Warehouse clubs are currently in the spotlight. While foreign brands like Costco and Sam's Club are well-known, domestic brands are emerging in second- and third-tier cities. The author recently visited Qiang Huitao, founder of Hebei Dunjie Supply Chain Management Co., Ltd., who operates the Luxiaoman warehouse club in Shijiazhuang, which has five stores and annual sales of 30 million yuan.
Readers may recall that in 2018, the "New Distribution 100 People" column reported on Dunjie's transformation from a second-tier distributor to one of Shijiazhuang's leading FMCG B2B platforms. Now, Dunjie's Luxiaoman warehouse club has opened five stores in Shijiazhuang, with annual sales reaching 30 million yuan.
The author met with Mr. Qiang at the No. 42 Middle School store. After an in-depth conversation, the author gained valuable insights. Let's discuss Mr. Qiang and his "Chinese-style" Luxiaoman warehouse club!
Taking It Step by Step: Challenges and Opportunities Go Hand in Hand
"It's not losing money now, but back in 2017, it was a loss-making venture all the way!" Mr. Qiang tapped his cigarette ash into the ashtray, sighed deeply, and said with a wry smile. Since opening the first Luxiaoman warehouse club in May, Dunjie has opened five chain stores in Shijiazhuang.
Mr. Qiang explained that the rapid expansion was mainly due to franchising, which allowed Dunjie to avoid direct capital investment and open stores quickly. Dunjie also provides extensive support to store owners, teaching them hands-on how to operate.
"The idea for warehouse stores actually came last year, but due to the pandemic, it was delayed. At that time, the pandemic in Shijiazhuang was severe. The government gave our company a green channel, and we were the only supplier. Normally, we did over 10 million yuan in monthly sales, but in just 20 days, we reached 23 million."
"But being locked down wasn't sustainable; the economy was struggling. So, even while the pandemic was still serious, they lifted the lockdown. As the New Year approached, people returned all the goods they had hoarded, many with only one or two months of shelf life left. We couldn't send these goods out again. That's when I thought of opening a discount warehouse store for near-expiry goods. So, we just opened it."
Mr. Qiang said, "Even if I sell something for 2 yuan that cost me 5 yuan, it's better than throwing it away!" When it first opened, Luxiaoman was located in Dunjie's cloud warehouse, and few people knew about it.
Then Mr. Qiang and his assistant came up with a great idea: they distributed cards for free laundry detergent to small shops like hair salons. Customers who spent money at those shops received a card, which they could exchange for free detergent at Dunjie's cloud warehouse.
Once people arrived and saw the variety of cheap, good-quality products, they started buying enthusiastically. Next, Dunjie upgraded the referral system by encouraging existing customers to bring new ones. They numbered customers who had used the same shop's exchange cards and gave them cards with their own numbers.
If a new customer with a numbered card spent over 99 yuan, the referring customer got 10 yuan back. And that new customer could also become a "card issuer." Word spread quickly, and Luxiaoman's customer traffic grew, with daily sales reaching tens of thousands of yuan, attracting all kinds of customers.
"Mr. Qiang, I noticed many electric bikes outside. The customers I saw were mostly housewives and elderly people. Are they the main customer base?" Mr. Qiang precisely tossed his cigarette butt into a glass bottle, turned to me with a smile, and said, "You're wrong! Wait until 5 or 6 PM, and you'll see all young people like you. On weekends, there are even more, with checkout lines stretching over ten meters!"
"But for now, we can't fully replicate Costco's model. I've visited Costco in Shanghai, but places like Shanghai have better economies and higher consumption levels that we can't match here. We need to adapt to our local market and run a local warehouse store, right? "
Currently, except for the Xinhua store in Dunjie's cloud warehouse, which is 8,000 square meters, and the No. 42 Middle School store at about 1,500 square meters, the other Luxiaoman stores are around 1,000 square meters. Daily sales are about 20,000 yuan, with 400 customers and an average transaction of about 50 yuan. During promotional events, sales can triple, and the gross margin per store is around 15%.
SKU count is around 5,000-6,000, with main categories including fresh produce, food and beverages, kitchenware, and daily necessities. Staffing is kept under 7 people per store. The annual membership fee is 99 yuan, and both members and non-members can enter, but products have member and non-member prices. For items under 10 yuan, members save at least 1 yuan; for items between 10 and 20 yuan, members save 2-3 yuan.
