The saga of Sam's Club and Hema chasing each other shows no sign of ending, but in the 2024 season, they have diverged: the former accelerates its "gallop," while the latter is mired in business "wavering." According to Walmart's latest financial report, Sam's Club's second fiscal quarter same-store sales grew 5.2%, membership climbed to a record 5 million, and membership income surged 23% year-over-year. Additionally, its expansion is accelerating, with plans to open 6-7 new stores annually in China. In contrast, Hema, despite reports of achieving profitability for the first time during the off-season from March to June 2024, has faced setbacks including the cancellation of its independent listing plans and the retirement of its founder, leading to a complete overhaul of its earlier "discount" reforms and frequent business adjustments, leaving its development path turbulent. Why has the former fierce competition turned into Sam's growing stronger while Hema frequently adjusts? From an operational style perspective, Hema excels at marketing, even positioning Sam's as a rival is a clever "bump" marketing move, but converting "traffic" into "retention" has become Hema's shortcoming. This is precisely the test of solid product strength and supply chain capability beyond marketing, which is Hema's weakness and Sam's secret. Conversely, Sam's, which has recently faced "marketing mishaps," could learn from Hema's marketing tactics. For both Sam's and Hema, they are both competitors and mentors to each other, shifting from competition to coopetition, learning from each other's strengths, which could yield a "1+1>2" effect. Specifically, Sam's can learn from Hema's marketing approach, while Hema should deepen its supply chain excellence like Sam's.
Marketing Must Be "Playful" From Apple's product launches to the Mid-Autumn Festival, Hema's "homophone pun" and trend-following marketing has never been absent. On September 10, when Apple released the iPhone 16, Hema followed up by holding an "Apple Pomegranate" launch event at its stores. The next day, Hema's "Chang'e (goose) is coming" (a pun on the Mid-Autumn moon goddess) rode the Mid-Autumn Festival hype. This "homophone pun" plus "trend-riding" marketing successfully garnered some attention in the traffic pool for Hema, which otherwise had no connection.
Image source: Weibo
Looking at Hema's actions during major trending events, this is not its first time "stirring things up." Recently, when "Black Myth: Wukong" became a sensation, Hema launched pretzel gold hoop rings and crispy rice gold cudgels. When the song "Xie Di, I want to diss you" went viral, Hema quickly responded with a "Crab Emperor" product and created a "Chengdu Disney" peripheral area in stores. Behind these attention-grabbing marketing moves lies Hema's deep understanding of the "people, goods, and place" elements. In the "people" dimension, marketing must align with target consumers' interests, build resonant topics, and thus shorten the distance between brand and users. Besides following trends, Hema also shapes a friendly and likable brand image with humor, such as the amusing product description "Although I'm dark and earthy, I'm fragrant," and Hema's slightly goofy IP image.
Image source: Internet
Secondly, in terms of the abundance and renewal of "goods," Hema is commendable. Based on capturing consumer needs, Hema continuously innovates in product development. For example, with eight-treasure rice pudding, after noticing the trend of decision-makers for New Year's Eve dinner shifting to Gen Z, Hema partnered with Dongfadao to launch novel flavors like taro, custard, and cheese. Following the rise of co-branding trends, Hema also kept pace, collaborating with "Game for Peace" to launch three chicken dishes: crispy roast chicken, spring chicken, and Hainanese chicken rice. Additionally, it co-created a new flavor of "Big Butt Face" ice cream with Tims, maple macchiato, using co-branded products to expand influence across circles and attract young consumers.
Based on "people" and "goods," Hema's shaping of "place" also imbues it with value transmission, creating a good shopping experience while subtly conveying brand philosophy. For example, the pop-up store "No Problem Knowledge Supermarket" co-created with Dr. Dingxiang features health eating tips and myth-busting information throughout; for customers with different dietary preferences, it cleverly sets fun labels, such as the snail noodle area dubbed "Smelly but Compatible Club," which not only highlights Hema's brand characteristics but also cleverly conveys a healthy lifestyle.
The three elements of "people, goods, and place" each have their own characteristics, but ultimately need to center on "people." Hema has precisely grasped the marketing lifeline based on "people," enabling it to break through with distinctive marketing in hot topics time and again. Compared to Hema, Sam's marketing clearly lacks a bit of "human touch." First, Sam's marketing strategy tends to be traditional, focusing on product display, placing "goods" above "people." Taking Sam's Mid-Autumn advertisement "Beware of Good Things Not Staying" as an example, although its creative concept is clever, it fails to stimulate audience participation, with sparse comments. Admittedly, the quality of Sam's products is its core competitiveness, but this one-way output marketing lacks two-way interaction with consumers, inadvertently building an invisible wall between the brand and customers. Second, Sam's marketing methods are relatively limited and monotonous, making it difficult to touch consumers' desire for exploration. Comparing the apps of Sam's and Hema, one finds that the latter, through diversified sections like Hema Town and Hema Fans Talk, integrates fun games and community interaction, using consumption to build social connections and social interaction to drive consumption, effectively enhancing user activity and stickiness. In contrast, Sam's app design leans more toward a pure shopping platform. Although this focuses on consumption, outside of consumption, consumers rarely think to open the Sam's app.
