Membership stores, once only in remote suburbs, have quietly moved into the city. Whether it's Sam's Club, Carrefour, Metro, or fudi, they are all opening stores in urban areas to get closer to consumers.
01 Membership Stores Enter the City On the afternoon of October 18, Si Qiu, a post-90s professional, rushed home from work to pick up her mother and ride an electric scooter for 20 minutes to the nearby Sam's Club Shanghai Baoshan store, aiming to buy an affordable birthday cake for her aunt's birthday the next day. This recently opened Sam's Club has become one of her regular "supermarkets." "In less than two months since opening, I've placed 13 orders online and offline combined," Si Qiu said, noting that this number exceeds her total visits to Sam's Club in the past year. The surge in her shopping frequency is because this store breaks Sam's tradition of locating in remote suburbs, quietly entering the city. It is near multiple subway lines, dense residential areas, and Shanghai University, located on the 2nd floor of Jufengyuan Road's Jufeng Shopping Plaza. Compared to other Sam's stores that require driving dozens of kilometers, this one is much closer to consumers. Si Qiu deeply feels this difference. "I used to drive over 30 kilometers to the Qingpu Sam's Club, which was inconvenient, so I only went every two or three months, spending at least 1,000 yuan each time. Now with the Baoshan store, I can go whenever I want, sometimes just to buy two boxes of blueberries or cherry tomatoes."
In fact, as Sam's 37th store in China and 4th in Shanghai, and the first "urban Sam's Club" with concepts like "accessible by subway in the city center" and "closest to the inner ring and main urban area," Baoshan Sam's was highly anticipated from the start. "Many people got memberships in advance, and some thought nearby housing prices would rise," recalled Lin Xingxing. Since last September, when Walmart's Shanghai Qilianshan store announced it would close and be renovated into a Sam's Club, she often saw promoters selling Sam's membership cards in nearby neighborhoods, and her family bought one early. This was also the first time Lin Xingxing's family included Sam's on their shopping list. Previously, despite hearing about Sam's and Costco, she had never visited one due to her reluctance to travel far. After receiving the opening notification for Baoshan Sam's, she eagerly grabbed several reservation vouchers and spent over 700 yuan on opening day. Since then, her family visits almost weekly, spending around 500-600 yuan each time, and occasionally accompanying friends and relatives who come to visit.
(Photo of shopping carts at Baoshan Sam's opening day, courtesy of interviewee)
Actually, Sam's is not the only player exploring "entering the city." A month after Baoshan Sam's opened, Carrefour opened a membership store in the city center. On September 30, Carrefour's Zhongshan Park store in Changning District, Shanghai, opened as its fourth membership store in China and its first in a central urban area. Located on B1 of Cloud Nine Shopping Mall, it is a two-minute walk from Zhongshan Park subway station and near multiple subway lines.
Following closely, on October 1, local warehouse club fudi opened its third store at Xingyue Plaza on Chaoyang North Road in Beijing, an area with strong community attributes. The new store covers 10,000 square meters, just 300 meters from a subway station, surrounded by densely populated residential areas, and within 5 kilometers are two mature business districts—the Chaoqing business circle (home to Joy City) and the Changying business circle (home to Longfor Changying Paradise Walk)—as well as two universities: Communication University of China and Beijing International Studies University.
Earlier, players like Metro and Jiajiayue had already opened membership stores in cities, and Hema X Membership Store even opened directly in residential areas, stating they want "consumers who don't drive to also shop at Hema X." In September this year, Metro China's Deputy CEO Chen Zhiyu publicly stated that future membership stores will compete more for city center locations, and Metro's upcoming stores this year will also be in city centers.
Unknowingly, membership stores have quietly moved from remote suburbs into the city.
02 Behind the Move to City Centers Membership stores are not new, but due to their large size, over the past 20-plus years, both Sam's (which entered China early) and Costco (which became popular in Shanghai in 2019) have typically chosen locations in remote suburbs with lower property costs. As a foreign concept, membership stores were first introduced to China by Walmart, which opened the first Sam's Club in Shenzhen in 1996, but it was far from the city center, requiring a taxi or car. Currently, Sam's stores in Shenzhen, Beijing, and Guangzhou are all in remote suburbs; for example, the Guangzhou Panyu store requires nearly an hour's drive to the city center.