"Consumers care about price. Even if the quality is slightly lower, price is the main focus for most customers. We have to keep prices as low as possible by sourcing directly from factories, cutting out middlemen, reducing costs and losses, so more people will buy!" Mr. Qiang poured some beer into his glass.
"Cheers! Eat the fish!" He placed a steaming grilled fish in front of me. "Let me show you our Douyin account!"
Online Douyin Traffic: Attracting Customers and Franchisees
"Let me tell you, Douyin is great for business. You can do franchise recruitment and promotions on it, and it's free!"
Mr. Qiang opened Douyin and scrolled down. All videos had tens of thousands of views, with the highest reaching 250,000 views.
"You might not come after seeing it once, but if I advertise frequently and you see it repeatedly, eventually you'll want to check it out! Many elderly people here—I asked how they found this place, and they said they watched the Douyin videos four or five times before coming."
Mr. Qiang also mentioned that elderly people have more free time and free bus rides, so they're willing to travel 10-20 kilometers and transfer buses two or three times to shop. This reduces the limitation of store location and allows coverage of more specific groups. "First, attract customers with low prices. Once you have traffic, you can sell anything!"
Since promoting on Douyin, not only customers but also supermarket owners looking to stock up, people from failing real estate and used car businesses, and even those in internet and software industries have come to franchise Dunjie's warehouse clubs.
The franchise process for Luxiaoman is simple: business consultation, qualification assessment, mutual inspection, contract signing, project preparation, and operations management. Dunjie offers three franchise models: free franchise, light franchise, and heavy franchise. Free franchise allows investors to share Dunjie's warehousing and logistics systems. Light franchise costs 20,000 yuan in franchise fees, and Dunjie doesn't restrict sourcing channels.
Heavy franchise costs 200 yuan per square meter plus a service fee of 1% of sales, covering store selection, product selection, store planning, and operational guidance. The total investment is 1,000 yuan per square meter. Mr. Qiang noted that light franchise is more common, especially among those not originally in the FMCG industry.
Regarding why they use Douyin, Mr. Qiang was philosophical. "People don't like reading text now; they prefer Douyin because it's just a few seconds. Just like business transformation, media promotion must keep up with the times. In short, we do what people like to watch, right?" He downed his drink and refilled it.
However, using Douyin has pros and cons. If people like your videos, Douyin's algorithm pushes them to more users, making them appear repeatedly. If people don't like or share, the video disappears into the vast sea. So, merchants need to think from the customer's perspective, encouraging likes and shares to create a traffic effect. For example, elderly people like discount activities, so encourage them to bring friends and relatives, offering an extra 5 yuan off for each additional person. Tailor Douyin content and promotion to the behavioral traits of the target group.
When the stores first opened, Dunjie hired two or three local influencers with 200,000-300,000 followers on Douyin for promotion, costing about 2,000 yuan per post, which brought many customers to the cloud warehouse store. Mr. Qiang then realized Douyin's powerful traffic-generation capability and made it the primary online promotion platform for Luxiaoman.
"Are you full? Let's go lie down in the car and rest!" "Okay!"
The Future Depends on Management; Unique Products Are a Must
When it comes to the future of warehouse stores, core management is essential.
Lowering prices means controlling other aspects, primarily personnel, space costs, and loss reduction.
"We try to keep staff numbers low, with each employee capable of multiple roles. For example, at the checkout, when it's not busy, one person is enough, and the other can restock. The whole store operates on rotating shifts, and every employee has multiple skills, which improves labor efficiency."
Mr. Qiang adjusted his car seat and draped his red Dunjie work jacket over himself. "Monthly rent for a store is tens of thousands of yuan. At 35 yuan per square meter, 1,500 square meters is significant. So, we focus on sales per square foot. Efficient use of space saves costs."
"Also, product display and loss control are crucial. There's a hypermarket nearby that sells white radishes at a premium. I went there and saw their employees neatly arranging the radishes, head to head, foot to foot, and customers were willing to pay."
When discussing losses, Mr. Qiang's expression turned serious. He said, Losses are directly linked to profits; reducing losses is equivalent to increasing profits.
For example, since few people buy Chinese cabbage now, we reduce the order quantity, even if some customers can't buy it, rather than letting it rot. During restocking, we must accurately record expiration dates so that near-expiry items can be handled or promoted promptly to reduce losses.
In addition to strict management, Dunjie also wants to offer as many SKUs as possible so customers can find everything they need and leave satisfied. Mr. Qiang plans to expand the store area from 1,500 to 3,500 square meters and increase SKUs to over 10,000.
