The wave of traditional supermarket closures continues, while warehouse clubs are surging ahead. Yet, beneath the heat of the warehouse club track, rational observation is necessary.
Carrefour's Big Retreat
Traditional Supermarket Closure Wave Persists
Traditional supermarkets continue to face a wave of closures, intensifying over time.
Carrefour continues to close stores due to poor performance. Its first store in Shenzhen, and the second Carrefour in China, officially ceased operations on June 10, drawing media attention and concern. This long-standing store in Nantou, Nanshan District, had been with Shenzhen residents for 27 years, and nearby residents expressed regret.
One consumer said, "My earliest impression of Carrefour was a reputable foreign supermarket with many imported goods. Now, news of store closures is spreading nationwide, and with my shopping card, I don't know what to buy."
With stock shortages, store closures, and 500 million yuan in assets frozen, Carrefour's closure wave has persisted for years. After being acquired by Suning, Carrefour China has been unable to recover, failing to keep pace with retail transformation, and has had to close stores.
In fact, Carrefour is not alone in closing stores.
Carrefour's rival Walmart has also been closing hypermarkets in recent years. On May 16, Walmart's Guangzhou Taojin store, which opened in 2009, ceased operations, leaving only 7 stores in Guangzhou. According to media statistics, from 2016 to 2022, Walmart closed over 130 hypermarkets in mainland China.
China's supermarket giant China Resources Vanguard is also struggling and closing stores. On May 30, Vanguard's Changzhou Wujin store closed, and Guangzhou's Tianhebei store will close on June 30.
The impact of e-commerce, rising offline costs, and changing consumer habits have made traditional supermarket operations increasingly difficult, forcing closures.
Traditional supermarket closures do not mean supermarkets will disappear; they are being replaced by community stores and MINI stores. Some supermarkets are moving into shopping malls, large shopping centers, and community ground floors, especially imported and premium supermarkets in large shopping centers, which are favored by consumers.
From the perspective of New Product Strategy Financial Insights, the evolution of the supermarket ecosystem has moved from the 1.0 era of small shops and small supermarkets, to the 2.0 era of hypermarkets, and now into the 3.0 era of premium and new retail. The closure wave of traditional supermarkets and hypermarkets is an inevitable development of the times.
Sam's Club's Rapid Advance: Warehouse Clubs Are Surging
In stark contrast to the closure wave of traditional supermarkets, warehouse clubs are surging.
First, let's talk about the leading player, Walmart. In the Chinese market, Walmart is closing hypermarkets while aggressively opening Sam's Club stores.
Sam's Club is accelerating its layout in the Chinese market, with noticeably faster store expansion. Since June last year, it has opened stores in Chongqing, Nanning, Wuxi, Beijing, and other cities. Stores in Fuzhou Cangshan and Shenzhen Qianhai are currently recruiting and expected to open soon, with a Dongguan store under construction.
Currently, Sam's Club China has 43 stores open. Its fifth store in Shanghai, located in the Zhenru sub-center of Putuo District, has opened. Walmart plans to open 30 new Sam's Club stores in mainland China in the future.
Sam's Club has become a new growth engine for Walmart in China. According to Walmart's financial report, Walmart China's Q1 net sales were $5.3 billion, a year-on-year increase of 28.3%, mainly driven by Sam's Club expansion and online sales performance. Sam's Club's private brand Member's Mark also saw a 46% sales increase.
Sam's old rival Costco, the largest membership warehouse chain in the US, is also accelerating its expansion in China, with 15 stores currently open. Recently, Costco opened two stores in Shanghai Pudong and Ningbo, and a store in Shenzhen Longhua will open within the year. Costco plans to open four new stores in China this year and will complete an 8-story China headquarters by 2025.
New retail giant Hema has also launched its warehouse club brand, Hema X Membership Store, with the first store opening in Shanghai in October 2022. To date, Hema X has opened 9 stores.
Carrefour China is also opening warehouse clubs, RT-Mart has opened its first paid membership store, and established players like Metro, Fudi, and Yonghui are steadily expanding.
