---
title: "Sam's Club Gains Another Rival"
description: "Sam's Club, the membership-only warehouse favored by China's middle class, faces increasing competition. Its global rival Costco, after five years in Shanghai and surrounding areas, has entered Sam's stronghold in Shenzhen, attracting 130,000 members and earning over 25 million yuan in membership fees shortly after opening. Costco's store locations show it is directly competing with Sam's, entering cities where Sam's already has at least two stores."
author: "让商业更具价值"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2024-01-23"
language: "en"
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---

# Sam's Club Gains Another Rival

> Sam's Club, the membership-only warehouse favored by China's middle class, faces increasing competition. Its global rival Costco, after five years in Shanghai and surrounding areas, has entered Sam's stronghold in Shenzhen, attracting 130,000 members and earning over 25 million yuan in membership fees shortly after opening. Costco's store locations show it is directly competing with Sam's, entering cities where Sam's already has at least two stores.

Sam's Club, the membership-only warehouse favored by China's middle class, now faces more rivals. Its global rival Costco, after five years in Shanghai and surrounding areas, has entered Sam's stronghold in Shenzhen, attracting 130,000 members and earning over 25 million yuan in membership fees shortly after opening. A review of Costco's opened stores shows it is directly competing with Sam's, entering cities where Sam's already has at least two stores.
#### **Costco Enters Sam's Heartland**
"Is the plain business war starting again?" On January 19, after hearing colleagues say "Sam's strawberries have dropped in price again," Erin, a post-90s worker in Shenzhen, went to the store after work to buy some. "Two pounds for 72.3 yuan, more than 20 yuan cheaper than before." After checking out, Erin posted this comment on her Moments, sparking heated discussion. Some shared their own price war victories, like "Sam's 907g JJ cherries dropped from 139 yuan to 94.9 yuan" and "A few days ago, Costco's red dragon fruit was 10 yuan cheaper than Sam's, and Sam's followed with a price cut." Others were waiting for the "fire" to spread: "Let the price war heat up, so Sam's doesn't dominate." Costco is the largest membership-only warehouse chain in the U.S., with more stores than Sam's Club, Walmart's premium membership warehouse. It has over 870 stores globally, with 600 in the U.S. Costco entered China in 2019, opening its first store in Shanghai, followed by four more in and around Shanghai. The Shenzhen store is its sixth, and its first outside the Shanghai area. As the first flagship store in South China, Costco Shenzhen has a shopping area of 15,000 square meters, but only one floor of retail space, with the rest being parking. Feng Ting, a personal shopper at Costco Shenzhen, described the opening days as "the area outside the store was jam-packed," "lines like a snake game," "shopping carts turned into bumper cars," and "every cart passing by was full." It's reported that Costco Shenzhen, which opened on January 12, quickly issued 130,000 membership cards. At the discounted annual fee of 199 yuan, membership fees alone brought in over 25 million yuan in just a few days. Facing Costco's offensive, Sam's has not been complacent. Although Shenzhen is its stronghold, having opened its first store there in 1996 and now operating three stores in Longgang, Longhua, and Futian, Costco's arrival has put it on high alert. On the day Costco Shenzhen opened, many Sam's members received a text message that started with an emotional appeal and then offered discounts, such as a robot vacuum and mop combo priced at over 3,000 yuan reduced to 2,499 yuan. "Sam's rarely sends such messages," said Lin Pei, a Shenzhen resident who became a Sam's member in 2021. She recalled that in the past three years, she had hardly received such messages. More Shenzhen residents who are not Sam's members noticed Sam's "anxiety" while commuting on the subway. Chen Qi, who works in Shenzhen, said that before Costco opened, Sam's had covered the Hongshan subway station with ads. This is the station closest to Costco's store. In the past, "Sam's rarely advertised at subway stations." It's no wonder Sam's is anxious. As Sam's biggest competitor, Costco has an impressive track record: average revenue of $240 million per store, total revenue of $242.29 billion in fiscal 2023, net profit of $6.292 billion, and a market cap exceeding $300 billion. Since entering China in 2019, it has repeatedly achieved "instant success upon opening." However, Costco previously focused on East China, and this is its first foray into the Shenzhen market. "Concentrating in one region facilitates centralized management and mutual learning among stores," James Murphy, Costco's international president, said in an earlier interview. Industry insiders also note that membership warehouse formats should be planned regionally. On one hand, this reduces supply chain pressure; on the other, it allows for more product diversity. Now, with Shenzhen as a starting point, Costco's official entry into the South China market may signal that it is ready for regional expansion and direct competition with Sam's. No wonder Sam's is visibly rattled. According to the Shenzhen Longhua District Industry and Information Technology Bureau, on opening day, Costco set several records: the highest number of membership cards issued globally and the highest sales for a single day in China. WeChat Index also shows that after Costco Shenzhen opened, its search volume briefly surpassed Sam's.
