---
title: "Sam's Club Sets Sights on China's Lower-Tier Markets"
description: "In 2023, Sam's Club accelerated its expansion into China's lower-tier markets, signing stores in cities like Dongguan, Jiaxing, Shaoxing, Jinan, Wenzhou, and Jinjiang, with Jinjiang becoming its second county-level city after Kunshan. This shift indicates a strategic move beyond first-tier cities to capture growth in second- and third-tier markets, driven by consumer potential and competitive dynamics."
author: "阳子"
publisher: "New Distribution"
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published: "2023-04-13"
language: "en"
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---

# Sam's Club Sets Sights on China's Lower-Tier Markets

> In 2023, Sam's Club accelerated its expansion into China's lower-tier markets, signing stores in cities like Dongguan, Jiaxing, Shaoxing, Jinan, Wenzhou, and Jinjiang, with Jinjiang becoming its second county-level city after Kunshan. This shift indicates a strategic move beyond first-tier cities to capture growth in second- and third-tier markets, driven by consumer potential and competitive dynamics.

In 2023, Sam's Club, accelerating its expansion, has set its sights on China's lower-tier markets. It is understood that Sam's Club has signed leases for new stores in **Dongguan Liaobu, Jiaxing Jingkai, Shaoxing Yuecheng, Jinan Lixia, Wenzhou Lucheng, and Jinjiang Chidian** among other locations. Notably, Jinjiang has become the second county-level city in China to host a Sam's Club store, following Kunshan. These moves indicate that after 27 years in China, Sam's Club is no longer confining itself to first-tier and new first-tier core cities; instead, its site selection strategy is gradually moving down the tiers, with **second- and third-tier cities becoming new strategic highlands.** On one hand, it continues to expand into lower-tier markets; on the other, it announced a profit concession of 500 million yuan, making long-term price reductions on 10 membership products. This raises curiosity: is Sam's Club, often seen as a representative of the new middle class, set to fully embrace a "down-to-earth" approach in 2023? In fact, due to factors such as the pandemic and economic conditions, getting consumers to willingly pay for products, let alone membership fees, is no easy task. However, Sam's Club has been growing against the trend, with net sales in the fourth fiscal quarter up 11.3% year-over-year to $21.4 billion, and membership income up 7.1% year-over-year. At the same time, Sam's Club, with its internet-famous attributes, maintains high popularity on social media. As one of the hottest membership-based warehouse stores, the brand has over 1.03 million related posts on Xiaohongshu, with topics like **#Sam's Club Check-in Guide#, #Sam's Club Repurchase List#, #Sam's Club Store Visit Must-See#** each garnering over 10,000 likes and favorites. This lively scene contrasts sharply with the declining performance, difficult transformation, and frequent store closures of traditional retail supermarkets. So why does Sam's Club, which has already established a strong foothold and shone in core cities like first-tier and new first-tier, continue to proactively "involution" into lower-tier markets? Perhaps as Zhu Xiaojing, President and CEO of Walmart China, said: "During economic downturns, changes in consumer behavior and psychology create space for innovation and also create opportunities for companies to overtake on curves." For Sam's Club, **seizing the lower-tier markets that membership-based warehouse stores have not yet deeply penetrated is a key driver for overtaking in fierce competition.**

**Sam's Club Continues to Move Downmarket**
In recent years, thanks to advantages such as rich categories, superior quality, and high cost-performance, warehouse membership stores have entered a period of rapid expansion. Data shows that the industry's market size is expected to grow to 40 billion yuan by 2025. As an early player in this retail format, Walmart's Sam's Club opened its first store in Shenzhen in 1996 and currently operates **42 stores** in China, with over **4 million** paying members. Compared with competitors like Costco, Metro, Hema X Membership Store, and RT-Mart M Membership Store, Sam's Club clearly has a significant advantage in market share and brand awareness. Looking at site selection trends over the years, Sam's Club has concentrated in **Shenzhen, Shanghai, Beijing, Guangzhou** and other cities, often with multiple stores in each. For example, Shanghai already has 5 Sam's Club stores, including the Zhenru store planned to open this year. Additionally, more store format innovations are being piloted in first-tier cities, such as the "city center store" in Baoshan, Shanghai, opened last year, and differentiated projects like "Sam's Cloud Home" and "Health Center" introduced at the Shijingshan store in Beijing, all using core cities as the first testbeds. For Sam's Club, it is already adept at serving the mid-to-high-income consumer groups cultivated in mature markets. Despite entering early, Sam's Club's expansion was not particularly fast in earlier years; before 2013, it expanded at an average rate of one store every two years. After 2013, rising per capita income and the maturation of the membership warehouse format prompted Sam's Club to accelerate, opening stores at an average rate of 4-5 per year. It was during this later high-growth period that Sam's Club turned its attention to lower-tier markets. In July 2020, the first Sam's Club store in a county-level city opened in Kunshan, setting a record for the highest turnover among newly opened Sam's stores on its opening day. Perhaps it was this consumption power and market performance that led Sam's Club to bet on another county-level market three years later—choosing Jinjiang. Furthermore, among the currently signed stores, **only Dongguan is a new first-tier city; Wenzhou, Jiaxing, Shaoxing, and Jinan are all prefecture-level cities**, which differs from the previous strategy of targeting first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen. Facing increasingly fierce competition in the retail sector, lower-tier markets with strong consumption potential and demand hold great appeal for Sam's Club, and such store-opening plans will only increase in the future, as Sam's Club aims to "pry open" more consumers' wallets.

