---
title: "Is the 'End' of Retail Membership Stores?"
description: "As market conditions change, hypermarkets are declining, and brick-and-mortar retailers are shifting strategies to adapt to new consumption trends, with many turning to warehouse membership stores as a way to break through. However, this path is not smooth, and competition is intensifying as more players enter. How should warehouse membership stores develop in the future? Will they become the 'ultimate' form of retail?"
author: "联商网编辑部"
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published: "2022-12-06"
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# Is the 'End' of Retail Membership Stores?

> As market conditions change, hypermarkets are declining, and brick-and-mortar retailers are shifting strategies to adapt to new consumption trends, with many turning to warehouse membership stores as a way to break through. However, this path is not smooth, and competition is intensifying as more players enter. How should warehouse membership stores develop in the future? Will they become the 'ultimate' form of retail?

As market conditions change, hypermarkets are declining, and brick-and-mortar retailers are shifting strategies to adapt to new consumption trends, with many turning to warehouse membership stores as a way to break through. However, this path is not smooth, and competition is intensifying as more players enter. How should warehouse membership stores develop in the future? Will they become the 'ultimate' form of retail?

**Many players, seeking change through exploration**

In the past two years, the warehouse membership store track has been hot. Not only are foreign supermarkets like Carrefour and Metro accelerating expansion, but local retailers such as Hema, Yonghui, Jiajiayue, Renrenle, Beijing Hualian, and Beiguo Warehouse Supermarket have also entered the fray. According to iiMedia Research data, the warehouse membership supermarket industry grew 12.3% year-on-year in 2021, reaching a market size of 30.43 billion yuan. It is predicted that this year's market size will reach 33.5 billion yuan, and by 2025 it is expected to approach 40 billion yuan. According to incomplete statistics from the Lianshang.com Retail Research Center, at least 11 companies have entered the warehouse membership store sector nationwide, with over 150 stores.

As a pioneer of warehouse membership supermarkets in China, Sam's Club has been deeply cultivating the Chinese market for 26 years. To date, Sam's Club has 40 stores in China, covering 23 cities, and through e-commerce platforms, it covers most regions of the country, with over 4 million paid members in China.

In October 2020, Hema opened its first warehouse-style X Membership Store in Shanghai, considered China's first project benchmarking Costco and Sam's Club. Subsequently, Hema X Membership Stores expanded to Beijing and entered a 'store opening wave.' Currently, it has opened 8 stores in Shanghai, Beijing, Suzhou, Nanjing, and other places, with 5 stores in Shanghai alone. It is reported that the next Hema X Membership Store in Shanghai's Zhenru will also open soon.

In May 2021, Yonghui opened its first warehouse store in Fuzhou, followed by rapid replication in Chengdu, Chongqing, Shanghai, Shenzhen, Beijing, Henan, Anhui, Guiyang, and other places. Yonghui has now opened over 50 warehouse stores.

Since June 2021, Metro has laid out paid membership stores in more than 10 cities including Beijing, Chengdu, Nanjing, Qingdao, Changchun, Changzhou, and Wuhan, with a total of 23 stores nationwide. In addition, over the past year, Metro's paid membership growth rate exceeded 50%, and it has now surpassed 3 million members. According to Chen Zhiyu, Deputy CEO of Metro China, all new Metro stores in China will be membership stores going forward, and there are plans to convert all existing Metro stores in the Chinese market into membership stores, covering both B2B and B2C markets.

**Heavyweight players enter, triggering a new wave**

Recently, a WeChat public account and app named 'M Membership Store' were launched, with the introduction page showing it as a high-end paid membership store under Sun Art Retail (RT-Mart). This also means that RT-Mart has officially entered the warehouse membership store track. It is reported that the first M Membership Store will be located in Yangzhou and is planned to officially open in April 2023. Currently, the store's exterior renderings have been released, offline promotional activities are underway, and consumers have begun to apply for membership cards. From the currently exposed membership benefits, product features, and service experience, M Membership Store is quite similar to membership stores like Sam's Club, Metro, and Costco.

If Sam's Club and Metro, which entered China early, introduced Chinese consumers to warehouse membership stores, and Costco ignited the Chinese warehouse membership store market, prompting many local retail companies to pay attention to this format, then RT-Mart's entry is likely to trigger a new wave of membership store enthusiasm.

Shang Jia, a member of the Lianshang Senior Advisory Group, pointed out that unlike before, this round of membership store enthusiasm is largely a forced transformation due to the decline of hypermarkets. Apart from new entrants, most are converted from traditional hypermarkets. Membership stores are considered the least costly turn for hypermarkets. Given the huge stock of existing hypermarkets, homogeneous competition in membership stores is a high-probability event in the future.

