The opportunities and challenges about Sam’s club：Pioneering a new era in retail
Sam’s Club is a Walmart-owned small-scale retail shop located in four countries and a pioneer in the adoption of membership-based retailing. Sam’s Club is enhancing its online and offline, in-store and at-home integration. It is recruiting more target customers through digital marketing, superior customer experience and aggressive development into new sales channels.
Opportunity: During the Covid-19 pandemic, Sam’s CEO Kath McLay notes that Sam’s members have become younger and more digitally savvy.
1: Changes in consumer attitudes
As the new generation of consumers becomes more brand conscious about the products they use every day, they are also spontaneously sharing and interacting with content related to their consumer lifestyles on social networks. For example, Xiaohongshu(Little red book) currently has 751.8million views on its ‘Sam’s Club’ related posts, up from 215.5million for its old rival Costco. This has led to some customers’ shopping lists seemingly referencing the “Sam’s must-haves” on the social media platform. Judging from the results, Sam’s Club’s KOL marketing and placement strategy has certainly been a success. With the joint promotion of big and small netizens and ordinary users, Sam’s has successfully transformed itself into a new generation of netizen shops. Consumer choice determines the rise and fall of retail formats, and this trend has helped to fuel the growth of Sam’s Club’s business.
2: The emergence of E-commerce
Sam’s Club is concentrating particularly on the growth of its internet business in addition to its physical stores. Currently, Sam’s e-commerce platform is able to fast fulfil orders within an hour by stocking its own products in “Jingdong warehouses” and delivering products by Jingdong, converting Jingdong’s customers into its own and luring more of them to sign up as members. More than 1,000 different everyday goods for high-frequency consumption can be supplied in one hour, covering all cities where Sam’s shops are present. In addition, the great majority of the nation is now serviced by Sam’s own e-commerce platform (Sam’s Member Shop App).
3: Catering to the fast pace of life in China
Sam’s Club has introduced the Scan & Go and scan&ship smartphone apps to enhance member convenience and service speed. Using scan&go, customers may scan things with their smartphones, pay for them within the app, and avoid the self-checkout line. Members of scan & Ship can make a single, straightforward digital purchase and have it delivered to the designated location. You can easily find detailed tutorials and instructions on how to use scan&go within the app on YouTube, Facebook and other social media. The Sam’s Club app reportedly received 9.6 million downloads last year, a staggering number that is almost twice as many as that of its rivals, and it has a 4.9 rating on the App Store.
According to the National Bureau of Statistics of China, there are around 67 million middle and upper income households in China. These households are the prospective targets for Sam’s Clubs. But even so, there are still issues that need to be addressed before Sam’s Clubs can directly capture the 67 million middle and upper income households.
Challenges 1: Strong competitors
With the booming development of e-commerce, more and more consumers choose to shop online, Jingdong, Taobao and other large enterprises to seize market share, followed by tiktok’s e-commerce, the formation of a two-pronged attack on supermarket outlets. Most elder people go to the supermarket, but the main consumer-young people almost all buy stuffs in Taobao, Jingdong, tiktok’s live. Online shopping is simple and convenient, easy to return, the price is cheaper relative to supermarkets. They caused a big impact on these offline large supermarkets.
Challenges 2: “Intermediaries” on the web
Because of Sam’s large packaging, there are many “downstream industries” that have been developed by buyers on Xiaohongshu and Taobao. Some people have organised “group buying”, like dividing a large cakes or meat into small boxes and distributing them as needed; others have developed different combinations of “Sam’s snack packs”, personalising them for those who want to try them. This allows many people to experience and enjoy Sam’s high quality products without having to buy a membership card. Often these tastemakers will prefer to buy popular items that are not so easy to get wrong, resulting in a scarcity of these goods, then the original member’s shopping experience may be diminished.
Challenge 3: Exploiting the vulnerabilities of technology
Many young people are buying non-compliant “one-time card” on second-hand market or Taobao in order to get into the shop. A search on shopping platforms (eg. Taobao) for “Sam’s membership card” will bring up many sellers, with the highest sales volume being over 4,000 orders a month. When consumers pay the membership fee, they enter a “buffet” scenario where they want to buy as many low-priced products as possible to earn back the membership fee, creating a buffet effect where the more products they buy, the more valuable membership is. To put it bluntly, the membership fee, in turn, has the potential to make people spend more money. However，In that way, a real membership card is placed into more phones, thus reducing a major part of Sam’s income.
In Conclusion
The number of club members is set to grow further as more Sam’s Club shops open. Alibaba, a strong competitor to Sam’s Clubs, has also picked up the pace. Membership shops are opening from the “far outskirts” to the city centre, but suitable locations, supply chain resources and merchandise are all scarce resources, so if this one takes over, the others will be gone. People doesn’t really need so many stores with membership, they must make choice. So with customer tastes changing, it will be a question for every new consumer merchant to consider how they can simply capture customer demand and lead the way.