Warehouse clubs differ significantly from traditional supermarkets in consumption scenarios: larger stores, more categories, bulk packaging, and price advantages. Consumers typically visit every one to two months.
Warehouse clubs operate on a paid membership system, and membership fees have become a major revenue source. Sam's Club's membership in China surpassed 4 million as early as November 2021. Even before the Pudong store opened, over 80,000 membership cards had been issued, bringing Sam's Club over 1 billion yuan in annual membership fees.
Warehouse clubs have become a hot track, with major players accelerating their expansion, making the track increasingly heated.
Rational Thinking Needed Amid the Boom
From the perspective of New Product Strategy Financial Insights, although warehouse clubs are booming, not everyone can succeed; it's not easy.
Like traditional supermarkets, warehouse clubs have a significant brand effect. A warehouse club typically radiates to the surrounding regional market, forming a regional brand aggregation effect.
For example, in Shenzhen, Futian Sam's Club mainly serves Futian, Luohu, and areas of Nanshan near Futian, while Longhua Sam's Club mainly serves northern areas like Longhua and Guangming.
Behind the brand advantages and effects of warehouse clubs lies supply chain management capability, domestic and international procurement capability, and market responsiveness, which directly determine the overall competitiveness of a warehouse club's products.
In terms of brand effect, supply chain management, and responsiveness, leading players like Sam's Club, Costco, and Hema have clear advantages.
According to iiMedia Research, in 2022, among Chinese consumers surveyed who had visited warehouse club supermarkets, 42.4% chose Sam's Club, ranking first, followed by Hema X Membership Store.
However, from the perspective of New Product Strategy Financial Insights, several phenomena in the warehouse club track deserve attention.
The first phenomenon is significant homogenization in the warehouse club industry.
Major players are rapidly expanding, making the track increasingly crowded. There is almost no difference in model, products, or supply chain, and the industry has fallen into a homogenization quagmire, with the phenomenon worsening.
The second phenomenon is the "four不像" (neither fish nor fowl) situation, which is awkward.
Warehouse clubs differ from traditional stores in larger store size, more categories, bulk packaging, and clear price advantages. However, some stores appear to be warehouse clubs but are not, such as Yonghui's warehouse stores, which do not use a membership system.
In particular, some traditional supermarket brands have opened warehouse clubs, but some show a "four不像" with logic but no capability, few systems, and a lack of specialized talent. There are even discount warehouse stores.
New Product Strategy Financial Insights believes that in the long term, the warehouse club track will see more players, more stores, and more intense competition. Market space and capacity also need attention and consideration.
Warehouse clubs are not suitable for all markets; they are mainly in first-tier, new first-tier, and second-tier cities. Relatively speaking, market capacity is ultimately limited, and horizontal market space is limited.
Currently, Sam's Club has three stores in Shenzhen (Futian, Longhua, Longgang) and a Qianhai store in preparation. In terms of regional market coverage, these four stores already cover the most core areas of Shenzhen. At most, two or three more stores could be added before market saturation. Costco in Longhua will also open this year, intensifying competition.
In terms of vertical market space, the downward market for warehouse clubs is extremely limited. Counties below prefecture-level cities cannot support warehouse club operations.
Looking at industry prospects, the warehouse club track will continue to grow rapidly in the coming years, with major players continuing to surge, all wanting a share.
iiMedia Research predicts that the warehouse club industry's market size will approach 40 billion yuan by 2025.
Final Thoughts
In the future, the warehouse club track has broad prospects and attractive profit potential, but layout must be rational. It's not about quantity but quality, requiring refined, premium, and sustainable operations, rather than flocking in and surging blindly.
Before this year's May Day holiday, Carrefour quietly closed its first warehouse membership supermarket in mainland China, located on Chengshan Road in Shanghai. This store opened in October 2021 and operated for only 1 year and 6 months before closing.
The warehouse club track will become increasingly hot, competition will intensify, the industry will continue to upgrade, leading players will keep surging, new players will enter, and some will be eliminated.