#### **Directly Competing with Sam's**
Costco and Sam's share similar labels: both were born in the U.S. in the 1970s and 1980s, and both operate on a model of "not relying on price differences but on membership fees." The difference is that Sam's entered mainland China earlier, 23 years before Costco. "In the U.S., Sam's customer base is relatively downmarket. In contrast, Costco's customers are mainly white, Asian, and international students," Chen Lin, who has lived in the U.S. for a long time, told the author. Monitoring data from GeoHey also shows that in the U.S., Sam's stores are typically in suburbs, while Costco tends to open in areas with higher population density and disposable income. But in China, Sam's seized the first-mover advantage and became a symbol of the middle class. At the same time, it took on the tasks of market education and localization, paving the way for Costco. "We actually got our business license in China many years ago, but we decided to develop other markets first," James Murphy said. Costco is a cautious company, weighing every new market entry with more than 20 relatively universal variables, such as market size and purchasing power. During Costco's dormant years, Sam's initially developed slowly, opening only 14 stores in its first 20 years in China. It wasn't until 2016 that it accelerated, opening dozens of new stores in just seven years, including five in 2023. According to Sam's official website, it now has 37 stores nationwide, with four in Beijing and three each in Shenzhen, Hangzhou, Suzhou, and Shanghai. Three years after Sam's accelerated, in 2019, Costco, after much observation, opened its first store in Shanghai in August of that year. That year, China's GDP per capita reached $10,000, and private car ownership exceeded 200 million, marking the starting point for the membership warehouse boom. If you pay attention, comparing the cities where Costco and Sam's have opened stores reveals a clever "coincidence": Costco's chosen cities—Shanghai, Suzhou, Ningbo, Hangzhou, and Shenzhen—all had at least two Sam's stores before. This means Costco is following Sam's lead. The advantage of following is that it doesn't need to spend money or effort educating consumers in these cities and can share their purchasing power. "In 1991, Costco opened its first store in Japan and took several years to become profitable. The lesson we learned is that preparation before entering a new market is crucial. It also takes time for locals to adapt to our style," James Murphy once admitted. Now in China, thanks to Sam's pioneering, Costco has had smooth sailing. According to a national city layout map Costco released earlier, its next expansion cities include Beijing, Guangzhou, Nanjing, Suzhou, Wuhan, Chongqing, and Chengdu. Sam's has already opened stores in all these cities. Moreover, not just the cities, but even the specific store locations, Costco is directly competing with Sam's. For example, Costco's Shenzhen store is only 4.2 kilometers from the nearest Sam's store; Hangzhou Costco is 7 kilometers from Sam's Xiaoshan store; Shanghai Pudong Costco is 13 kilometers by car from Sam's Pudong store; and the upcoming Nanjing Costco is 15 kilometers in a straight line from a Sam's store. Additionally, Costco has adopted Sam's tactics, such as creating hit products and using social media for promotion. An industry insider revealed that Sam's has a dedicated team for promoting bestsellers, with Xiaohongshu being the most effective platform. "Sam's posts promotional tasks on video platforms, bloggers accept tasks, and then earn based on promotional results." Now, even those who haven't visited Costco know from Xiaohongshu that Costco's kale and celery juice is a "must-buy," the steak is delicious, and the bakery items are a good deal. Costco's imitative approach has been effective. From its first store in Shanghai Minhang to subsequent stores in Suzhou, Shanghai Pudong, Ningbo, Hangzhou, and Shenzhen, every new Costco opening has seen "long queues," "traffic restrictions," and "traffic jams." "Although the business model is the same, Costco has an advantage in global procurement," said a market analyst. China's Sam's differs from global Sam's in positioning, limiting synergies in product procurement. Costco, on the other hand, has higher global consistency and synergy, giving it stronger scale advantages. "This is why Costco can successfully enter the same cities as Sam's," the analyst added.
