By ZHAO Xiaojuan
Sam's Club, the heart of a chain of membership-only retail warehouses owned and operated by Walmart, might have over 600 branches in the United States, but the two biggest branches are in China.
Walmart’s most recent report paid tribute to Sam’s Club’s double-digit growth, with a 65 percent jump in Q4 net e-commerce sales through Sam’s and Walmart. Walmart’s new president in China, ZHU Xiaojing made her first public appearance at Sam’s.
The good times have rolled
Sam’s Club has 3 million registered members in China, with a renewal rate of up to 80 percent, a competitive rate in retail, and the room for further growth remains huge among China 70 million middle- and high-income families. Walmart plans a total of 45 stores by next year. So far, there are 31 stores in China.
But behind Sam’s gloss lurks Walmart’s admittedly weak hypermarket business with no exact figures given in the report. During 2019 and 2020, Sam’s Club stores opened while Walmart’s overall store numbers stayed put, implying that as many hypermarkets closed as Sam’s opened, with at least 23 closures on record, most of which were due to termination of lease contracts. Offline traffic is trending downward, probably irreversibly. Only stores like Sam’s and Ikea are growing. Hypermarkets have been on a slippery slope for years, inevitably.
Walmart opened many stores with 10-15 year leases in the first decade of this century, therefore, it’s time to renew or terminate some leases. Carrefour and Rt-Mart are in the same boat.
Hypermarkets are shifting category as more low-gross-margin goods are sold, and less high-gross-margin products. On the side, resources are migrating to online platforms. Deliveries now common among offline retailers in their efforts to gain a piece of online traffic.
Hello Costco
Since beginning home deliveries in 2016, Walmart-to-home and Sam’s super-fast services have expanded significantly. By 2020, Online business leaped by 63 percent in Q3 and 65 percent in Q4. Daily orders from Sam’s super-fast cloud warehouse surged 10-fold compared to the early days when the service was introduced.
Unfortunately, all this growth is not high enough to move Walmart’s overall business in China in the right direction. Net sales declined in 2020.
Sam’s Club does not have an edge in either the size of stores or customer loyalty. Its numbers of stores are relatively small compared to the 400-plus hypermarkets. Sam’s arch-enemy in China is Costco now, a foe it knows well from various battles overseas, which opened its first store in Shanghai in 2019. Sam’s Club, in China for over 20 years, announced in March 2020 its plan to open a flagship store in Shanghai.
Goodbye China?
There appear to be hard times to come for Sam’s. Suspicions are the byproduct of Walmart’s weak performance.
The replacement of CEO CHEN Wenyuan with Zhu led to rumors that Walmart was considering selling up in China, partly based on Zhu’s experience in investment and negotiation. Walmart has specifically dismissed the rumor, while forlornly claiming that it never comments on market rumors, and clearly stated that it has no plan to sell its China business. The market awaits!
