Warehouse club stores are surging ahead, but why are they so popular? On August 26, Hangzhou's first Costco opened. On the first day, the crowd was so huge that parking queues took at least an hour. The mall, originally scheduled to open at 9 a.m., opened 40 minutes early and began restricting entry after 10 a.m. This is Costco's fifth store in mainland China. Every previous new store opening has seen similar scenes. As early as August 2019, the first mainland Costco opened in Minhang District, Shanghai. The parking lot was packed the night before, and within 10 minutes of opening, entry was restricted; within 20 minutes, the store and surrounding area were so crowded that traffic was paralyzed, and checkout queues took 3 hours—a surreal scene unprecedented in China's supermarket industry. By December 2021, Costco's second mainland store opened in Suzhou, Jiangsu Province, with first-day sales reaching 10 million yuan, setting a record for first-day sales in Chinese hypermarkets, with an average daily customer count of 19,980. In contrast, traditional supermarkets are struggling. On August 26—the same day as the Hangzhou Costco opening—Guangzhou's last Carrefour store, Carrefour Guangzhou Xinshi, ceased operations. On July 31, Vanguard's Changsha Huachen Century store announced the closure of both offline and online businesses. On July 26, Lotus's Shantou MIXC store closed. Earlier, Fuzhou Century Lianhua Zhongting Street store and Walmart Fuzhou Dalijia branch also announced closures. Carrefour, once known as the "godfather of hypermarkets," closed 106 stores in the first half of the year alone. In terms of performance, traditional supermarkets generally performed poorly in the first half of this year. Yonghui Superstores' revenue fell 13.76% year-on-year, and its financial report mentioned the closure of 29 stores in the first half. Lianhua Supermarket saw both revenue and profit decline, with net profit attributable to parent company at -116 million yuan. Also mired in difficulties are Hunan's leading local supermarket Bubugao and Guangdong's well-known Renrenle. Although they have reached acquisition agreements with state capital, they still reported declines in both revenue and net profit in the first half. During the reporting period, Bubugao closed 65 stores, and Renrenle closed 6 stores. Carrefour has been plagued by negative news such as拖欠 supplier payments since the end of last year. In the first half of this year, Suning.com's net profit was -1.93 billion yuan, of which Carrefour's net loss attributable to parent company was -1.293 billion yuan. As of June 30, Carrefour had only 41 stores left in the mainland market. The development gap between warehouse club stores and traditional supermarkets is stark. Why have warehouse club stores developed so rapidly in recent years, and what advantages do they have over traditional supermarkets? Warehouse Club Stores vs. Traditional Supermarkets First, warehouse club stores and traditional supermarkets differ significantly in location. Warehouse club stores are typically located in areas away from city centers, with large sales areas, bulk packaging, large parking lots, and shopping carts that can accommodate two-child families. They target middle-class families with cars who need regular bulk purchases. This target group has certain spending power, pursues quality and high cost-performance, and is therefore more willing to pay annual membership fees. Additionally, warehouse club stores have far fewer SKUs. Traditional supermarkets, especially hypermarkets, typically have tens of thousands of SKUs, while warehouse club stores have only a few thousand. This reflects a different product selection logic. Warehouse club stores only stock curated products, while traditional supermarkets stock everything for consumers to choose from. More importantly, for these few thousand SKUs, warehouse club stores often have global supply chains, bypassing intermediaries to offer prices close to cost, attracting members and achieving high average transaction values, high repurchase rates, and high turnover, while also creating hit products. Take Sam's Club as an example. According to New Consumption Think Tank, Sam's has a grain-fed beef product that ranks in the top three most popular private-label items among Chinese members. This product is highly popular on the sales side, and Sam's controls 80% of the supply of Australian grain-fed 100-day beef in China. Leveraging its supply chain advantage, it can price an Australian sirloin steak at as low as 30 yuan. Costco also focuses on high cost-performance, actively reducing gross margins, requiring that gross margins not exceed 14%, selling products as close to factory prices as possible, and striving for an inclusive pricing strategy to attract and retain members. The