More than 20 years later, when Costco entered China, its first store was also in a remote suburb of Shanghai, in Minhang District, over 20 kilometers from the city center, even farther than Hongqiao Airport, with no direct subway. Its second store, opened in Suzhou in December last year, was also in the high-tech zone in the suburbs.
One reason is that warehouse clubs have strict requirements for location, area, ceiling height, and parking. The bulk packaging characteristic of membership stores necessitates large areas for product display, high storage racks, and ample parking for customers who drive to stock up. Lower product prices also require strict control over site selection, decoration, labor, and transportation costs, making remote suburbs the best choice.
So why are membership stores moving into the city? Retail and marketing expert Ding Liguo analyzed that on one hand, many hypermarket players, facing operational difficulties, are following the trend of transformation, attempting to convert some urban hypermarkets into warehouse-style membership stores. On the other hand, membership store players are also seeking new changes, "like when hypermarkets moved from foreign suburbs to domestic city centers, they are making attempts."
Additionally, it may be due to competition for consumers. Ding Liguo said that as suburban markets become saturated, merchants will inevitably think of potential consumers in urban areas who have strong purchasing power but are not yet accustomed to shopping in remote suburbs. Although this attempt breaks the original concept, if competitors capture this segment, it would be a loss.
Indeed, in July 2021, Walmart China CEO Zhu Xiaojing revealed that Sam's Club would try to build new stores in city centers of first- and second-tier cities or convert some eligible Walmart hypermarkets into Sam's city center stores, and Baoshan Sam's is one of them. "In core cities like Beijing and Shanghai, many consumers are already suitable for Sam's—those who pursue quality life, have high time costs, have more shopping channel choices, and have unmet personalized needs," Zhu explained why to open membership stores in city centers.
However, due to the high population density in China's first- and second-tier cities, it is not easy to find suitable properties for standard membership stores. Therefore, although Baoshan Sam's is internally called a "city center store," it is currently just an attempt by Walmart to convert a hypermarket, testing whether getting closer to consumers can yield good results.
This is a common problem for new and old players, but new entrants like Hema, Carrefour, Metro, fudi, and Jiajiayue are more proactive in converting hypermarkets into membership stores, and the trend of membership stores entering cities is mainly driven by these players. For example, Hema X's Dacheng store and its first Beijing store, as well as Carrefour's Zhongshan membership store, were all converted from former supermarket sites. Carrefour China's former CEO Tian Rui once said in 2021 that Carrefour plans to upgrade 100 of its 200 domestic hypermarkets into membership stores within three years. In the future, in Shanghai, consumers could encounter a Carrefour membership store within a 15-minute drive.
(Photo source: Visual China)
Metro China's Deputy CEO Chen Zhiyu revealed that although the rent for properties vacated by city center hypermarkets is higher than in suburbs, the cost of building a new membership store is much higher than renovating an existing site, and it is a one-time expense, putting pressure on cash flow. He predicted that future membership stores will compete more for city center locations. Over the past year, Metro has indeed taken many actions in this regard. Data shows that with the opening of the Wuhan Hongshan store on September 25, 2022, Metro's national membership store count reached 23, most of which were upgraded from existing hypermarkets, and many are located in city centers.
Currently, with more players entering, market competition is intensifying, and grabbing people and business districts has inevitably become a key goal for all membership stores. Factors such as the scarcity of prime properties in core urban business districts, the time constraints of middle-class customers, the shift in consumption habits of the new generation, and the release of quality properties after traditional hypermarket transformations are all driving the membership store format from suburbs to city centers.
03 The "Entering the City" Battle Although various players are trying to open paid-membership stores closer to consumers, replicating suburban success in urban areas is not easy.
The first challenge is property. Ding Liguo revealed that in urban areas, especially city centers, building floor area ratios are generally high, making it almost impossible to find a property of over 10,000 square meters with high ceilings suitable for a membership store. Therefore, to enter urban areas, membership stores must adjust their product mix, replenishment, operations, and supply chain.