#### **Sam's Enemies Are Multiplying**
Costco is not Sam's first enemy. As the pioneer of membership warehouses in China, Sam's now faces more and more rivals. "Membership stores like Sam's have dismantled the long-held pricing power of upstream manufacturers and agents," Chen Liping, a professor at Capital University of Economics and Business, told the author. The core of membership stores is using scale to force supply chain concessions, then attracting target customers who seek high quality and efficiency with curated SKUs and membership services. Currently, Sam's annual membership fee is 260 yuan. Based on Sam's previously disclosed 4 million members in China, annual membership fee revenue exceeds 1 billion yuan. Costco's membership fee is higher, 299 yuan per year without discounts. With over 100,000 members per store, annual membership revenue also reaches hundreds of millions. In an era where consumption is polarizing and value for money is a consensus, this business model is particularly popular. "The so-called 'consumption downgrade' is a paradox. On one hand, consumption concepts haven't downgraded; they've upgraded. On the other hand, spending is indeed decreasing," Chen Liping said. To compete for these consumers, more players are imitating Sam's at a pixel level, and Sam's enemies are growing. In October 2020, the first Hema X membership store opened in Shanghai Pudong. Shortly after the news, Sam's pushed a message via its app about "expanding fresh food delivery in Shanghai." Given Hema X's strength in fresh food and localized supply chains, Sam's move was interpreted as "actively confronting Hema." In 2021, Carrefour joined the fray, opening its first membership store less than three kilometers from a Sam's store and accusing Sam's of forcing suppliers to choose between them. The situation escalated into a drama of "Carrefour accusing, Hema helping, and Sam's defending itself." That year, Beijing's local membership store fudi launched, focusing on differentiated competition with Sam's. In terms of products, fudi went further than Sam's localization, offering products more suited to Chinese consumers, with smaller portions and lower prices, earning the label "affordable Sam's." Also choosing differentiation was RT-Mart's M membership store. In 2022, the first M store opened in Yangzhou. In product selection, it leveraged RT-Mart's scale advantages to co-create private labels with suppliers. According to incomplete statistics from Lianshang.com, by the end of 2022, there were at least 11 membership warehouse chains in China. By "sect," these "Sam's rivals" can be roughly divided into three categories: foreign players like Costco, traditional supermarket transformations like M membership stores, and local new forces like Hema X and fudi. Each is trying to prove its business model as soon as possible. But it must be admitted that foreign players are ahead. Chen Liping told the author that Costco and Sam's advantages lie in their long-accumulated global supply chains and product development systems. "The logic of discount stores is hit product thinking, extreme cost performance, and supply chain management. But ultimately, it's about supply chain." In other words, Costco and Sam's are actually competing with local players using price differences between domestic and international products. In Chen Liping's view, without global procurement, it's impossible to integrate price advantages or achieve differentiation. These are exactly the areas where domestic players need to catch up. "For example, when Hema competes with Sam's on price, Sam's might see it as naive. If you compete on price, they compete on quality; if you compete on quality, they compete on product iteration," Chen Liping said. It's foreseeable that in the near future, local governments, to boost consumption, will increase support for Sam's and Costco, allowing them to enter the Chinese market at relatively lower costs. Meanwhile, a positive sign is that despite the competition, "Hema and others" are beginning to value supply chain and accumulation. An industry insider said that recently, Hema CEO Hou Yi lamented that after traveling the world, he found that milk costing 7-8 yuan per liter in China can be bought for 4 yuan in Europe.
(All names except Chen Liping are pseudonyms)
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