differences in product supply chains also determine different profit models: traditional supermarkets rely more on supplier entry fees and product price differences, while warehouse club stores rely more on membership fees. Under the impact of community group buying and warehouse stores, people's consumption habits are changing, and the living space for traditional supermarkets is being squeezed. Compared to the past when people preferred to "browse" at nearby supermarkets, now online can meet 80% of daily shopping needs. If they must go to a supermarket, for middle-class families, driving to a distant but cost-effective warehouse club store on weekends to "stock up" is more in line with current shopping habits. Therefore, traditional supermarkets are also trying to reverse this situation through the new "membership store" format. For example, Vanguard launched Wanjia LiFE, a community store format centered on families, covering a 5-10 minute walking radius. Carrefour and Yonghui have also attempted to upgrade hypermarkets into membership stores or warehouse stores, but Carrefour has only opened 4 membership stores and closed 2; Yonghui's warehouse store ceased operations after just one year. As mentioned above, warehouse membership is just a form; the core is product cost-performance. The strong supply chain capabilities of warehouse club stores are not something traditional supermarkets can catch up with overnight. At the same time, the business models and logic formed by traditional supermarkets over decades of development are not easy to change. Hema, Sam's Club, and Costco: A Three-Way Standoff On August 12, 1996, Sam's Club opened China's first warehouse club store in Shenzhen. In the first three days, sales exceeded 2.5 million yuan, setting a retail record in Shenzhen at the time. Subsequently, Makro, Metro, and PriceSmart rushed into the Chinese market. However, China at that time was not fertile ground for warehouse club stores. Many brands closed or transformed into hypermarkets, and only Sam's survived, but it entered a dormant period, opening only 26 stores in the 23 years from 1996 to 2019. In 2019, the opening of Costco's Shanghai Minhang store reignited hope. Since then, this track has become lively again. On October 1, 2020, the first Hema X Membership Store opened and declared profitability just two months later. As of December 2022, Hema X had opened 9 stores in China, with average transaction value growing about 30% year-on-year. This year, Costco opened new stores in Shanghai, Ningbo, and Hangzhou, all with booming business. Sam's Club, dormant for years, has also accelerated store openings. Currently, Sam's has opened 45 stores nationwide, with the pace of openings in the past two years more than five times the compound growth rate of the previous 23 years. Its parent company Walmart also specifically mentioned in its fiscal 2021 report that Sam's Club's strong sales drove China's business, with double-digit growth offsetting weak hypermarket sales. In China's booming warehouse club market, a "three-way standoff" among Hema, Sam's Club, and Costco is emerging. As foreign brands entering the Chinese market, Sam's and Costco have been competing continuously. Sam's entered the Chinese market earlier, is more familiar with it, and responds faster, thus having more stores. Currently, Sam's has 45 stores nationwide, while Costco has only 5, but with 5 new stores planned, it will reach 10 nationwide. Geographically, the main battlegrounds for Sam's and Costco are the Yangtze River Delta and Pearl River Delta. Costco has confirmed 3 stores in Shanghai, with 2 open. In addition to Ningbo and Hangzhou, Nanjing will get a store in 2024. By the end of 2023, Costco will enter the Pearl River Delta, opening a store in Shenzhen, with Guangzhou also in the pipeline. Sam's has been heavily focused on Shanghai, opening its largest global store and China's first flagship store in Waigaoqiao in 2021. Sam's currently has 5 stores in Shanghai, with at least one more in planning. In terms of membership numbers, as of December 2022, Sam's membership exceeded 4 million. Based on a basic membership fee of 260 yuan, annual fees alone generate 1.04 billion yuan for Sam's. For Costco, due to the limited number of stores, membership numbers are still small and accumulating. Private labels are also a competitive point for warehouse club stores to provide differentiated services and retain long-term customers. Currently, both Sam's and Costco have private label shares exceeding 30%. Sam's popular Swiss rolls, durian mille crepes, and other products are from its private label Member's Mark. Costco also has its own brand, Kirkland, to ensure advantages in private labels. From a supply chain perspective, both overseas mature warehouse club brands have strong