Warehouse Clubs are Gaining Popularity in China, Will it Be the New Trend?

By: Telpo

Sam’s Club, the high-end membership-only retail warehouse club operated by Walmart, recently opened its first and also the world’s biggest flagship club in China. Along with the popularity of the warehouse club, people can’t help speculate whether it will become a new trend and business model for China’s retail industry.

If you are not familiar with a warehouse club, it is a retail store or supermarket that sells commodities at lower prices and charge customers an annual membership fee to run the shop. The core of the traditional retail store is to earn the price difference of goods, while the warehouse club focuses more on selecting the most cost-performance commodities and small stock-keeping units (SKUs), plus gaining profit from membership fees.

Why warehouse clubs suddenly gain popularity in China?
The world’s biggest Sam’s Club opened in China indicating that the warehouse store model has huge consumption potential with the largest consumer population. Sam’s Club entered the China market in 1996, but wasn’t very effective at that time.

However, as of February 2021, Walmart’s financial report data showed that Sam’s Club has 13.3% year-on-year sales growth. The membership revenue reached the highest quarterly growth in the past five years with a new member increase of more than 60% and a core member retention rate over 80%.   

So, why exactly are warehouse clubs suddenly gaining popularity in China? First, consumer consumption ideas have been affected over decades of development with the retail e-commerce industry. Before 2015, it was hard to make consumers charge annual membership fees because they thought it was not cost-effective. But nowadays, consumers focus on the quality of goods as their quality of life and income improve. Compared with the personal and family income, the membership fees only occupy a small proportion, thus consumers begin to accept this method.

Secondly, the increasing number of individual car owners allows consumers to transport purchased commodities home by themselves. Finally, the bulk shopping form of warehouse club conforms to consumers’ household consumption. 

If warehouse clubs become the new trend, how can it gain sustainable profit?
Any retail format cannot survive without three elements: people, goods, and location/visibility. In the high-tech era, to achieve sustainable profits, warehouse stores should utilize up-to-date technologies and smart devices to make personalized experiences – providing a rich shopping experience based on targeted audience demands. 

The competition of supply chain strength and digital capability lies behind the pursuit of differentiated goods and services in the era of homogenization. Look for technology partners who offer a family of smart solutions to make warehouse clubs connect omnichannel operations, elevate store digitalization, and keep a sustainable profit. Examples of smart solutions that can imrove warehouse club operations include:

  1. Mobile store management: With the help of multi-functional mobile handheld POS, the store associates can access a series of business operations on the go, such as mobile checkout, price adjustments, inventory tracking, commodity inquiry, membership signup, price tag printing, etc.
  2. Online & offline operation: With the online and offline operation model, customers can choose to purchase commodities on a website/app and receive pick up directly at a brick-and-mortar store. Online stores allow customers to enter the delivery address, add items to a virtual cart, choose the payment method, schedule delivery time, and wait for the home delivery. They can also enjoy an all-in-one self-checkout at the big screen self-service kiosk. The online sales data can help warehouse clubs to quickly select the high-demand products and place them conveniently in the front of the physical store.
  3. Superior AI shopping experience: In virtue of 3D structural light camera, voice recognition technology, face recognition, and intelligent algorithms, AI cash registers allow consumers to freely benefit from face recognition, financial FR payment, voice input, voice interaction, real-time voice translation, standardized voice assistance, and other services at one single machine. When customers are ready to checkout, the AI cash register can capture their facial features and recognize their memberships without cashiers entering customer information. Once their identities are matched with the membership database, they can gain membership discounts or points, and easily self-checkout.
  4. Multi-payment acceptance: There is no doubt that payment habits and preferences vary among different people. Taking common payment methods into consideration, the EFT-POS can support magnetic stripe card payment, IC card payment, contactless/NFC payment, and QR code payment, providing a hassle-free payment experience.
  5. Membership management: The simple paid membership system is hard to maximize the value of the member, but with the help of a digital tool, it can be done. With the sales data recorded by the platform, the store can understand each member’s consumption preferences and make targeted business strategies. Warehouse clubs can utilize the consumers’ mentality to build loyalty. In addition, they can push digital, special offerings to customers via email or SMS. For members who are not active enough, issuing coupons is a great way to stimulate their shopping desire.
  6. Digital commodity management: Inventory and logistics management is undoubtedly a headache but a significant part of the business. Using 1D/2D scanning technology to decode each commodity code is conducive to commodity tracking, grasp inventory information, reduce ordering costs, and improve purchasing efficiency. The background system enables the supplier timely reports to understand the logistics and current sales situation, helping them better implement category management, make impactful business decisions, and reduce their inventory backlog.

As retail stores enter the development bottleneck, digital warehouse clubs with profitable growth might be a new trend in the China retail industry. We [technology providers] need to continue developing and offering smart retail solutions will that empower different retail models with multi-functional smart devices.