1. Membership store promotion"Membership stores are starting to offer promotions, and hard discounts are starting to soften." A supermarket operator told Spirit Beast after a business trip abroad that European supermarkets and consumers have not changed much in appearance, but in content, the changes are very big. On the one hand, the low-price trend of European supermarkets has accelerated, and discount stores have expanded massively; on the other hand, traditional supermarkets are also alienated, with a large increase in the proportion of large-packaged, low-priced goods, alienated business formats, and a significant increase in the proportion of private brands. "The market competition is fierce, and hard discounts are starting to soften. Some hard discount retailers have also started advertising and promotions." said the above person. 1. Hard discounts refer to low-price strategies achieved by optimizing the supply chain, reducing intermediate links, and reducing operating costs. All low prices have nothing to do with product quality. Such as ALDI, LIDI, COSTCO, Sam's Club, Metro, Hema X Membership Store, etc. The first selling point of soft discounts is that the prices are particularly attractive, and products that are about to expire are the representatives of soft discounts. For example, the prices of products sold at Hema Outlets are very low because the products are sourced from Hema Fresh. Before the products of Hema Fresh are about to expire, they are transferred to Hema Outlets for centralized sales, so that a large number of products with surprisingly low prices will appear in Hema Outlets stores. Membership-based supermarkets are typical hard discount stores, with the main features of streamlined SKU numbers, warehouse-style decoration, and high cost-effectiveness of products. Only members can enter to shop. In recent years, the disappearance of the Internet traffic dividend has directly led to the entire retail industry entering the stock era. Paid membership has become a new battlefield in the retail industry, and players who have reaped the dividends have continued to increase their layout. From the early "imported products" that were criticized for not adapting to the market, to now becoming a track that giants are competing for "not for making money first". Since 2022, the competition among paid membership stores has become increasingly fierce. Sam's Club has accelerated its store expansion. After the first stores of Hema X membership stores and Metro membership stores opened in 2020, the number of stores has continued to increase. COSTCO is also actively expanding. As the scale of membership stores gradually expands, many traditional supermarkets have also made it a focus of transformation and deployment. However, with the increase in players, the challenges faced by each company are also increasing. COSTCO's performance in the third quarter of fiscal year 2023 also fell short of expectations. During the reporting period, total revenue was US$53.648 billion, up 1.9% from US$52.596 billion in the same period last year, but lower than the market expectation of US$54.66 billion. The company's net profit was US$1.302 billion, down 3.8% from US$1.353 billion in the same period last year. At the launch of Sun Art Retail's M Membership Store, CEO Lin Xiaohai made it clear that the M Membership Store had no profit plan for the next three years. In the first year, no profit target was set for the team, but the focus was on two key indicators - the number of members and the renewal rate. Metro directly launched a limited-time flash sale promotion mode in terms of content. There are products participating in the promotion every day in the Metro APP. For example, a mini Wellington steak from McSelect originally costs 88 yuan, but the limited-time flash sale price is 78 yuan; Taitole chicken seasoning originally costs 19.9 yuan, but the limited-time flash sale price is 17.9 yuan; Qianhe soy sauce originally costs 44.9 yuan, but the limited-time flash sale price is 42.9 yuan, etc. With the ever-increasing competition among membership stores, when retailers have the same products to offer to consumers, low-price competition to attract consumers has become the most common tactic used by companies. 2. The gap between local enterprises and leading foreign-funded membership storesThe most eye-catching promotion model directly launched by membership stores is the price war among the top merchants. A few days ago, a local membership store in more than 10 cities including Beijing, Shanghai, Hangzhou, and Chengdu saw the "Mountain Moving Price", that is, consumers can choose high-cost-effective products marked with the "Mountain Moving Price" online or in the store. The so-called "Mountain Moving Price" means that hot-selling products are sold at low prices. According to Spirit Beast, the "Mountain Moving Price" of this membership store covers multiple categories such as fruits, meat, poultry, eggs, milk, aquatic products, dairy products, bakery, wine and beverages. Specifically, the products are some of the most popular hits, such as durian thousand-layer cake. Industry insiders said that it is very intuitive to see that this membership store is benchmarking against Sam's Club. This can also be seen from a series of actions of the two companies. A box of 1,000 grams of durian crepe cake was sold at 128 yuan in Sam's Club. With the launch of the "Mountain Moving Price", the local membership store reduced the price of the product to 99 yuan, and then the price of durian crepe cake in Sam's Club was revised to 98.9 yuan. Subsequently, the local membership store reduced the price to 89 yuan, and Sam's Club reduced the price again to 88 yuan... The price war started by the two retailers shows that the competition among membership stores has become fierce. In fact, the competition among membership stores has always existed. Sam's Club, Carrefour, Metro, COSTCO, Hema and RT-Mart have successively developed membership stores in the Chinese market, among which COSTCO and Sam's Club have a relative advantage. These retail giants have even clashed over store location selection and supplier competition, but none of them have caused such a concrete and targeted incident as the current "Moving Mountain Price". In recent years, while traditional hypermarkets such as Carrefour, BBK, and Walmart have closed stores one after another, Sam's Club, Metro, COSTCO, Hema, and RT-Mart have all been vigorously expanding their membership stores. In the process of rapid store expansion, there have been disputes over store site selection. Carrefour even encountered the dilemma of some suppliers withdrawing on the first day of the opening of its membership store. After the wave of competition for opening stores, the most practical thing for merchants in the track is to compete for and retain high-quality customers. This also deeply tests the membership store companies' large-scale purchasing capabilities, product selection capabilities, and long-term trial and error and valuable experience. Sam's Club and COSTCO have a strong advantage in global purchasing scale. In contrast, Carrefour membership stores, M membership stores, fudi, etc. are "newcomers" in the membership store market. They directly create similar products by learning from the popular products of Sam's Club and COSTCO to attract customers, but the categories are similar and cannot be differentiated. At this time, they can only attract consumers by competing on price. The price competition that starts with popular products will also extend to discount promotions and limited-time flash sales in other categories, so as to compete for and retain customers. It is worth mentioning that the member stores with hard discounts have to implement promotions, limited-time flash sales, and join price wars, which is a great challenge for retail companies. Member stores originally have high cost-effective core products. If they choose to reduce prices for promotions or price wars, they need to find more efficient cost supply chains to purchase goods at a lower cost, which is a huge challenge for the procurement team. 3. Heavy saturation?Overall, the market space for membership-based supermarkets is large but still limited. The changes in domestic family structure and young people's living and consumption habits have gradually complicated membership stores. In the current environment, consumer groups are more cautious in consumption and more rational and pragmatic. People are beginning to advocate careful budgeting and rational consumption. Market limitations are a major risk faced by membership stores. If we calculate based on the city population, taking Shanghai and Beijing as examples, the population of Shanghai in 2022 will be 27.45 million, and the population of Beijing will be 21.84 million. Among the target population divided by indicators such as middle-class income and family consumption, not many people can actually become members' store customers. According to relevant data, it takes 200,000 to 300,000 members to support a COSTCO or Sam's Club. So how many membership stores can be opened in a first-tier city like Beijing? 5, 10, or 20? Judging from the current situation, the saturation is not low, and the internal competition is serious. Taking Shanghai as an example, the number of paid membership stores, whether foreign-funded or local, such as Sam's Club, COSTCO, Metro, and Hema X Membership Store, has exceeded 16. In this highly competitive environment, brands must do their best to attract and retain members. Member retention rate is often seen as the "life and death line" and is also the focus of competition among various companies. Take COSTCO as an example. Although its global membership has exceeded 100 million and its overseas renewal rate has reached over 90%, since its first store opened in mainland China in 2019, its renewal rate in the mainland has not been high, at one point only 60%. For this reason, COSTCO has put a lot of thought into localization in recent years. For example, in terms of product selection, half of COSTCO's products are currently imported, and the other half are made and improved in China. However, COSTCO's instant delivery and price are not advantageous in the Chinese market. Looking back at 2021, since the "first year of membership stores", retailers have been crowding into the track. Some local companies did not polish their supply chains when they entered the market, and their supply chains were highly overlapped with those of traditional supermarkets they had previously operated. They did not even establish a member-first service system. They simply changed the shelves in the stores, put on some of their own brands, and then opened for business and collected membership fees. How could such "competitiveness" withstand the moves of powerful players in the fierce competition? Carrefour Member Stores did not realize its dream of opening 100 stores in three years, and Beijing Hualian also closed its first store of 7,000 square meters... In this regard, industry insiders said that, from the current perspective, among local companies, Hema X membership stores are relatively resilient, and it is difficult for other retailers to compete with Sam's Club or COSTCO. In the future, the Chinese market will still be a competition field between Sam's Club and COSTCO. Take Sam's Club as an example. After years of development, it has established a strong supply chain system and a value system centered on members, forming an impenetrable business network, which makes the moat of the membership store format insurmountable. When responding to the competition of companies in the same track using promotions, price cuts and other means, it also verifies its supply chain strength. For example, at the end of last year, Sam's Club announced a 500 million yuan profit cut to give back to members, and made long-term price cuts on 10 products with the highest repurchase rate and penetration rate, including popular online products such as lime juice, mochi, and Swiss rolls. In May this year, when Sam's Club Putuo Zhenru store opened, Sam's Club once again cut prices on 10 products. In this regard, industry insiders said that the membership-based supermarket lies in the accuracy and clarity of its business model and the interlocking of various links. By serving the middle-class consumer group, the number of commodities has been reduced to only about 4,000 SKUs. On the one hand, the small but refined SKUs ensure a high turnover rate, and on the other hand, by deeply binding with suppliers, a stable and huge purchase volume is achieved, while obtaining high bargaining power. In this way, compared with general supermarkets, the membership-based supermarket can realize its own image of high quality and high cost performance. Pei Liang, president of the China Chain Store & Franchise Association, believes that the retail industry, especially traditional hypermarkets, has not had an easy time in recent years, and retail brands must use new models to open up growth space. "Although competition is fierce, for consumers, competition prompts member stores to provide more favorable prices and better services, which is also a good thing." Although some have already left the market and some are still struggling to hold on, their fight in the Chinese market will certainly promote the development of the industry, and only a few brands will be able to truly gain a foothold in the market and develop. Author: Ling Xiaoqi Source: Lingshouke (ID: lingshouke) |
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