sam's Club stores, while only 4 cities in the North have Sam's Club stores?
As a member of the Fortune 500, Sam's Club has strict requirements for site selection. According to the official website of Walmart (China) Investment Co., Ltd., Sam's Club requires a business district radius of 7-10 kilometers, a business district population of more than 800,000, and an average annual household income of 200,000 yuan. This means that the number of customers and spending power are the primary factors that Walmart considers.
Recently, a reporter from Xin Huanghe Dayu Finance sent an interview outline to the email address of Walmart (China) Investment Co., Ltd., but has not received a reply yet.
"Walmart should not distinguish between southern cities or northern cities. What is more important is to consider from a business perspective, including market prospects and expected sales levels." Dong Yanling, director of the Institute of Regional Economics at Shandong University of Finance and Economics, analyzed that Sam's Club requires not only a sufficient number of high-income people, but also a level of dispersion within the business district that cannot be too high.
New Yellow River Dayu Financial Reporter sorted out the evaluations of different cities by Huang Jianing, Vice President of Real Estate Development of Walmart (China) in the past nine years. When evaluating cities and regions, Huang Jianing focused on factors such as location advantages, convenient transportation, market potential, consumption capacity and demand, business district quality, and business environment.
The membership fee of 260 yuan has selected a group of "precise" users for Sam's Club: these users are middle- and high-income groups with certain payment capabilities and pursuit of quality of life, and they have a clear understanding of Sam's Club's products.
In the view of Jiang Han, a senior researcher at Pangu Think Tank, the fact that there are far more Sam's Clubs in southern cities than in northern cities is probably closely related to the economic development levels of the two regions. The economy in the south, especially in coastal provinces, is relatively more developed, and residents have higher income levels and stronger spending power, which provides a broader market space for high-end retail brands such as Sam's.
"Consumption habits are also an important factor affecting the layout of Sam's Club." Jiang Han said that consumers in southern cities may be more inclined to pursue quality life and have a higher demand for imported goods, high-quality food, etc., which is consistent with the product positioning of Sam's Club. In addition, the population density and consumption potential of southern cities also provide a good market environment for Sam's business model.
Scramble Behind Sam
The opening of Sam's Club in Qingdao has excited many Shandong people. In fact, Sam's first contact with Shandong began in Jinan.
In August 2021, Huang Jianing, vice president of Walmart (China) Real Estate Development, and his delegation visited Lixia District, Jinan City. A month later, the Lixia District Investment Promotion Committee, Walmart (China) Investment Co., Ltd. and Yinfeng Group signed a strategic cooperation agreement. Three years later, the specific plan for the land where Sam's Club plans to open a store was announced, but there was no content about Sam's Club, which disappointed the citizens.
Not only Jinan, but many cities are striving to land Sam's Club stores. As early as June 2021, the senior director of Walmart (China) Affairs Department visited Xi'an and said, "Walmart plans to open 2-3 Sam's Club stores in Shaanxi and is currently selecting sites." It was not until three years later that the first Sam's Club in Northwest China was officially signed and construction was scheduled to start in June this year.
In addition, when Sam's Club will be located in Zhengzhou and its specific address have always attracted much attention. Jinshui District, Erqi District, Zhongyuan District and Zhengdong New District have all competed for it, and there are many different opinions on the location of the first store in Henan. In June this year, a public notice from Zhengdong New District once again attracted attention.
Provinces that already have Sam's Clubs are also actively seeking to open more stores. Recently, the Shantou Investment Promotion Bureau admitted in response to questions from netizens that the city does lack large chain supermarkets with high-end positioning such as Sam's Club. Shantou is also continuously striving for opportunities to introduce high-end supermarkets and has taken the initiative to visit Walmart Group to discuss relevant matters regarding Sam's Club entering Shantou.
Why are cities vying to open Sam's Club stores? Compared with other retail companies, Sam's Club stores have relatively excellent performance.
In late July, the China Chain Store & Franchise Association (CCFA) released the "2023 China Supermarket TOP100". Walmart (China)'s Sam's Club and Walmart achieved sales of 120.2 billion yuan in 2023, ranking first in the supermarket TOP100. This is also the only company among the top 10 supermarkets to achieve positive growth in retail sales. Walmart China has topped the list for three consecutive years.
