Wang Li, a resident of Wangjing, Chaoyang, Beijing, went to Carrefour to buy New Year goods as the Spring Festival approached, only to find that most products in the store were labeled with 'Fu Qi Xin Xuan' (Blessing Heart Selection), and these labeled items could not be purchased with her stored-value card. 'Before entering the store, at the checkout, I saw an elderly man buying a dozen Supor pots. At the time, I thought it was ridiculous, but after entering the store, I realized that compared to the remaining items that could be bought with the stored-value card, the pots might have had a smaller price increase and were less likely to expire if hoarded,' Wang Li said. In fact, Wang Li's experience is not unique, and after multiple locations saw empty shelves and restrictions on stored-value card use, Carrefour's management had to step in early January to refute rumors of bankruptcy. In stark contrast to Carrefour's downturn, warehouse club stores have been expanding rapidly, with viral products like Swiss rolls, roast chicken, and mochi. For example, Sam's Club added 6 new stores in 2022 alone, including the Daxing store opened at the end of last year; on the 10th of this month, Costco will open its second store in Shanghai, the Pudong store. As a local player, Hema has opened 9 Hema X membership stores nationwide, including another new store in Shanghai this January. While established players are opening stores in various cities, new players are also entering the fray. Early last month, Gaoxin Retail announced that it would open its first warehouse club store, M Membership Store, in Yangzhou on April 28. With the influx of new entrants and the continuous expansion of incumbents, this track is gradually moving into the deep end, and the time window for new entrants is narrowing. This urgency stems not only from the deep integration of online and offline by existing players, which hinders market share for latecomers, but also from the barriers created by incumbents' continuous efforts in private labels. In terms of online-offline integration, take Walmart, Sam's parent company, as an example. According to its latest Q4 earnings report, e-commerce net sales accounted for 48% of total sales, with a growth rate of 70%. In the recent launch of new categories under 'Sam's Cloud Home,' this integration is even clearer: while launching pianos and camping equipment online, offline stores leverage their physical presence to recreate usage scenarios, allowing members to seamlessly transition between online and offline experiences. In terms of private labels, Hema X Membership Store has been increasing their share. According to Hema, private labels currently account for 40%, and it is expected that in the next fiscal year, the proportion will approach 50%. Clearly, in the warehouse club store track that has entered the deep end, it is no longer a land of milk and honey for new players. Streamlining SKUs and focusing on private labels Sam's Club was the first to introduce the warehouse club concept to China. In 1996, Sam's opened its first store in Shenzhen, selling only to customers who paid for membership cards, which amazed consumers who came out of curiosity. Before that, domestic consumers' understanding of card membership was limited to traditional hypermarket stored-value cards. In Shenzhen in the 1990s, per capita monthly income ranged from a few hundred to a thousand yuan, and having to spend over a hundred yuan on a membership card before shopping was daunting. However, behind the membership card lies the fundamental difference between Sam's and ordinary retail stores: the membership threshold precisely targets middle- and high-income families who prioritize product quality over price. This precise targeting also helps Sam's unify its product selection. Andrew Miles, President of Sam's Club China, once mentioned in an interview that if members' needs are diverse, it becomes difficult to satisfy all members during procurement, which is not conducive to Sam's overall business development. Precisely because it is a paid membership store targeting high-income families, Sam's is tested on its service and supply chain capabilities. First, in terms of service, unlike traditional hypermarkets that offer a wide range of products, Sam's pursues streamlined SKUs. Instead of making consumers anxious with a dazzling array of products, Sam's aims to curate products for members, reducing the time cost of ineffective choices through strict selection. Second, to provide paying members with continuous satisfaction within a limited SKU range, Sam's must continuously introduce products with price advantages or exclusive items, relying on its nearly 200-person procurement team at its Shenzhen headquarters and global procurement teams as support. Although Sam's experienced a period of dormancy in its early years in China, with the rise of the domestic middle class and its unique model, it has now opened 42 stores nationwide after more than 20 years of accumulation. According to public reports, membership fees alone brought Sam's over 1 billion yuan in revenue in 2021. Metro, another veteran warehouse club player, entered China in 1996 as Germany's largest supermarket, with a model of 'warehouse supermarket + corporate customers + professional services.' Compared to Sam's, Metro initially focused on providing products and services to B2B clients, but in November 2021, it shifted to C-end consumers with a brand upgrade. While shifting to C-end, Metro also made corresponding adjustments. According to Metro, first, it streamlined its SKUs. 