In the decline of the retail industry, Costco and Sam's Club are like two shining stars, not only swimming against the current in the Chinese market, but also becoming a unique landscape in the retail industry on a global scale. While other retailers have been losing ground under the wave of e-commerce and have even become a sunset industry, Costco and Sam's Club have shown amazing vitality with their unique strategies, deep customer insights and precise market positioning.
Back in Shanghai in 2019, Costco's first store had to be temporarily closed on the opening day due to too many **, which undoubtedly became a spectacle at the time. Five years later, when the offline retail industry was considered to be on the wane, Costco's sixth store in Shenzhen set a global record for the number of sign-up membersThis can't help but make people curious:With so many retailers closing stores or even withdrawing from the Chinese market, how did Costco and Sam's Club do it?
Before analyzing the secrets of its success, we must first look at the surrounding depression: during the same period, traditional retail giants such as Carrefour and Walmart closed stores, and some even withdrew from the Chinese market altogether. Domestic retailers such as Yonghui are also facing the same dilemma, and for a while, the decline of the supermarket industry seems to have become an irreversible trend. However, Costco and Sam's Club not only survived, but also bucked the trend, what magic weapons did these two "foreign monks" use?
First of all, Costco and Sam's Club have demonstrated a deep understanding of the Chinese market at the beginning of their entry into China. They are not just moving the Western operating model to China, but also localizing and adjusting according to the actual needs of Chinese consumers while maintaining their own characteristics.
For example, Costco's product structure has been optimized for the preferences of Chinese consumers, and more products suitable for Chinese tastes have been introduced. At the same time, both companies have adopted a membership system to attract a large number of cost-effective Chinese consumers through cost-effective strategies.
However, merchandise and ** strategies alone are not enough to explain the success of Costco and Sam's Club. Behind them are deep market research and customer insights. Costco, for example, is very particular about location, preferring to choose convenient and densely populated areas, so that members can conveniently shop in stores. Sam's Club has made great efforts in digital transformation, improving customer experience and efficiency through the combination of online and offline.
The success stories of these two retail giants are not only a resounding slap in the face to their peers, but also a profound enlightenment to the entire industry - even under the impact of e-commerce, offline retail still has room to survive, and the key lies in how to meet the needs of consumers through innovation and precise positioning. In a sense, Costco and Sam's Club exemplify this concept. They're not just selling goods, they're creating a shopping experience that many Chinese consumers are looking for today.
With such a huge success, one can't help but wonder what the future holds for Costco and Sam's Club. Will they continue to fight the retail chessboard? The movements of these two business giants will undoubtedly be the bellwether of the future market. And as they further deepen their presence in the Chinese market, will other retailers be able to learn from the experience and seek new vitality in the face of adversity?
In an era that seems to be "first-class", Costco and Sam's Club have found a new way and played a trump card of "high quality and low price" in the retail industry. These two retail giants have fused the common people** and luxury quality together, and achieved a shopping paradise in the minds of consumers. But this is not an overnight magic, but a sophisticated calculation of merchandising strategy, chain management, and brand loyalty.
First of all, Costco and Sam's Club have carefully designed their merchandising strategies. They are not mindlessly pursuing "low prices", but implementing a kind of "high quality at the same price, the same quality at the same price". Behind this strategy is the ultimate pursuit of product quality and strict control of cost control. Costco has set a rule that the gross profit margin of all goods is capped at 14%, while the actual average is only 7%. Not to be outdone, Sam's Club prices its overlapping items at an average of 8% lower. But what's even more remarkable is the game that these two stores are better at - getting big-name merchandise off the altar.
For example, Costco was able to mark a Hermes leather bag priced at 180,000 on the outside as 1460,000 **; And a Samsonite suitcase that costs 1,300 yuan on the market is only 799 yuan here. Such a pricing strategy is like pushing the aristocracy to the common area, allowing consumers to enjoy unprecedented shopping pleasure.
How do you do "big brands are cheaper", so how do Costco and Sam's Club do it? The answer lies in their strict control and incomparably fine management of the ** chain. Through high sales, the two retailers have gained strong bargaining power, and are able to put forward more demanding requirements to the merchants, and even make some products exclusive to the channel, thus achieving "high quality and low price".
This strategy allows their goods to maintain a high standard of quality and sell at a lower level than the market, forming a virtuous circle: low selling prices bring high sales, and high sales feed back low purchase prices, thus pushing down the selling prices again.
The balance between selection and quality. Not only that, but Costco and Sam's Club have far fewer items than traditional supermarkets. In 2023, Costco's number of merchandise units (SKUs) will remain around 4,000, while Sam's will only have 5,500. This is in stark contrast to the huge figure of 20,000 SKUs in the average hypermarket.
