---
title: "Factory Price 63, Retail Price 69.9: Who Is Hard Discount Really Taking Business From?"
description: "A supplier to Sam's Club reveals that their factory price is 63 yuan while Sam's retail price is only 69.9 yuan, highlighting the power of its supply chain. Hard discount models, including warehouse clubs and snack discount stores, are reshaping retail by offering high cost-performance, and this trend is forcing brands to rethink their strategies."
author: "任文青Andy"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-02-18"
language: "en"
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# Factory Price 63, Retail Price 69.9: Who Is Hard Discount Really Taking Business From?

> A supplier to Sam's Club reveals that their factory price is 63 yuan while Sam's retail price is only 69.9 yuan, highlighting the power of its supply chain. Hard discount models, including warehouse clubs and snack discount stores, are reshaping retail by offering high cost-performance, and this trend is forcing brands to rethink their strategies.

"To be honest, after supplying to Sam's Club, my understanding of retail has been completely overturned," a Sam's Club supplier told me. He gave me an example: for a certain product, their factory price was 63 yuan, but Sam's retail price was only 69.9 yuan. "It's unimaginable; in traditional supermarkets, it would sell for at least one to two hundred." From this supplier's statement, we can see that behind Sam's popularity, there is strong supply chain support. In 2022, Sam's Club's sales reached 66 billion yuan with 42 stores, averaging nearly 1.6 billion yuan per store annually, which translates to about 4.38 million yuan per store per day. In 2023, Sam's opened 5 new stores, with projected sales of 70-80 billion yuan. Costco, also a warehouse club, is equally popular. On January 12, Costco opened its first store in South China, and customers flooded in; by the opening day, over 140,000 memberships had been sold, ranking first globally. While traditional supermarkets face operational difficulties and closures, warehouse clubs are indeed challenging industry perceptions. Many consumers drive dozens of kilometers specifically to shop at membership stores, while ignoring supermarkets right next to their homes. The reason consumers are willing to go to Sam's is ultimately because the products there offer extreme cost-performance: buying at 63 and selling at 69.9, Sam's entire system retains only a 10% gross margin. There's also differentiation: products in Sam's are mostly customized from source factories, and even big-brand products differ in specifications from the circulating goods in traditional supermarkets. **Traditional retail operates on shelf space; whoever can afford entry fees, barcode fees, and display fees gets on the shelf. Warehouse clubs operate on products; only products truly loved by consumers and selling well get on the shelf.** During the 2024 Spring Festival, warehouse clubs remained hot, as seen across various self-media news. Similarly, in the past two years, the industry's focus has been on warehouse clubs and snack discount stores.
"100 boxes of goods in the warehouse might have sold out in 5 days before, but now they can't sell out in a month," said a distributor, noting that after snack discount stores opened locally, business became increasingly difficult. In 2023, snack discount stores expanded from the south to the north, from second- and third-tier cities to township markets. Traditional retail has been affected, and so have the distributors supplying them and their upstream brands. Direct sourcing from upstream, carefully selected SKUs, and removing brand premiums to provide consumers with cost-effective products. Hard discount shows itself as low prices, but essentially it is both a business philosophy and a distribution model. Broadly speaking, snack discount stores and warehouse clubs both belong to hard discount, but they target different demographics and consumption scenarios: **warehouse clubs target middle-class family consumption, offering high cost-performance on high average transaction values; snack discount stores target personal consumption in lower-tier markets, offering high cost-performance on low average transaction values.** An important way to remove brand premiums and pursue high cost-performance is to cooperate with source factories to create channel-customized products. These products are called white-label, factory-brand, private label, or hard discount brands. No matter what they're called, they differ from traditional brands. The biggest difference is that traditional brands must spend heavily on marketing, including both advertising and channel marketing. Without advertising, consumers don't recognize the brand; without channel promotion, products can't get on retailers' shelves. Investing in both can make a well-known brand. Investing only in the latter can get products on shelves, but they become what consumers call "generic brands." Hard discount offers another path. "When consumers shop here, do they come for your brand? I am the brand," a Sam's Club buyer told its supplier. Consumers go to Sam's Club for the store, not for a specific product or brand. **When a channel reaches a certain scale and gains consumer trust, the channel itself becomes the brand, and products on the shelves sell well.**
Private label is the result of sales scale and consumer trust; it is not the reason the hard discount model works. When a channel hasn't yet gained consumer trust and lacks scale advantages, private label is actually a false proposition. But snack discount stores, especially the leading ones, have already met these conditions. In 2023, snack discount stores competed mainly on the first battlefield, focusing on market layout and store density. In 2024, they will fight on two battlefields simultaneously. **The second battlefield is supply chain integration and product differentiation.** Simply put, the relationship between snack discount stores and upstream can be divided into three stages: "confrontation – negotiation – ecosystem."
> 1. Confrontation stage: Brand manufacturers resist cooperating with snack discount stores due to existing systems and price maintenance. 2. Negotiation stage: Under sales pressure, they proactively cooperate with snack stores but negotiate on specifications, supply scale, and prices. 3. Ecosystem stage: Deep integration of the industry chain, where brands and factories with supply chain advantages work with channels to provide consumers with more cost-effective products.