Dunjie's cloud warehouse supply chain is entirely self-purchased and agency-based. Most of Luxiaoman's products are directly supplied by Dunjie's cloud warehouse, with fresh produce operated through merchant partnerships and joint operations. In the future, Luxiaoman will focus on household daily consumer goods.
Mr. Qiang laughed, admitting that this approach might not be "authentic," but considering regional differences in lifestyle, he needs to cater to the market and run a warehouse club with "Chinese characteristics."
Like Costco and Sam's Club, Luxiaoman will later introduce signature products for traffic, increase the variety of imported goods, and gradually add trendy internet-famous products that young people like.
Mr. Qiang mentioned that thanks to Dunjie's strong supply chain, they can source at factory prices in Hebei, Shanxi, Inner Mongolia, and other regions, providing a solid foundation for expanding the warehouse club to other cities in the future.
"First, scale up to create traffic and scale effects. Once these effects form, various partnerships and resources will follow!" "Right!"
"Enough talk, let's close our eyes and rest for a bit!"
Final Thoughts:
As warehouse clubs continue to develop nationwide, many new business models derived from them are also emerging.
However, whether it's a foreign-style warehouse club or a "Chinese-style" one, any store that brings more convenience and benefits to consumers is a good store!
In business, first take good care of consumers, and then they'll willingly pay. Don't you agree?
Expert Commentary by Mr. Wang Jun:
I didn't expect Old Qiang to move so fast. Five large chain stores over 1,000 square meters in Shijiazhuang at once! Impressive!
Since we're far apart and I can't visit in person, let's discuss this hot topic remotely based on the interview—warehouse clubs, specifically how local distributors can open them.
I. What advantages do local distributors have in opening warehouse clubs?
They have warehouses ready. With minor modifications, they can have a store in front and a warehouse in back, maximizing cost reuse.
They already represent thousands of products and have partnerships with upstream brands for over a decade, maximizing resource and network reuse.
They serve retail store customers daily, knowing which products sell well and which locations have good foot traffic. Now they can become store owners themselves with higher margins.
By directly facing consumers, they complete the entire chain from supply chain to retail to 2C, forming a strong regional barrier. In a complex business environment, they remain invincible. Previously, they had to find channels for excess inventory; now they can't even keep up with demand!
But in reality, every industry has its own expertise. Retail is a meticulous job, and chain operations are a highly challenging management task. For local distributors, taking this step is not easy. From Old Qiang's sharing, we can try to review how he faced and solved these problems.
II. Warehouse stores have poor locations but low costs. See how Old Qiang handled the first step: "store opening and traffic generation."
Cross-industry integration: distributing cards in surrounding community stores to attract customers to the store.
Old customers bringing new ones: direct fission. Bring one more person, get additional discounts.
Collaborating with local influencers for online advertising.
Building their own Douyin account for local promotion, attracting customers and franchisees simultaneously.
Of course, the prerequisite for successful traffic generation is lowering prices!
These seemingly simple marketing actions are not easy to execute well. Persistently exploring and finding a high-ROI marketing method that suits you is the hardest part. You must keep trying, not simply copy, and not get frustrated if results don't show immediately. Methods have no right or wrong, and they're not universal.
III. Create high sales per square foot in single stores, form a model effect, and build brand impression.
"What kind of store is this? Why would consumers choose to come to your store?" — This is the question I most want to ask Mr. Qiang.
Retail competition is fierce and long-term; there's never eternal loyalty. The logic of warehouse clubs is usually poor location, average shopping environment, and extreme cost savings to achieve extreme retail prices.
Encourage bulk purchasing, streamline SKUs and SPUs to achieve high sales volume for each listed product, and form a positive premium with brands.
I see Mr. Qiang's next step is to expand the area and categories. That's the traditional hypermarket approach. Expanding categories provides more choices but also increases operational costs and blurs your store's label. My conservative suggestion is to re-evaluate this.
IV. How to expand and replicate
Franchising is always the fastest expansion model. Maintaining the location and operational efficiency of franchise stores is the key to healthy development. We've seen many excellent local warehouse clubs across the country and almost all retail giants trying this.
Our suggestion is to simplify: streamline the operational management concepts to be executable, stick to principles, and as long as franchise stores don't deviate, the valuable experience of the model store can be maximized.
Special thanks to Mr. Qiang Huitao, founder of Hebei Dunjie Supply Chain, for his strong support for this New Distribution interview!
Special thanks to Mr. Wang Jun for his in-depth and detailed professional commentary!
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