This "less but better" product selection strategy not only brings consumers a clearer shopping choice, but also greatly increases the sales of single products. This means that every product on the shelf is a "fine soldier" that has been screened layer by layer, and each product contributes more than ordinary benefits to sales.
For example, Costco's sales per SKU in 2023 are a staggering 5,942$80,000, while Sam's Club also has $1,533That's a good performance of $60,000. In contrast, the sales of many domestic hypermarkets can only reach 2.6 million yuan, which can be seen.
The success of this strategy is not just about "selling cheap", but about how to select products that resonate with consumers, those that can become talking points and even social currency.
For example, Sam's Swiss rolls, ** are close to the people to less than 4 yuan per piece, but their quality is comparable to high-end brands such as Starbucks. They use imported cream and butter, as well as high-protein flour, and no added flavors, which ensures the purity and high texture of the dessert. Such a product has become a real "boutique", which is not only a taste enjoyment, but also a representative of cost performance.
But the success of Costco and Sam's Club is not something that can be sustained by a low-price strategy alone. They build a brand loyalty that transcends the best battles. By providing high-quality goods and services, they win the hearts and minds of their customers, and this loyalty is far more lasting and far-reaching than mere ** advantage. This trust and loyalty has led to customers willing to become members and enjoy more benefits and services, further strengthening the market position of the two retailers.
Combining these elements, Costco and Sam's Club have created a unique ecosystem in the retail industry. They're not just selling goods, they're creating a new shopping experience, one that makes people feel like smart consumers. This kind of experience can't be fully replicated by e-commerce, because it involves the atmosphere of the physical store, the real feeling of the product, and the shopping pleasure that can be found at any time.
As we delve deeper into the business models of Costco and Sam's Club, we have to ask: can this success be replicated by other retailers? Can their business wisdom and strategies provide inspiration for the future of China's retail industry?
In the retail kingdom, Costco and Sam not only won the first battle, but also played a big game of efficiency and cost control. These two retail giants, through the membership model and unique warehouse layout, have created an efficient business operation mechanism, forming a solid shield against external factors such as high land rent and fierce competition from e-commerce. But the kung fu behind this is far from being as simple as one or two tricks on the surface.
First of all, the membership model became a strong ** for Costco and Sam. Unlike the average retailer, which is open to customers, they are directly pocketed through membership fees, which not only provides a steady cash flow for the two retailers, but also builds a fortress of consumer loyalty. Imagine that when you have already paid the annual fee for one store, will you easily go to other stores to spend? This psychological mechanism skillfully binds the interests of consumers and merchants, on the one hand, it ensures the return rate of customers, and on the other hand, it also brings considerable direct benefits to merchants in the early stage.
Then, their warehouse layout was also a well-designed strategy. Costco and Sam's combined the warehouse with the sales location, a "warehouse-store-in-one" model that reduces logistics costs and improves the efficiency of inventory turnover. Goods are moved directly from the warehouse to the sales area, minimizing waste of time and space. This layout allows them to quickly respond to market changes and quickly replenish hot-selling products, thus maintaining a very high inventory flow rate.
However, cost control is the key to Costco and Sam's being able to stay ahead of the competition. Faced with high ground rents, these two retailers often choose to set up shop in the suburbs or less prosperous areas, which saves a lot of money. At the same time, they insist on using warehouse-style large packaging, which not only meets the needs of consumers for bulk purchases, but also further reduces packaging and operating costs. Costco and Sam are also notoriously frugal when it comes to advertising, relying more on word-of-mouth and the attractiveness of the membership system itself than spending a lot of money on advertising.
This focus on efficiency and cost budgeting has led to Costco's inventory turnover rate of up to 11 over the past four years5 times, far more than many peers. This is not only a numbers game, but also a deep understanding and unremitting pursuit of business operation efficiency.
So, are Costco's and Sam's efficiency advantages sustainable? After a period of market testing, we can see that although their models are not foolproof, their deep understanding of the market and accurate grasp of customer needs ensure that their strategies are always in line with the times. For example, Costco and Sam's will prioritize consumption scenarios and life cycles when developing products, and choose products that can be widely accepted and consumed for a long time. This strategy not only increased the repurchase rate of customers, but also improved the sales efficiency of the product, making certain items such as Swiss rolls and mochi sales champions.
In terms of the future direction of China's retail market, Costco and Sam have demonstrated a business philosophy of efficiency first and strict cost control. Their success tells us that even in the face of the impact of e-commerce and the continuous increase in land rent, the retail industry can still find room for survival and development through refined management and accurate capture of customer needs. This is undoubtedly a new enlightenment for Chinese retailers - in addition to the pursuit of "better", how to achieve innovation and improvement of business models through efficiency and cost optimization.
As the clock tickles down in 2024, it remains to be seen how Costco and Sam's will continue to spur efficiency in China's retail market. Whether China's retail peers can find their footing in this war of efficiency and cost will also become the focus of industry observation.