---
title: "Chief Procurement Officer Reveals: How Does Sam's Club Keep Prices Low?"
description: "In the past year, both Pinduoduo and Sam's Club have thrived, becoming models for their industries. Despite vastly different customer bases, the shared emphasis on value for money has driven their success. Sam's Club's strong growth and expansion offer new insights for the retail sector, while its chief procurement officer reveals strategies such as long-term planning, omnichannel integration, and direct brand partnerships to reduce costs and lower prices."
author: "孙静"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-02-04"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/chief-procurement-officer-reveals-how-does-sam-s-club-keep-prices-low-d7dbfe3a/"
markdown: "https://xinjignxiao.com/en/articles/chief-procurement-officer-reveals-how-does-sam-s-club-keep-prices-low-d7dbfe3a.md"
original_source: "https://mp.weixin.qq.com/s/qSZyvPpZyXTxARBLdkTDSg"
translation: "https://xinjignxiao.com/zh/articles/%E9%A6%96%E5%B8%AD%E9%87%87%E8%B4%AD%E5%AE%98%E6%8F%AD%E7%A7%98-%E5%B1%B1%E5%A7%86%E6%98%AF%E6%80%8E%E4%B9%88%E6%8A%8A%E4%BB%B7%E6%A0%BC%E6%89%93%E4%B8%8B%E6%9D%A5%E7%9A%84-d7dbfe3a.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/chief-procurement-officer-reveals-how-does-sam-s-club-keep-prices-low-d7dbfe3a/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Chief Procurement Officer Reveals: How Does Sam's Club Keep Prices Low?

> In the past year, both Pinduoduo and Sam's Club have thrived, becoming models for their industries. Despite vastly different customer bases, the shared emphasis on value for money has driven their success. Sam's Club's strong growth and expansion offer new insights for the retail sector, while its chief procurement officer reveals strategies such as long-term planning, omnichannel integration, and direct brand partnerships to reduce costs and lower prices.