supply chain capabilities, but with differences. Relying on Walmart's global supply chain built over 30 years, Sam's global sourcing advantages are obvious. Although Sam's and Walmart are currently two independent procurement teams, Sam's can share Walmart's suppliers and logistics resources. This allows Sam's to access retailers and suppliers in various countries and regions, with mature partners in sourcing and logistics. Additionally, Sam's adheres to a strategy of focusing on specific single products, increasing purchase volumes, thereby giving it strong bargaining power and reducing procurement costs. For example, after Philips portable kettle entered Sam's system, shipments grew rapidly, achieving scale, and the partner manufacturer added 5 production lines to accommodate, with bulk purchasing achieving lower prices. Costco adopts a strategy of ultra-low SKU + scale procurement + strict selection. A professional, large procurement team pre-selects products in the same category, keeping only the 2-3 most cost-effective items on shelves, solving customers' product selection problems while offering the lowest prices. Therefore, Costco's SKU count is often lower. This low-SKU strategy also compresses inventory cycles; Costco's inventory turnover is only 30 days, far lower than Walmart's 43 days. At the same time, Costco's Kirkland brand can compensate for external supplier disadvantages. When Costco determines that a brand cannot be sold at the most economical price in the store, it seeks suppliers to produce similar products under the Kirkland brand to meet consumer demand. Hema X Membership Store is the first domestic brand to enter the warehouse club track and is seen by Sam's as its only competitor in the Chinese market. Currently, Hema X has 9 stores, and Hema has nearly 3 million members. Although Hema is in the same warehouse club supermarket track as the other two, its positioning differs. Sam's and Costco generally have high unit prices and large portions, targeting family-oriented consumers who "stock up." However, in the context of China's current single-person economy, Hema takes a different path with small packaging, cultivating more convenient and casual shopping habits. In terms of supply chain, Hema's core advantage lies in its fresh products. First, Hema's strong supply chain system for fresh products comes from its vast upstream resource advantages. Currently, Hema has over 70,000 mu of land globally, providing more than 5,000 types of fruits, vegetables, meats, and seafood. Second, Hema Fresh ensures supply by signing cooperation agreements with upstream suppliers. During cooperation, Hema Fresh strictly controls and screens suppliers to ensure high-quality upstream supply. At the same time, Hema Fresh ensures product quality from the source. To better understand the growth of various fruits and vegetables, Hema has established its own agricultural base in Shanghai. Apart from fresh products, Hema is weaker in supply chain compared to the other two brands. Compared to the two veteran warehouse club brands that can sell Moutai and designer bags at low prices, Hema still has shortcomings in product procurement and price competition. From another perspective, compared to Sam's and Costco, Hema, which grew out of Alibaba, has a unique advantage: precise control over online e-commerce models. To support its more convenient and casual shopping approach, Hema first built a mature online delivery system rather than membership stores. First, Hema adopts a three-tier architecture of "front warehouse + store + delivery personnel." To deliver products to users as quickly as possible, Hema's delivery team often arrives at the user's location within half an hour and delivers within 30 minutes. To enable fast receipt, Hema also uses a "pre-sale system," where after a consumer places an order, Hema processes the order first, then allocates inventory. This reduces inventory backlog and ensures products reach users in the shortest time. Additionally, Hema uses a "self-built logistics + cooperative logistics" model, enabling next-day or second-day delivery. In contrast, Sam's currently uses a model of "stores (located in suburbs) + cloud warehouses (urban front warehouses)," building a cloud warehouse network within each store's city, offering express delivery based on stores and front warehouses, achieving integrated online-offline development. Currently, about 55% of Sam's orders come from online. Costco's online model is just beginning. Currently, Costco has chosen to cooperate with a third-party service provider, Tiaotiao Shopping. Officially, Tiaotiao Shopping is designated as Costco's official online mall. According to the background company shown on the Tiaotiao Shopping mini-program, it is affiliated with a company called Shanghai Leli