'In the past, Metro stores might have had 10,000 to 20,000 SKUs, but Metro membership stores have around 6,000 SKUs, of which 40% are private label, imported, or exclusive products.' At the same time, in private label development, on one hand, it created the 'Metro Premium Selection' series based on lifestyle upgrades; on the other hand, it leveraged its B-end advantages to create the high cost-performance 'Yi Ke' series. Additionally, because C-end members are more adventurous than B-end members, Metro continuously iterates and adjusts SKUs in its membership stores while maintaining the same price and quality stability as B-end members. 'For example, we increased the development of snacks, upgraded fresh products, introduced various high-quality beef, premium vegetables, imported fruits, and developed bakery, deli, and prepared dishes,' Metro introduced. Last year, Metro's paid membership in China exceeded 3 million. Undoubtedly, with veteran players like Sam's and Metro entering China and educating consumers about paid memberships, the warehouse club model has gradually become known and accepted, laying a solid user foundation for subsequent players. A clear example is that in 2019, when Costco, the largest U.S. membership warehouse chain, opened its first store in Shanghai, consumers no longer questioned the need to buy a membership to enter; instead, they focused on which products offered better value. Continuous iteration from product selection to store layout Unlike traditional stores that profit from selling goods at a markup, warehouse club stores earn money through membership fees, renewals, and upgrades. This means they must continuously curate products for members and maintain brand appeal through differentiated private label products to sustain growth in paid members. Hema, which joined the warehouse club ranks in 2020, has now opened 9 X membership stores and has nearly 3 million paid users nationwide. Compared to regular Hema Fresh stores, Hema X membership stores cover over 16,000 square meters, 3-4 times larger, and have streamlined SKUs. Each store maintains around 3,000 SKUs, a two-thirds reduction from the tens of thousands in Hema Fresh stores. In product iteration, Hema X membership stores tend to develop private labels based on domestic consumers' living habits. For example, in the deli section, there are white-cut lamb, raw or cooked drunken crab and shrimp. In the food service area, besides traditional roast chicken and beef, they offer beltfish and yellow croaker. Additionally, exclusive items like 'Hema MAX Coconut Water' and butterfly cookies are key attractions for members. By streamlining SKUs, Hema X membership stores enhance single-item selection efficiency, and as they develop, they have even iterated on store design. According to Hema, unlike Costco's strategy of using one standard, one blueprint, and one product set for all stores, each Hema X membership store is different to provide differentiated experiences. 'Among our 9 stores, no two have identical layouts or traffic flows. Theoretically, warehouse club stores are very standard boxes, but for self-built stores, we plan everything from design to construction in advance, based on Hema X membership store characteristics, to create our own box,' Hema introduced. As the pioneer of warehouse clubs in China, Sam's has also been continuously iterating its products, driven by the real needs of paying members. For example, Sam's bakery, beef, and snack categories are often hot topics on social media. At the end of last year, Sam's expanded its product strength to general merchandise: Riedel wine glasses, DeLonghi coffee machines, KitchenAid stand mixers, Tom Ford perfume, Anna Sui clothing... These well-known top brands appear at Sam's stores at affordable prices, becoming part of members' daily consumption. Similar cases of product iteration based on member pain points are also evident in Metro's development. For instance, while the large packaging typical of warehouse clubs visually attracts consumers, for bakery items like mochi, other warehouse clubs commonly sell boxes of 24. For a family of three, it's often hard to finish before the expiration date, leading to waste. Recognizing this pain point, Metro adjusted the product size and price, reducing the number of mochi per box to 16, while keeping the unit price roughly the same as other warehouse clubs. 'Similarly, for fresh milk, other membership stores offer 2-liter bottles, but if members can't finish it, the milk goes bad. Based on this pain point, we made two 1-liter bottles so consumers can open one at a time,' Metro introduced. Additionally, Metro adjusts products in its membership stores based on penetration rate, repurchase rate, and even virality. 