18 July 2019

How Sam’s Club found its way back in China

In 1996, when most Chinese consumers used to buying things from mom-and-pop stores were only beginning to grasp the supermarket concept, Walmart offered a radical alternative.

The world’s largest discount retailer named it Sam’s Club, after its eponymous founder, Sam Walton.

It was a massive warehouse and wholesale market that looked nothing like its bright, neat supermarkets with white walls.  

Sam’s Club failed to resonate with Chinese consumers — it was too far ahead of its time. Two such outlets in Changchun and Kunming were shut in 2003 and 2004 due to dismal sales, Economic Weekly reported.

A decade later, with competition among traditional supermarkets driving margins thinner and increasing car ownership making commutes to the suburbs no longer an issue, Walmart is resurrecting Sam’s Club.

Walmart spent 15 years to build six such outlets as of 2012. It plans to open an additional seven new stores in the next two years, obviously betting against the lackluster retail climate. 

There’s logic to this madness and this time, things might actually work out fine.

With traditional supermarkets crowding out each other in urban centers where they already contend with soaring rent and too much competition, Walmart is scattering its assets around the country and getting a little help from surging car ownership.

That means its stores, no matter the location, are reasonably accessible and buyers seeking bargains will find the trip worth it.

China’s expressway system is nearing 100,000 kilometers. The number of private vehicles has topped 85 million. And the burgeoning middle class likes to drive out of town for their daily needs. These are the kinds of numbers Walmart is building on with its Sam’s Club concept. 

It’s down to geography and basic amenities. Most of its stores are near the entrance to expressways or the intercity grid, with ample parking space to boot. For instance, the newly opened 25,000 square meter Suzhou store has 1,700 parking slots.

Also, by building its stores away from urban centers, Sam’s Club is able to substantially cut land acquisition and construction cost.

A Sam’s Club can serve up to 500,000 people within a 50-80 kilometer radius, a senior Walmart China executive told Nanfang Daily. Soon, there will be a Sam’s Club in Tianjin, Ningbo, Nanjing and Chengdu.

The expansion does not stop there. Sam’s Club is joining forces with mall operators to capture a growing market of consumers who spend the weekends for family recreation and shopping.

– Contact the writer at [email protected] 




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