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Warehouse-style Membership Stores Usher in an Explosive Period in China



Driven by consumption upgrades and the rapid development of the new retail industry, warehouse-style membership stores are increasingly becoming a consumption trend. With the opening of the American Costco store in Shanghai in August 2019, coupled with the entry of Metro, Chinese fudi, Hema and Carrefour, the retail membership store track is getting hotter with more and more new entrants.


The development of warehousing member stores has developed rapidly in recent years, which is determined by many factors. In the early years, China's consumption habits liked to shop nearby. On the day of buying on the same day, the purchase volume was less. With the improvement of people's requirements for quality of life and the impact of the epidemic, many people's shopping habits are gradually changing, and they are more inclined to buy, and the volume of single purchases becomes larger.


In the current market structure, the two global giants still have apparent advantages. Sam is the first warehouse-style membership store to enter the Chinese market. It has been deeply involved in the Chinese market for 26 years. It mainly targets mid-to-high-end consumer groups and takes root in first-tier cities such as Beijing and Shanghai. Regarding business philosophy, Sam focuses on low-margin operations, mainly earning profits by charging membership fees, and the products themselves hardly make money.


Costco is the largest chain membership warehouse store in the United States and has always been famous worldwide for its preferential prices and high-quality products. Costco has a large number of members and a stable supply chain, and it can provide members with high-quality products at the lowest prices in the market. The data shows that Costco's average gross profit rate is 10%, and the gross profit rate of a single commodity does not exceed 14%. Regarding the product concept, Costco will also choose the most popular brand products in the market, sell them in large quantities of packaging, and continue introducing new imported products to increase product diversity.


According to the report released by the China Council for the Promotion of International Trade Research Institute, according to the development experience of retail formats in various countries, a certain level of national income corresponds to a dominant retail structure. The per capita GDP is around US$10,000, the growth period of warehouse stores and shopping malls. In the 1990s, China's per capita GDP was only 5,569 yuan. In 2021, the per capita GDP reached 80,976 yuan (US$12,551). Coupled with years of market cultivation, the paid membership system has also begun to be recognized by consumers, which has brought opportunities for the rapid development of the warehouse membership industry.


In addition, with the overall decline of traditional large-scale supermarkets and other hypermarket formats, the advantages of warehouse-style member stores in terms of goods and services have become prominent. In recent years, under the impact of e-commerce, community group buying, and the epidemic, a large number of traditional supermarkets have begun to seek transformation and explore new growth points. The rapid development of leading companies such as Sam and Costco in the Chinese market in the past two years has also directly led to the transformation of more companies, adding factors of consumption upgrades, and the entire industry has entered a golden development period.





 

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