'For snacks, consumers always like to try new flavors, so we proactively seek new changes for members. In the second half of 2021, we developed a Mai Mai Bear popcorn in a 1.2kg package designed like a bear. This popcorn is produced by the same factory as Disneyland's, so the taste is guaranteed. Products like this are inherently shareable and can serve as social currency, triggering secondary sharing among members.' The time window for new entrants is closing In fact, traditional stores have also attempted to transform into warehouse club stores. For example, Carrefour opened a warehouse club store, trying to replicate existing models with rows of upright freezers in the frozen section and introducing mochi and Swiss rolls in the bakery category, but it didn't make much of a splash. Perhaps for traditional supermarkets, it's easy to 'copy' existing warehouse club stores in terms of products and even memberships, but what should be recognized is the supply chain accumulation and deep user insight behind warehouse club stores, which are the foundation for rapid product iteration and their core competency. Take Metro as an example: in user insight, through its cooperation with Duodian Dmall in 2019, it advanced in backend fulfillment efficiency, digital transformation, and C-end business development. According to Metro, online sales accounted for 20% in the past year, and with Duodian's system, Metro developed its own online APP business. Based on digitalization, it launched 'Jisuda' delivery within 3-5 kilometers of stores and improved fresh product delivery times and coverage. Metro also mentioned that in 2023, it will continue to innovate in online channels. 'For example, we will add a discovery channel to introduce new products that members may not have planned to buy or never tried, combining products with members' daily lives to satisfy their desire for novelty and bring new inspiration,' Metro said. In product development, according to previous media reports, Hema X membership stores have a monthly new product rate of about 12%, with each store adding over 300 new products per month, and a product replacement rate of about 7%. In supply chain, Hema X membership stores benefit from Hema Fresh's efficient warehouse network, which includes 5 hub centers, 8 supply chain operation centers, over 100 origin and sales warehouses, and 110 trunk routes nationwide. Sharing the supply chain platform with Hema Fresh stores allows for unified coordination and allocation of supply chain resources, resulting in very high product turnover efficiency. At the same time, Hema X membership stores' global supply chain system is maturing, with stable supply relationships with dozens of countries and supply chain bases in Southeast Asia, the United States, and Australia. Notably, while maintaining these routine operations, Hema X membership stores have further elevated supplier relationships through deep co-creation. At a previous Hema press conference, Leng Yijia, General Manager of Shanghai Yibei Catering Management Co., Ltd., expressed her feelings. Before becoming a supplier to Hema X membership stores, Leng Yijia worked at Carrefour as a legal counsel, responsible for drafting and perfecting contracts between the company and suppliers. Although the contracts were meticulously drafted, disputes still arose between the store and suppliers over the years. She was once puzzled, 'Can the zero-supply relationship really not be reconciled?' It wasn't until she left Carrefour to start her own business and became a supplier to Hema X membership stores that she discovered the difference. Initially, Leng Yijia and her team opened a restaurant specializing in fresh handmade dumplings and steamed buns, and after joining Hema Fresh, online sales once exceeded offline store sales. Then the Hema team approached her and suggested transforming the products for retail. Leng Yijia said what impressed her most was the co-creation experience during their cooperation. Initially, Hema proposed a need based on her products: to develop a product that consumers could heat in a microwave in the morning and achieve a texture close to freshly steamed buns. 'We tried dozens of flours and dozens of formulas without success. Finally, the Hema team, during their inspections in Russia and Bayannur, sent us boxes of various flours. Because Russian flour made the products darker, we eventually chose a local Bayannur flour that, after microwaving, remained fluffy, elastic, high in moisture, and high in protein. This product went through dozens of trials,' Leng Yijia said. Hydrogen Consumption learned that through over 6 years of cooperation, Leng Yijia's company now has an annual output value of 100 million yuan, with 2 factories in Songjiang and over 300 employees. Clearly, for new entrants, the obvious difficulty lies in the initial lack of a member base and the fact that consumers' perception of warehouse clubs is dominated by representative players like Sam's, Hema X, and Metro. How to shake consumers' entrenched views of incumbents through continuous product and experience improvement is a challenge. But compared to these visible difficulties, the real challenge is how to break away from the traditional hypermarket model's supplier relationships and shift the business focus from obtaining good 'goods' from suppliers to providing growth increments for suppliers. This might be one of the tickets that new players can still grasp to overtake on the curve.