This era belongs to Pinduoduo, and also to Sam's Club.
In the past year, both companies have become what their struggling peers aspire to be, leading everyone to learn from Pinduoduo and aspire to be like Sam's Club.
Despite the vast difference in customer bases, akin to the science fiction novel "Beijing Folding," the deep-rooted appeal of "value for money" and the resulting era dividends are similar—Pinduoduo's explosive latest financial report needs no elaboration, while Sam's Club's robust growth and accelerated expansion offer new insights for the anxious retail industry.
Of course, it also makes peers more anxious. For instance, Hema launched a high-profile "Move Mountain Price" campaign and subsequently decisively announced a comprehensive discount strategy. Hema CEO Hou Yi admitted that "Move Mountain Price" was aimed at competing with Sam's Club for middle-class attention.
With only 47 stores in 25 cities, Sam's Club has attracted over 5 million middle-class members. Based on its 2022 revenue of approximately 66 billion yuan and Walmart China's over 20% sales growth in the first three quarters, **the author estimates that Sam's Club's 2023 revenue will be at least 80 billion yuan.**
Walmart China's Q3 FY2024 net sales growth indicators
According to Walmart China's plans, Sam's Club is accelerating store openings, with an expected 6-7 new stores annually. Meanwhile, through online models such as one-hour express delivery, next-day citywide delivery, and nationwide delivery, Sam's Club's "business flywheel" is spinning faster.
Domestic retail peers, feeling the pressure, are embracing discounting, such as Hema, Yonghui, and some regional supermarkets.
Despite different formats and operating models, the "soul" of discounting is the same: improving supply chain efficiency through scale and high turnover, ultimately achieving low prices.
This underlying logic is basic common sense in retail, not mysterious; the challenge lies in implementation. Since everyone wants to learn from Sam's Club, how exactly does it lower prices? Is it replicable for domestic retailers?
In a recent interview, Zhang Qing, Chief Procurement Officer of Sam's Club China, partially revealed the secrets.
**What is long-term business planning?**
"We don't tend to use promotions as a primary means; it's more of a long-term reward. Once we adjust prices, it's a long-term reduction," Zhang Qing revealed. Over the past 12 months, Sam's Club invested nearly 1 billion yuan in repricing, achieving long-term price reductions on dozens of items frequently purchased by members.
She attributes this to long-term cost efficiency.
On "saving money," Sam's Club, with 27 years in China, certainly has authority.
**First, long-term business planning:** Sam's Club's product planning cycle is 12-18 months, some even longer, such as organic products requiring three years of soil purification in advance. In the supply chain, it establishes long-term partnerships with source manufacturers with basic raw materials. This long-term cooperation allows Sam's Club to lock in raw material prices at troughs, reducing the impact of price fluctuations on product prices.
Currently, direct cooperation with source manufacturers and vertical supply chain integration have become one of the main efforts for domestic retailers to reduce costs. Among domestic supermarkets, Yonghui was the earliest and most thorough, Hema has a foundation in fresh produce, and is now focusing on bakery.
However, the author believes the most valuable lesson is not the model itself, but the concept of "long-term planning" and the ability for long-termism. Retail is not like the internet—where an idea today can be a product tomorrow. Retail is hard to achieve overnight; behind products is slow, meticulous work. The current consumer trend appears to be a price war, but the core is "product power."
**Second, omnichannel to amplify scale benefits:** In 2016, it joined JD.com; in 2018, it piloted front warehouses, initially with only dozens of orders per day. Since then, through its own e-commerce platform's one-hour express delivery (front warehouse), next-day citywide delivery, and nationwide delivery, Sam's Club has snowballed to cover more customer groups and continuously increased repurchase frequency.
On January 5 this year, Sam's Club announced a limited-time 299 yuan free shipping for nationwide delivery, covering most regions.
Omnichannel has significantly contributed to Sam's Club's performance. In the Q3 FY2024 earnings call in November 2023, Walmart executives revealed that Walmart China's physical stores and digital business account for about 1:1. Some industry insiders estimate that Sam's Club's online business may exceed 50%.
High online delivery costs have plagued many fresh food e-commerce warehouses, and even Hema couldn't withstand the loss pressure, publicly urging members to shop offline. But Sam's Club, with high average order values, firmly controls instant delivery.
**A source close to Sam's Club told "NoNoise" that Sam's Club's e-commerce business is currently profitable.**
**The third focus is direct cooperation with international brands to reduce intermediate links.** This allows Sam's Club to return the saved costs to members.
Some domestic retailers have also realized the urgency of de-KA (key account) strategies. But the prerequisite is sufficient scale for direct communication with brands. Besides Hema's difficult transformation, some regional supermarkets like Biyoute are currently responding by "sharing warehouses"—when retail enterprises lack market scale to cooperate directly with manufacturers, they jointly build warehouses.
According to data shared by Biyoute Chairman Meng Fanzhong at the 2023 China Retail Leadership Summit, goods from factory to shared warehouse and then to retailers only adds 3 percentage points in costs. Removing the prefecture and county-level agent links can save 17 percentage points.
**How to reduce costs in the supply chain?**
The outbreak of domestic retail discounting aligns with consumers' increasing emphasis on value for money on one end, and relies on the reality of oversupply on the supply side.
A Hangzhou prepared food supplier previously told the author, **considering equipment depreciation, loan interest, and other costs, factories generally need over 20% gross margin to ensure operations.** But 2023 was too competitive with product surplus, so when large retailers demand price cuts, even at 10% gross margin, some factories are willing to cooperate.
However, in this supplier's view, optimizing the supply chain is not simply squeezing factories; that's not a solid way to reduce costs. "Like Sam's Club delivering a pallet directly to the warehouse, or RT-Mart's one shelf per category, both reduce costs directly through efficiency."
**In the cost reduction process with suppliers, Zhang Qing emphasized that long-term cooperation is key.** Only then is it possible to reduce costs throughout the supply chain.
Take Member's Mark regular scent beads as an example: the price dropped from 89 yuan to 79 yuan, not only due to sourcing from the original supplier and upgrading semi-automatic feeding machines to fully automatic, but also because with scale, both parties continued lean improvements. For instance, while keeping weight unchanged, reducing the volume of scent beads not only improves water solubility but also reduces packaging costs. After packaging improvements, more bottles fit on a pallet, increasing pallet utilization and further improving efficiency.
One of Sam's Club's most repurchased items, Member's Mark egg yolk pastry, dropped from 49.8 yuan to 42.8 yuan at the end of 2022. Behind the price adjustment was Sam's Club customizing a production line with manufacturers, replacing manual egg brushing with robotic arms, improving factory efficiency.
**It can be said that retail profits are squeezed from details and efficiency, and the membership store model merely maximizes this through scale.**
Sam's Club is also paying attention to market competition. "We need to accurately judge and implement product strategies and actions, especially when market prices are chaotic. Sam's Club first returns to quality as an anchor. If quality is not challenged, we need to continuously improve value. If others can achieve the same quality and price, and sustain it long-term, then we will deeply review and reflect, discuss with supplier partners, and see where we fell short in efficiency or other areas," Zhang Qing believes that ultimately, members benefit from competition.
Competition also makes Sam's Club faster, from the annual increase in new store openings and omnichannel transformation to timely price adjustments on items anchored by peers, such as durian cakes. Sam's Club's competition for China's 70 million middle-class consumers appears unwavering, though the market competition landscape has become more complex.
For domestic retailers, the learning process requires patience and perseverance, as well as the ability to continuously innovate and evolve.
Only then can learners find their own path confidence faster.
**PS: From March 14-16, 2024, the 9th China FMCG Innovation Conference & the 2nd China FMCG Hard Discount Conference & the 2nd China FMCG Distributor Conference, hosted by New Distribution and co-hosted by Anneng Zhilian, will be grandly held in Chengdu! The 2nd China FMCG Distributor Conference will be hosted by New Distribution and co-hosted by Zhoupu Data.**
This conference will focus on the theme of "Supply Chain Revolution." Over three days, there will be one main forum, one China FMCG Hard Discount Conference, one China FMCG Distributor Conference, over ten sub-forums and closed-door exchange sessions, and the first major debut of the [Ultimate Supply Chain] Brand Factory Direct Procurement Fair. Together with thousands of FMCG brand owners, distributors, retail transformers, and industry service providers from across the country, we will meet in Chengdu for continuous brainstorming to explore the challenges, opportunities, transformations, and solutions in the era of supply chain revolution.
In this era of supply chain revolution, a new business era will be born. We hope every participant will still have a place in this wave, and we believe this will be a worthwhile conference! For business cooperation, please contact:
**🔺Scan code for ticket inquiries🔺**


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671