In December 2023, Haoxiangni and Yanjin Shop invested in Snack Busy Group, a landmark event—though this is only publicly listed company information. What does the hard discount's relationship with upstream entering the ecosystem stage mean for brand manufacturers? Brands and factories without resources and advantages in the supply chain will not find a niche in this ecosystem. For example, new consumer brands that outsource production to factories and invest in marketing to seek a premium when selling products have proven this model doesn't work. The few brands that succeed must go deeper upstream to gain supply chain resources and capabilities. This is even more true today as consumers become more rational and hard discount prevails. **Initially, hard discount is retail that competes on price, then it becomes a channel that brings sales, but for brand manufacturers without supply chain advantages, it is actually a model that takes away your business.**
Referring to past stories of B2b and community group buying, hard discount will ultimately just be a channel, one of many channels for brand manufacturers to sell through, so there's no need to invest too much energy in it. Many hold this view. I agree with the first part of this view because retail is certainly diverse, and the market won't end up with only hard discount channels. However, hard discount cannot be equated with discount retail. When we talk about hard discount, we start from snack discount stores and warehouse clubs, but they are manifestations, not hard discount itself. **Hard discount is a presentation of systemic change; it is the result, not the cause; it is the surface, not the core.** The downturn in China's economic cycle, oversupply in the FMCG industry, shrinking consumer wallets, and rationalized consumption habits are the reasons hard discount has developed. Vertical supply chain integration, de-intermediation, wide categories/narrow SKUs, developing private labels, and operating products rather than shelves are the core accompanying hard discount. Traditional supermarkets, under pressure, will also follow this logic, or consumers won't come back. The retail industry won't all be discount stores in the future; referring to data from developed markets, it won't be the dominant retail model either. But for brand manufacturers, seeing this industry trend clearly is most important. We need to look at this in conjunction with data recently released by Nielsen.
In 2023, major FMCG categories, except beverages and personal care, basically saw negative growth, and offline channels only saw growth in beverages. Source: NielsenIQ **Now it's not stock competition, but shrinkage competition.** Combined with the retail-level changes we see: on one hand, hard discount chains will increase the supply of factory brands or private labels through vertical integration. On the other hand, traditional retailers will try to attract consumers by adjusting product mixes and streamlining SKUs. This means that some products currently on shelves will lose their living space, mainly second- and third-tier brands, those without industry chain advantages, especially those without manufacturing capabilities. In the future, whether hard discount chains or traditional supermarkets, one thing will converge: **operating products, not shelves.** Brand manufacturers advertise in the air, then arm ground forces with enough ammunition to occupy terminal shelves and displays. Will this model still work in the future when traditional supermarkets with a back-end model either die or transform? Brands will certainly exist in the future, without a doubt. Even in developed markets like Europe and the US, private labels in retail channels only account for a small market share. But brand manufacturers must learn to think from the retailer's perspective and define their positioning. **The retail era of opening stores, setting up shelves, and letting whoever can afford the fees put their products on shelves and make money is over.** **The future is to find target customer groups, do good category planning, cooperate deeply with upstream, and create product portfolios to meet consumer needs. As long as this is achieved, different retail models will have their living space.** For brand manufacturers, which category do I belong to, how to expand and deepen supply chain resources and capabilities, which channels to sell through, which price band to target, and what consumption scenarios to serve? These all require establishing truly close cooperative relationships with retail channels. In the past, the relationship between brands and channels was confrontational; in the future, it will be ecosystem-based. Brand manufacturers that truly understand this logic will embrace hard discount and actively invest energy in studying the industry trends behind it.
**On March 15, in Chengdu, the 'Second China FMCG Hard Discount Conference' will bring together discount retail founders, brand executives, distributor owners, traditional retail enterprises, and industry research experts to focus on core hard discount topics and examine new directions, new thinking, and new opportunities in the discount era. We look forward to your arrival!**
On March 14, a closed-door meeting on hard discount will be held: Hard Discount Models and Operations, with one-on-one dialogues and discussions with expert teachers, sharing experiences, and discussing dividend opportunities in the hard discount era!
During the three-day conference, centered on the theme 'Supply Chain Revolution,' in addition to the Second Hard Discount Conference, there will be a main forum, a China FMCG Distributor Conference, over ten sub-forums and closed-door exchange sessions, and the first major debut of the 'Extreme Supply Chain' Brand Factory Direct Sourcing Fair, which will bring together thousands of FMCG brand manufacturers, distributors, retail transformers, and industry service providers from across the country in Chengdu for continuous brainstorming to discuss the challenges and opportunities, changes and solutions of the supply chain revolution era.
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 conference business cooperation, please contact:
**🔺Scan code for ticket consultation🔺**


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