Costco's opening customers have finally entered the Guangdong Hong Kong Macao Greater Bay Area market.
On January 12, the first Costco opening member store in South China officially opened, which is the sixth store in Chinese Mainland. It has been more than 4 years since the company opened its first store in Chinese Mainland in Minhang, Shanghai in 2019.
In the past four years, the scenes of Sam's Club rubbing shoulders one after another are often seen in the newspapers. The slogan of Hema Xiansheng's "mountain moving price" ignited a war of words last year, as well as Metro AG, M Club and other brands competing for supremacy. Under the trend of new consumption mode, the business of the Club has become more and more popular.
According to data from third-party research firm iMedia Consulting, the warehousing member supermarket industry grew by 12.3% year-on-year in 2021, with a market size of 30.43 billion yuan. In 2022, the market size reached about 33.5 billion yuan, and it is expected to approach 40 billion yuan by 2025.
Late arrival
"We are finally here," Zhang Shuyun, the general manager of Chinese Mainland District, a market opener, said excitedly at the media meeting in Shenzhen. Interestingly, as the first store in the Greater Bay Area, the target audience of the opening customers is not only residents of Guangzhou and Shenzhen, but also Hong Kong residents. They have launched the "Mainland PAY Hong Kong Dollar" mobile payment service with WeChat, which has a clear intention of attracting Hong Kong people to go north for consumption. At present, the number of registered members of Shenzhen Longhua Store has exceeded 90000, of which about 9000 are Hong Kong residents.
However, this first store in South China did indeed arrive late. According to insiders of Kaishike, due to the epidemic, some work processes in the past may have been delayed for a period of time, so subsequent store opening plans are being intensively prepared.
Zhang Yi, CEO and chief analyst of iMedia Consulting, told the 21st Century Business Herald reporter that the opening speed of stores for market opening customers was indeed a little slow, because in the past, offline supermarkets and large supermarkets have encountered great difficulties, such as the continuous closure of Carrefour and other brands, which also led to the cautious pace of expansion of warehouse style membership stores, because of the larger scale of storage model and more investment. "However, objectively speaking, the warehousing style membership store, as a shopping method, and the lifestyle it presents, are increasingly popular among Chinese consumers."
Due to the high demand from consumers, warehouse membership stores have also expanded significantly. For example, Sam's Club has opened 47 stores in 24 cities across China since its first store was opened in Shenzhen 28 years ago, and its expansion speed is still accelerating.
So, when it comes to being late, Zhang Shuyun is not worried. Instead, he is patient and confident. "Many retail brands are actively laying out and accelerating their store opening pace. