Sam is not without anxiety

Sam's Club, which has been advancing rapidly in the global retail landscape, has recently encountered challenges in its expansion in the Chinese market. From product quality issues to food safety incidents, the retail giant seems to be facing the dual test of brand reputation and supply chain management. This article will deeply analyze the source of Sam's anxiety in the Chinese market and explore its challenges and coping strategies in brand, supply chain and local competition.

Sam's Club, which has been booming all the way, has run into trouble again, which directly reflects that Sam's Club is not without anxiety in the Chinese market.

01 Sam was racing along, but something went wrong again

As the year draws to a close, Sam's Club (hereinafter referred to as Sam's), owned by global retail giant Walmart, continues to soar in the Chinese market.

According to media reports, another Sam's Club has been lit up. Recently, Sam's Club in Jiaxing, Zhejiang has been lit up and entered the final preparation stage for opening. It is expected to officially open in the first quarter of 2025. At the same time, Sam's Club Quanzhou and Wenzhou stores will also open in December.

In addition to Sam's Club Jiaxing, Walmart's recruitment information in November revealed plans to open four other new stores, including Shaoxing Store (opened on November 22), Wenzhou Store, Quanzhou Store and Wuhan Jiangan Store. Among them, Wenzhou Lucheng Store is expected to open on December 18, and Quanzhou Jinjiang Store is scheduled to open on December 26.

Overall, Sam's Club will continue to maintain its rapid development momentum in the Chinese market in 2024 and continue to lead the pack.

Public information shows that the number of new stores opened by Sam's Club this year is on par with the historical high in 2022. Four stores have been opened in Nanjing Jiangbei, Chengdu Wuhou, Dongguan Liaobu, and Shaoxing Yuecheng.

Walmart China said at the end of 2023 that it would open 6 to 7 new stores every year in the future. According to media reports, Sam's Club has already achieved its annual new store opening target this year.

Sam's Club continued to soar, making a lot of money and achieving outstanding performance.

According to Walmart's financial report, Walmart's net sales in China reached US$4.9 billion (about RMB 35.5 billion) in the third quarter, a year-on-year increase of 17.0%. As of mid-November 2024, Sam's Club's sales reached RMB 90.6 billion. Excluding the global shopping business, Sam's Club China's sales were about RMB 85 billion, which has exceeded last year's full-year sales.

"New Product Finance" believes that Sam's Club China's outstanding performance is unmatched by any other competitor in the current consumption environment and against the backdrop of the entire traditional supermarket industry's retreat.

However, the surging Sam has another side. Sam has had several negative incidents in succession this year. Recently, Sam has had another incident.

According to Tianyancha's risk information, Hangzhou Sam's Club Co., Ltd. was recently fined more than 18,000 yuan by the Hangzhou Shangcheng District Market Supervision Administration for producing and selling products that do not meet the national standards and industry standards for protecting human health and personal and property safety.

The reason for the penalty was that the "60 count LF Lenzing Tencel Mattress Cover" sold by the party was found to be unqualified after a supervised random inspection for the "formaldehyde content" item which did not meet the requirements for Class A textiles.

Although the amount of the fine imposed on Sam's Club this time is not large, it is another negative factor for Sam's Club as a whole, after all, it is a product quality issue.

According to Hangzhou Traffic 918, not long ago, a consumer bought organic bananas at a Sam's Club in Hangzhou that were moldy and had "white hair" on them.

Sam's Club has recently been involved in a series of negative events, which is indeed a shameful thing for a global retail giant, especially in terms of food issues and product quality.

Every time Sam experiences a negative event, one layer of Sam's internet celebrity halo effect filter will be reduced.

Sam's Club is a complex and multifaceted online celebrity. On the one hand, Sam's Club has been making great strides, with more than 50 stores and booming business. On the other hand, Sam's Club has had several negative incidents in the past one or two years, and the frequency of these incidents has increased, which is not a good sign for Sam's Club.

02 Sam is not without anxiety

However, although Sam has been making great progress, he cannot sit back and relax and is also anxious.

In the view of New Product Finance, although Sam's Club has been surging in the Chinese market and making a fortune, with negative events happening one after another, Sam's Club is not without anxiety under the spotlight, which is specifically manifested in the damage to its brand reputation, localized quality control of supply chain management, and pursuit by potential local Chinese competitors.

First of all, in terms of damaged brand reputation, more and more negative incidents have occurred, causing disgraceful impact on Sam's brand image.

This year, Sam's Club has had negative scandals in Shenzhen, Hangzhou and Shanghai. For example, last month, a consumer bought spoiled coconut water at Sam's Club in Qianhai, Shenzhen. After the child drank it, he had a stomachache and was diagnosed with acute gastroenteritis.

According to media reports, searching for the keyword "Sam's Club" on the Black Cat Complaint Platform showed a total of 8,675 related complaints, many of which were food safety scandals such as "mold", "foreign objects" and "worms".

Food safety scandals are not a plus for Sam's Club. When similar problems occurred in Sam's Club stores, some of the stores involved did not immediately take a proactive approach to resolve them. Instead, they accelerated the resolution process after the issues were repeatedly exposed and fermented by the media. Clearly, there is room for improvement.

I believe that with Sam's strong strength, it can easily and proactively solve the problem at the first time. In terms of customer service response, especially customer service response after a negative incident, Sam's Club still needs to lower its posture. In this regard, the approach of Pang Donglai, who is also an Internet celebrity like Sam, deserves praise.

The second is the quality control problem of localized supply chain management. In the past one or two years, the frequent negative events at Sam's Club are mainly due to some quality control problems in the localized supply chain management.

Sam's Club has grown rapidly in the Chinese market and has done a good job in accelerating the localization of supply chain management. For example, it has bet on forward warehouses and focused on e-commerce online business, which accounts for about half of its total revenue. Sam's Club has learned the essence of localization of Chinese e-commerce.

According to media reports, more than 70% of Sam's Club China's products are sourced from Chinese suppliers, rather than seeking suppliers globally, which may result in different standardization between Sam's Club China and other parts of the world.

An industry insider told lianshang.com that Sam's Club China and Sam's Club Worldwide may not have formed much synergy in terms of commodity procurement. In this regard, Sam's Club is not as good as Costco. Relatively speaking, Costco's global consistency is worse than Sam's Club.

Sam's policy of vigorously developing localization in China is correct, but under the rapid development model, the frequent occurrence of negative events has also exposed that there are still many areas that need improvement and enhancement in Sam's local supply chain management. Sam's needs to continuously improve the standardization of local supply chain management in China to achieve Sam's global unified standards.

The third aspect is that the market for China's warehouse membership supermarkets is highly competitive and will enter a stage of stock development in the future. Chinese local brands are accelerating innovation and may pose certain challenges to Sam's Club in the future.

Although Sam's Club is the absolute leader in China's warehouse membership supermarkets at this stage, industry competition has intensified and domestic and foreign competitors are also striving to catch up.

For example, although Costco is developing at a slower pace, it will definitely compete with Sam's Club in the future. In addition, Chinese local brands, such as Hema, have not given up Hema X membership stores.

The rise of the internet celebrity brand Pang Donglai has provided a new sample for China's local supermarket brands, especially Yonghui Supermarket, which has undergone a major change after being adjusted by Pang Donglai. Ye Guofu invested in Yonghui Supermarket at a bargain price with the aim of creating a future Chinese version of Sam's Club.

From a long-term perspective, warehouse membership supermarkets are still in a period of growth and will inevitably enter a period of stable development. At that time, it will be an era of deep cultivation and meticulous work. Although Sam's Club still has its advantages, the renewal and upgrading of Chinese local supermarket brands is also worth looking forward to.

03 New Challenges for the New Head of Sam's Club China

Sam's Club China, which has been in the spotlight, is going to change its leader.

According to the appointment letter, Andrew Miles, deputy CEO of Walmart China and president of Sam's Club, will retire on January 31, 2025, and will be replaced by Jane Ewing, current senior vice president of operations of Walmart International.

Wen Ande, who is about to retire, joined Walmart China as Sam's COO as early as 2012. He was later promoted to President of Sam's China in 2017. Since 2020, he has served as Walmart China's Deputy CEO and Sam's President.

Sam's Club has been booming in the Chinese market in recent years. It is precisely the fruitful results achieved under the management of Andre Van Vierge that have enabled Sam's Club China to now support two-thirds of Walmart China's performance, becoming the mainstay of its performance.

According to the arrangement, Jane Ewing will take up her new position at Walmart China at the end of January 2025 as acting president of Sam's Club, reporting directly to Zhu Xiaojing, president and CEO of Walmart China.

It is worth noting that the new head of Sam's Club China, Jane Ewing, is currently the senior vice president of operations of Walmart's International Division and a long-time senior executive of the international supply chain department. Judging from her resume, the market expects that one of Jane Ewing's important tasks after taking office will be to lead the team to reorganize and upgrade Sam's Club China's supply chain system.

Reorganizing and upgrading Sam's Club's China supply chain system is a key strategy for Sam's Club to continue to deepen its presence in the Chinese market, improve quality, reduce negative incidents, and improve and enhance its brand reputation in the next few years.

In the next few years and in the future, Sam's Club will still be the absolute leading company in China's warehouse membership supermarket track, enjoying the dividends of industry development and remaining an industry benchmark. However, this does not mean that Sam's Club can always sit back and relax. In the future, it will need to keep up with the rapid changes in the Chinese consumer market and actively innovate.

There is a view in China's retail industry that Sam's Club is the strongest rival. However, Yu Donglai, the founder of Pang Donglai, recently stated that Pang Donglai and Sam's Club are not rivals, but more like comrades-in-arms.

Chinese supermarket operators can learn from Sam's Club, speed up innovation and catch up with Sam's Club. China may not have a Chinese version of Sam's Club, but consumption diversification can accommodate all domestic and foreign industry players, including Sam's Club.

Produced by: Xinpinlue Finance Author: Wu Wenwu