Image: Comparison of Sam's and Hema apps
In fact, Sam's has a solid foundation for creating hit products, such as the giant instant noodle bucket launched at its Shenzhen flagship store in April, which sparked online buzz and was snapped up. However, due to cost reduction needs, Sam's investment in marketing is relatively limited, relying more on product word-of-mouth to drive market response. Yet, Sam's recent "mystical marketing" in public opinion has risen and then backfired, coupled with frequent food safety doubts, tightening online public opinion. With its expansion strategy into lower-tier markets underway, perhaps borrowing Hema's marketing strategies to close the distance with Chinese consumers, expand market influence, and enhance brand affinity could serve as a shock absorber in public opinion. For Hema, while it can "play" adeptly in the public opinion arena, how to maintain its advantage and "play" to new heights is a topic it urgently needs to explore.
Sam's Standard vs. Hema's Speed: The Battle of Product "Precision" and "Variety"
Despite Hema's unique marketing, its products cannot effectively carry traffic, so it still struggles to threaten Sam's, which has solid product strength. In building its product matrix, Sam's adheres to the concept of "wide SPU, narrow SKU," pursuing comprehensive coverage of product categories while strictly selecting within each subcategory, typically offering only 1 to 3 premium products for members, pre-screening brands and quality for them. For example, in the chilled fresh milk category, Hema's shelves have nearly 30 options, JD Seven Fresh has over 40, but Sam's has only 3. To select the most cost-effective products, Sam's procurement team and standards are quite strict. In the procurement team, everyone is a product manager. It is understood that Sam's recruitment for procurement particularly favors those with overseas study experience, having lived in a more mature commodity society, thus having higher product aesthetics. Sam's product selection standards also have a unique process. A retail industry insider revealed, "Sam's product standards are far stricter than national standards. Product manufacturers need to sign separate specification sheets, undergo unannounced 'flight inspections,' and pass Sam's internal quality checks, SGS, and Tianxiang's three quality check gates." Specifically, during the selection phase, Sam's procurement team, when judging whether a product is worth listing, will first negotiate with industry leaders to leverage scale effects for the lowest cost. If the price does not meet expectations, they flexibly turn to second-tier or related mature enterprises, continuously seeking the best cost-performance. Even for externally sourced products, Sam's will apply a certain degree of "Sam's standard" transformation. For products produced according to Sam's standards, Sam's implements a comprehensive "exclusive sales" strategy, giving suppliers huge procurement volumes, sometimes achieving sales of hundreds of millions for a single product, bringing substantial returns to suppliers. However, if externally sourced brands fail to meet standards, Sam's relies on deep insights into member needs and massive data accumulation to independently develop new products. For example, its private brand Member's Mark, although only accounting for 25% to 30% of total products, contributes nearly 40% of Sam's China's revenue. Guided by selection principles and "Sam's standards," external sourcing and self-development work in tandem to ensure every product meets the highest quality standards, not only accelerating members' shopping decisions but also solidifying Sam's brand image as a "symbol of quality life." At the same time, this strategy attracts more quality suppliers, forming a positive cycle.
Compared to Sam's, Hema is slightly inferior in product strength. Although it uses "Move Mountain Price" marketing to "bump" Sam's products, boasting higher durian content and lower prices in the durian mille crepe price war, this single-point breakthrough approach cannot fully demonstrate the brand's overall product competitiveness and advantages.
Image source: Xiaohongshu
Overall, Hema still maintains the style of domestic supermarkets, with a wide variety of products; Hema Fresh's offline stores have over 5,000 SKUs (reduced to about 1,800 at the beginning of 2024). Additionally, although Hema has a high frequency of new product launches, its product planning lacks stability to some extent. It is reported that Hema's private brand products have an average update cycle of 45 days, while for series products it is only about 30 days. Although a rich product variety and rapid iteration provide consumers with more choices, it also means less effort is invested in each product during the selection phase, lowering quality requirements and increasing uncertainty in product benefits. For example, at the end of 2023, Hema removed over 3,000 underperforming products. In contrast, Sam's product planning period is typically 12 to 18 months, with a particular focus on the breadth of consumption scenarios and product life cycle, tending to avoid short-shelf-life and highly seasonal products, instead focusing on products with a life cycle of at least one year, aiming to ensure broad market acceptance and sustained consumer repurchase rates. Furthermore, there is another significant difference in business layout: Sam's does not engage in live seafood, but live seafood is a key business for Hema.