On the other hand, the current market environment and consumption situation are also considered the foundation for the popularity of membership stores: first, the rise of the middle class and the rise of 'curated' businesses have a good market foundation both in theoretical capacity and actual operations; second, the market education for 'paid membership' has been completed; third, cost-performance demand has become mainstream; fourth, the maturity of omni-channel operations has to some extent resisted the risks of a single channel; fifth, the industry already has some insights and trials of the membership model, and the herd effect has emerged.

In the view of Liu Erbai, another member of the Lianshang Senior Advisory Group, in the new wave of membership store enthusiasm, retailers have gained some rationality and more competitive conditions. In the previous wave, some retailers seemed to jump on the bandwagon. This time, against the backdrop of intensified competition and less optimistic consumer disposable income, opening a membership store requires not only significant investment but also full expectations for the future. After all, many retailers cannot afford too many setbacks and mistakes.

**Products are the core, private labels are the moat**

For warehouse membership stores, having core products means having a competitive advantage. The core value of their operation is to serve paid members with good products and low prices, reducing members' decision-making costs. For example, Sam's Club's Member's Mark, Metro's Metro Chef, and Hema's Hema MAX are all loved by consumers. The share of private label products represents the membership store's ability to develop and focus on core hot-selling items, so many membership stores have private label product shares exceeding 40%.

Liu Erbai said that for local supermarkets developing membership stores, the most important thing is to have core products; products are the important support for membership stores. However, because cultivating a personalized supply chain takes a long time, many local membership stores still rely on old or public supply chain resources, which makes their products lose the advantages of differentiation and cost-performance. For those established membership stores, if you look at their core, you will find that distinctive high-cost-performance products are an important competitive weapon. There must be products worth consumers paying for membership cards; that is the foundation for the survival of membership stores. Retailers must also have their own 'core content,' with irresistible reasons for consumers to join membership and visit stores. That is the core. Although the coat of membership stores is bright, if not worn well, it can also look ugly.

Shang Jia also said that in the current membership store landscape, many players have not yet gained a firm foothold. If we must find a 'one' to break through, it should be product power. Various membership benefits, service add-ons, and omni-channel tactics can be copied, but product power as the central axis is definitely not achieved overnight. Breaking through in product power cannot rely on public supply chains; it will quickly enter a homogeneous channel, forcing suppliers to choose one over the other, which is neither ethical nor possibly legal. Therefore, the breakthrough must come from exclusive supply chains, and private labels and customized brands become the cornerstone. When operating private labels, design capability and turnover capability are crucial. Design capability reflects understanding of users; turnover capability requires integrating total channel volume, production management, and marketing capabilities. Future players in membership stores must be masters of private label operations.

**How will membership stores develop in the future?**

With the continuous influx of various players, competition in the warehouse membership store track is intensifying. So where will the second half of membership stores be? How can membership store players break through in the face of competition? In this regard, Shang Jia believes that the core of membership stores is a business model centered on 'membership fees + cost-performance.' The key to consumers' willingness to pay is the value of cost-performance, and behind cost-performance is the comprehensive implementation of core issues such as customer positioning, product selection, supply chain, and inventory turnover. The efficient operation of 'products' is the core capability. But we also agree with 'getting on the bus first, then buying a ticket.' In many ways, we believe in the value of enterprise growth.

**For local supermarkets, the core issue to note is grasping the underlying logic for successfully opening a store:**

1. The core understanding of membership stores must be insight into the value flywheel; if you do it, go all in.
2. Independent organization, continuous growth: The membership store team must be carefully selected; the right people are half the success.
3. Strictly select the location conditions for membership stores and scientifically evaluate market capacity: For physical retail, location is a key factor.
4. Based on the upgrade needs of local market users, always build capabilities around product power and service power, and ultra-fast delivery is definitely a high-probability demand.

At the same time, Shang Jia also emphasized that from a future perspective, membership stores are one of the directions of retail. Curated selection, bulk sales, quality upgrades, service, and even omni-channel are not new topics for today's Chinese retail market. Combined with Chinese consumers' living environment, lifestyle, consumption patterns, and the current supply-side situation, the paid membership model still has a dividend period. Therefore, the membership model will definitely remain a hot direction, with increasing players. And the vast Chinese market will certainly produce some excellent membership store players, just like the development trajectory of hypermarkets in the past.

**Final thoughts:**

Currently, from the perspective of store openings, the site selection for warehouse membership stores is mainly concentrated in first- and second-tier cities, targeting the middle class. As the market scale expands, the scope of site selection may also expand in the future. Membership stores offer higher product quality and more obvious price advantages, which require strong supply chain support. At the same time, warehouse membership stores need to continuously iterate and cultivate internal strengths. How to continuously provide high-quality products and a good shopping experience is the key to retaining members.

Note: Image/Lianshang Image Library


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