Currently, new and old players generally accept that membership stores entering urban areas must reduce store size, but they are also trying other measures to address the challenges brought by location changes.
Compared to Sam's standard stores with 9-meter ceilings, an average area of 10,000-20,000 square meters, 600-800 parking spaces, and about 4,000 SKUs, the Baoshan Sam's, converted from a hypermarket, has only about 8,000 square meters, 3,000 SKUs, and 400 parking spaces, with reduced ceiling height, making it difficult to store as much inventory on high racks. To adapt, Baoshan Sam's innovated in replenishment and inventory management, changing from the standard "fewer times, more quantity" to "more times, less quantity."
In terms of product mix and operations, to ensure that the shopping experience is not compromised by reduced in-store display, Baoshan Sam's has made many new attempts in integrating physical stores with online business. "Some large and heavy items, like rice, oil, and desks, are only sold online, as it's inconvenient for members to carry them," Sam's said. Additionally, it uses clear signage or standees in stores to remind members to scan QR codes with the Sam's app to see more products online and have them delivered home.
Strengthening online channels is also a direction other membership store players are pursuing. For example, Carrefour membership stores launched on the Suning.com app in June this year, initially targeting consumers in Jiangsu, Zhejiang, and Shanghai; in August, consumers in six other provinces and cities (Anhui, Beijing, Guangdong, Shandong, Jiangxi, and Henan) could also order Carrefour membership store products via mini-programs and the Suning app. Carrefour believes that the opening of the Zhongshan Park store will further implement the two "15-minute" concepts: "15-minute drive" to the store and "15-minute life circle" for home delivery, breaking the pain point that membership stores are only in remote suburbs and making nearby membership stores a reality.
Chen Zhiyu believes that online consumption has changed from an "option" to a "must." To this end, Metro's online layout is progressing in stages, currently mainly offering "ultra-fast delivery" within 5 kilometers of stores. Chen also revealed that Metro's online sales now account for over 10%, with some typical stores exceeding 20%.
fudi is also expanding its online business. The new Chaoyang North Road store has expanded its online delivery range to 1.5 times the original, testing whether Generation Z, who are young and still in college, are potential customers for warehouse clubs. fudi hopes online business will eventually reach 35%-40%.
In addition to online business as a supplement, some players are also experimenting with multi-story membership stores to compensate for reduced single-floor area. Metro's store opened in Beijing Sijiqing in May this year has two floors, and Hema X Membership Store also uses a two-story model.
(Photo source: Visual China)
Will membership stores entering the city become a major trend? "The Baoshan store is just a pilot; testing is its purpose. We need to see if members like it and if we can continue," Sam's said. According to reports, Sam's currently has no plans to promote smaller stores, and its store opening plans until next year are still standard Sam's Clubs. If the Baoshan store ultimately succeeds, Sam's may face more options, but so far, "it's too early" to judge.
Chen Zhiyu believes that warehouse clubs moving to city centers and becoming appropriately smaller is the right direction. But the key is how much the consumer experience declines after compromising on store space, and how much supply chain efficiency is lost. "This is something the whole industry is exploring, and it's key to whether the membership store format can expand further."
In fact, from the consumer perspective, membership stores entering the city are currently relatively welcome. Due to significantly shortened shopping distances and convenient transportation, urban membership stores have indeed attracted many customers. Si Qiu and Lin Xingxing both said that Baoshan Sam's still has large foot traffic, often with queues. "Although this Sam's is not large, it's very convenient, and the products are good value," Lin Xingxing recalled. Originally, when the store was a Walmart, it wasn't popular, "couldn't compete with Yonghui," but now it has "beaten Yonghui." "Recently, Yonghui's popularity has dropped a lot; we used to shop there, but now we've basically switched to Sam's," Lin said.
However, some consumers have complained about issues like out-of-stock items and difficulty finding parking. For now, whether membership stores can replicate their suburban success in urban areas requires further testing and validation. But regardless of the future trend, it is certain that competition among membership stores is intensifying.
(Consumer names are pseudonyms)
Source: AI Finance and Economics (ID: aicjnews) Author: Zhou Xiangyue
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