Image: Hema seafood area
Sam's has explained that live seafood is prone to death, disease, and secondary contamination during transportation and temporary holding, making it difficult to stably guarantee nutrition and flavor. Additionally, pursuing the full freshness of fish and shrimp from catch to store requires high logistics costs and high product loss rates, which inevitably push up product prices and affect cost-performance. The more core challenge is that standardization of live seafood products is extremely difficult, and Hema Fresh often suffers criticism for quality control issues. For example, customers' lobsters, after being processed by Hema, significantly decline in quality, causing deep disappointment. This "unstable deliciousness" consumption experience severely undermines customer trust in the Hema brand. The author believes that in the face of the many challenges in the live seafood market, as the saying goes, "the bigger the waves, the more expensive the fish," Sam's absence provides an opportunity for Hema. Hema should seize this to deepen its live seafood business, build a solid competitive barrier, and create a unique moat.
Supply Chain Determines "Life and Death"
Delving deeper into product competition, it is essentially a battle of supply chain systems. To provide members with products that combine quality and affordability, Sam's has a strict supply chain management system. Upstream, Sam's establishes stable long-term cooperation with source manufacturers, locking in resources when raw material prices are low, thereby resisting market fluctuations and ensuring stable product prices. At the same time, Sam's imposes raw material management requirements on cooperative suppliers from both cost and quality dimensions. Taking bird's nest porridge as an example, Sam's forced suppliers to go to Indonesia to restructure the bird's nest supply chain, achieving raw material traceability, factory upgrades, and scale expansion, successfully significantly improving the cost-performance of bird's nest porridge, from the original 300mg6 bowls at 168 yuan to 600mg6 bowls at only 119 yuan.
Image: Sam's bird's nest porridge
In the midstream, Sam's conducts full traceability through internal teams and third-party companies, covering raw materials, design, packaging, distribution, and display, striving for excellence in every link, removing redundancy, and directly returning every penny saved to consumers, with some products achieving price reductions of up to 35%. For example, Sam's eliminated the unnecessary card insert design for a private brand health product, directly reducing packaging cost per unit by 0.2 yuan. Additionally, Sam's products generally use large portion packaging, with high unit price but low average price, achieving cost-performance through scale sales. Downstream, it builds an omni-channel system, strengthening online e-commerce, entering JD.com, setting up front warehouses, etc., to broaden market coverage and amplify scale effects. In 2023, Sam's deployed nearly 500 front warehouses across 25 cities, achieving an efficient 1:10 linkage between stores and front warehouses. With an efficient delivery system, Sam's online business thrives, with orders accounting for over 50%, and annual online sales approaching 40 billion yuan. Vertically, Sam's optimizes the entire industry chain, reducing costs and improving efficiency, thereby providing members with affordable prices in a healthy and sustainable way. Horizontally, leveraging its global supply chain advantages, it carefully selects global premium products to meet members' high-quality needs. A Sam's employee once said, "We have local retailers and supplier resources in various countries, and we have mature and stable logistics partners for international trade by sea and air. Whether it's accessing the most upstream supplier resources or coordinating logistics and transportation, we can supply globally selected products to the Chinese market." Furthermore, Sam's is backed by Walmart, and with Walmart's deep supply chain resources, it is like adding wings to a tiger.
Looking at Hema's supply chain, despite the support of internet companies, it still has a certain distance from Sam's in refined management. However, it is worth mentioning that Hema is currently actively engaged in global expansion, continuously increasing the breadth of its supply chain. In early April 2024, Hema set sail overseas, with the first stop in the United States, entering 99 Ranch Market and Yami website. Its private brand products topped the new product charts on the East and West Coasts in the first week of listing, and by July, sales had surged 3.6 times compared to May.
Image source: Hema Weibo
In early August, Hema followed up by expanding its overseas footprint to Singapore, with private brand products landing on the e-commerce giant Lazada platform. From Hema's current actions, it is still in the trial stage of going overseas, not involving physical supermarkets, but adopting a light-asset strategy for private brand products, selecting small packages, long shelf life, and domestically popular food categories, steadily exploring the international market. The path of going overseas is fraught with challenges and opportunities. To further expand its global presence, Hema needs to confront and solve multiple difficulties, including deepening understanding of local cultural customs and consumer preferences, overcoming stringent product standards, and how to solve supply chain challenges in depth.
Sam's and Hema are both mentors, friends, and rivals. Hema excels in marketing innovation and fresh food advantages but is slightly inferior in product strength and global supply chain. It should uphold its existing advantages while learning from Sam's strengths, refining product strength, and expanding the global supply chain to narrow the gap. For Sam's, the warehouse membership store model has taken root in China. For future market expansion, besides opening new stores, it needs to master marketing, break through circles, and strengthen brand influence. From an industry perspective, the membership supermarket track is already fraught with competition, with Costco, Yonghui, RT-Mart, and other brands eyeing the Chinese market, and competition is intensifying. How the story of Sam's and Hema, this "happy couple of rivals," will unfold is worth watching.