**Why Target Lower-Tier Markets?**
Sam's Club has always regarded mid-to-high-income groups as its precise target customers, so many believe that expanding into lower-tier markets seems inconsistent with its strategy. Is that really the case? This move is not a hasty decision. First, although different players have slightly different layouts, core cities like first-tier and new first-tier are all important battlegrounds. Currently, these markets are highly saturated and competitive, especially Shanghai, where the number of membership warehouse stores from foreign and local companies such as Sam's Club, Metro, Costco, Carrefour, and Hema exceeds 16. In such an extremely developed market environment, brands must go all out to attract more members and renewals. Additionally, supply chain competition in first-tier cities has reached a fever pitch. For instance, the rise of instant retail models has raised users' satisfaction thresholds, leading to higher maintenance costs, combined with the aforementioned high customer acquisition costs, both providing an opportunity for Sam's Club, which is experiencing growth fatigue, to seek lower-tier markets.

Second, the industry's wind is blowing further afield. With the rise of social media, young users seeking immersive consumption and novel experiences already view Sam's Club through a favorable lens, as seen in popular posts about Sam's Club check-ins and purchasing agents. Even if their cities lack Sam's Club stores, the internet has eliminated geographical barriers, allowing the brand to penetrate user minds early. Moreover, whether it's the aspiration for a refined middle-class lifestyle or the craving for a dazzling array of internet-famous products, it all highlights the vibrant consumption demand in lower-tier markets. Data shows that nearly 80% of consumers in third-tier cities are willing to apply for warehouse store membership cards. Facing such a market with **infinitely reduced education costs, continuously rising marketing heat, and unbounded willingness to consume**, Sam's Club is naturally happy to go downmarket.

Finally, today's lower-tier markets are not as "low" as you might think. Looking at Sam's Club's new store locations, they have all chosen cities with strong consumption power. According to the 2022 GDP quality rankings for Jiangsu, Zhejiang, Shanghai, and Fujian, Wenzhou, one of Sam's Club's chosen locations, topped the list with a GDP of 802.98 billion yuan and a quality index of 75.71%, while Jiaxing ranked seventh with a GDP of 673.945 billion yuan and a quality index of 51.26%. The continuously rising resident income and growing consumption power in second- and third-tier cities have expanded the new middle-class group, giving Sam's Club a more solid foundation and confidence for expansion. It is the combination of these factors that has led Sam's Club to focus more on areas beyond first-tier cities, actively seeking **traffic, profitability, and momentum** from lower-tier markets.

**Challenges in Lower-Tier Markets**
Markets are always changing, and opportunities coexist with challenges, especially in China's retail market. On one hand, with community group buying and instant retail making last-mile service an industry standard, the requirements and challenges for major retail giants have escalated. Compared with core cities like first-tier and new first-tier, **the rider allocation and delivery capabilities in third-tier cities are significantly weaker**, which hinders the efficiency of subsequent product delivery. Additionally, Sam's Club's cloud warehouse project has not yet penetrated third-tier cities, so competing for community traffic in these areas may be more challenging.

On the other hand, Sam's Club has stated that membership numbers are more important than sales. Breaking it down, there are two main types of Sam's Club members: one is the brand's **"loyal users"**, who care more about the quality products and high cost-performance that Sam's Club offers, focusing on "buying". The other type is **"interest users"** generated by traffic, who focus more on "browsing" and "checking in", with lower repeat frequency, and some even rent out their membership cards after one visit. This has a significant impact on Sam's Club's membership renewal rate and runs counter to its goal of increasing membership numbers. If this is the case in first-tier cities, it goes without saying in lower-tier markets. How to quickly increase membership numbers and renewal rates has become a new challenge for Sam's Club as it moves downmarket.

Another point worth noting is that although the number of single people in lower-tier markets is smaller than in first-tier cities, their consumption needs still deserve attention. For Sam's Club, **the proportion of low-, mid-, and high-end products within existing SKUs, the packaging sizes of private-label products, and product pricing** all need to be finely adjusted based on local user profiles to attract more consumer groups and bring higher per-item sales and turnover efficiency. However, Sam's Club's strong core supply chain is key to differentiating itself from other brands. With emerging digital technologies empowering retail enterprises, Sam's Club's "people, goods, and places" matching efficiency in lower-tier markets will also improve. From this perspective, there is no need to worry too much.

On the contrary, what needs to be vigilant about is that other membership warehouse stores competing with Sam's Club in first-tier cities are also eyeing lower-tier markets. Previously, Hema X Membership Store, which found its store-opening rhythm and operating model in first-tier cities like Beijing and Shanghai, has already stated that it will replicate and expand on a large scale in second-tier cities in the future. And RT-Mart's first M Membership Store avoided first-tier cities from the start, choosing Yangzhou, a third-tier city, as its foothold. Not to mention another competitor, Costco, which is accelerating store openings and will inevitably extend its reach to more lower-tier markets in the future. This means that the fierce battles seen in first-tier cities will be replayed here.

Therefore, occupying lower-tier markets does not mean total victory, but it is certain that Sam's Club, by being the first to move, has seized the opportunity to overtake on curves. Looking at the 2022 financial report, Walmart is still betting on Sam's Club for growth. To meet Walmart's expectations, Sam's Club, now in a new growth cycle, needs to leverage the Chinese market, which has greater growth space. However, whether targeting lower-tier cities can become Sam's Club's new growth engine may require more time to tell.

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