E-commerce Services, with Youzan providing technical support. Tiaotiao Shopping only serves Suzhou, Wuxi, Nantong, Ningbo, and Hangzhou; other places, including Shanghai where Costco has stores, do not yet support ordering and delivery. Currently, Costco's online sales are mediocre, and whether it will operate its own online mall in the future is unknown. Costco has strong supply chain and procurement capabilities, Sam's enjoys the dividends of entering the Chinese market early, and Hema quickly acquires customers through its strong fresh supply chain and digital capabilities. Each of the three players has advantages and shortcomings. Under the competition among these giants, the industry is flourishing, and other local Chinese warehouse club brands are emerging like bamboo shoots after rain. Rise of Local Brands fudi is the fastest-growing local warehouse club brand besides Hema. Since its birth in May 2021, it has opened 3 membership stores and 2 premium supermarkets in Beijing, accumulating over 188,000 members. Additionally, fudi plans to accelerate expansion, adding 15 new stores in 2024. fudi's membership system is relatively rich. Especially after exceeding 188,000 members, fudi launched a new 188-yuan annual membership, a "lightweight" membership introduced in response to consumption habits shifting toward lighter and essential needs observed over the past two years, mainly for omnichannel purchases. In supply chain, fudi relies on its parent company Yaodi Agriculture's 7 years of fresh supply chain accumulation through its community premium supermarket brand "Caixian Guomei." Yaodi Agriculture has established over 100 bases in multiple domestic locations and has its own agricultural bases in the Philippines, Vietnam, Thailand, etc., with cumulative planting area of 269,000 mu. Comparatively, although fudi's supply chain base count is similar to Hema's, fudi has not publicly disclosed its private label development, meaning the depth of cooperation with supply chain bases may need to go a step further. Against the backdrop of multiple difficulties facing traditional supermarkets, many traditional supermarket brands are testing the warehouse club track. RT-Mart's parent company, Gaoxin Retail, is one notable example. On April 28 this year, Gaoxin Retail's first M Membership Store opened in Yangzhou, with over 3,000 curated SKUs, and paid members exceeded 30,000 before official opening. Leveraging its parent company's core capabilities accumulated over years, Gaoxin's M Membership Store uses RT-Mart's membership system and, thanks to its strong property base, opened the store in the city center at low cost. In digital services, due to deep cooperation with Alibaba, M Membership Store launched "express delivery" at the outset. Currently, M Membership Store offers delivery within one hour to consumers within a 5-kilometer radius. Based on years of deep cultivation in product supply chains, Gaoxin M Membership Store quickly launched its private label "Member's Premium," containing over 300 products, accounting for about 10%, covering fresh fruits and vegetables, seafood, meat, poultry, eggs, dairy, and bakery. In the future, the number of "Member's Premium" products will continue to increase. In addition to Gaoxin Retail, Jiajiayue, founded in the 1980s, opened its first warehouse club store in Jinan at the end of 2021. The store has about 3,000 curated SKUs, all independently packaged and customized, with half sourced from overseas. In product selection, Jiajiayue classifies and quantifies consumer characteristics, consumption habits, core suppliers, key category trends, and display space data based on its membership system, business system, and product data. Focusing on market and target customer needs, a professional procurement team of over 400 people is responsible for special selection from more than 30 countries and regions. In supply chain, Jiajiayue has over 200 global overseas bases. Domestically, it has established over 1,500 direct procurement bases, including cooperation with over 200 agricultural product cooperatives and farms, supporting direct procurement of over 80% of fresh products. It is also worth mentioning that Jiajiayue's central kitchen is considered top-notch in the industry, making fresh and cooked foods highlights of its membership stores. Conclusion As consumers become more accepting of paid membership systems, the warehouse club supermarket battlefield is becoming more lively. There are experienced and strong foreign brands, local new forces born from internet companies, and latecomers with their own advantages. In the future, as the industry matures and the market expands, how to maintain supply chain advantages and retain consumers with better products, services, and experiences is an issue brands cannot ignore.