Walmart China's net sales in the first quarter of fiscal year 2025 increased by 16.2% year-on-year. Sam's Club and e-commerce businesses performed strongly in the first quarter. Driven by sales growth, higher Sam's Club penetration rate and efficient operations, the overall operating expense rate in Q1 decreased and operating income increased.
Sam's Club has grown against the trend under the impact of e-commerce. Its unique "wide SPU, narrow SKU" strategy creates a high-quality lifestyle for its members through differentiated products, unique shopping experience and membership benefits. After the completion of Sam's Club, it will provide residents with a brand-new shopping experience, meet their needs for high-end and diversified consumption, and become a new landmark of the city and a new model for commercial development.
In addition, the establishment of Sam's Club can increase tax revenue and create employment opportunities, effectively enhance the commercial activity of the city, and promote the development of high-end trade in the regional economy. Sam's Club will also promote the development of the retail supply chain in the city where it is located, and provide strong support for the optimization and strengthening of the modern service industry and the improvement of the quality of urban functions.
"As a well-known brand and high-end retail brand, Sam's Club has greater initiative in choosing the cities it enters, which has led to a situation where various cities are scrambling to open Sam's Club," said Jiang Han.
Where is "Local Sam"?
Behind the scramble for Sam's Club, what is the difficulty for a city to cultivate Internet-famous supermarkets such as "Chinese Sam's Club" and "Local Fat Donglai"? Why can't Chinese-funded supermarkets have their own Costco and Sam's Club?
Among the top 100 supermarkets in China in 2023, there are 17 national chain supermarket brands, including Yonghui, RT-Mart, CR Vanguard, Hema Fresh, Wumart, Metro, Lianhua, Hualian, Jiajiayue, Shiban, CP Penghua, Jimailong, Buyute, Jiadele, Chengji Life, Renrenle, Guan Supermarket, etc. Among them, only Buyute, Jiadele and Chengji Life achieved positive sales growth in 2023. Jiadele and Chengji Life both belong to Harbin New Century Jiadele Trading Co., Ltd., and their sales in 2023 increased slightly by 0.5%; Heilongjiang Buyute Commercial Group Co., Ltd.'s sales increased by 18.3% year-on-year.
Buyote is known as the "Fat Donglai" of Northeast China. In 2023, its sales volume reached 5.39 billion yuan and it has 66 stores. By transforming its distribution system and reducing procurement costs, Buyote has become the largest supermarket chain brand in Northeast China. At present, Buyote has not opened stores outside the three northeastern provinces.
Among the top 100 supermarkets in China in 2023, 74 companies are regional supermarket chains. Hongqi Chain Store has deep roots in Sichuan; most of Qiandama's stores are located in southern cities, with nearly 2,000 stores in Guangzhou; Shandong has well-known supermarket brands in the province, such as Ginza, Liqun, Jialejia, Zhongbai, and Zhenhua Supermarket, but most of these brands are developed in their headquarters cities and expand slowly.
In Jiang Han's view, if a city wants to cultivate its own "Sam's Club", it will not be easy to accumulate. "Brand building is difficult, and the success of high-end retail brands cannot be separated from long-term brand building and market accumulation. This requires companies to continuously innovate and improve in product quality, service experience, marketing strategy and other aspects to form a unique brand image and market competitiveness." Jiang Han said that this process requires a lot of time, money and manpower investment, which is difficult for most companies.
Jiang Han took the Hongqi Supermarket as an example, "It is an absolute giant in the local area, far surpassing other supermarket brands, but it hardly goes beyond Sichuan." He believes that regional brands have their own capacity boundaries, which is not to say that they are bad. After all, different regions are too different, and consumption styles vary greatly. Many brands that blindly try to go nationwide have encountered problems.
Dong Yanling also observed that many regional chain supermarkets have made efforts locally or in the province, but their influence across the country is not enough. "Long-term brand building is needed. Can the quality assurance capabilities, organization of supply, and service standardization be suitable for consumers across the country? This all requires a long period of testing and tempering." Dong Yanling said that as time goes by, there will definitely be excellent Shandong regional chain supermarket brands deployed across the country.
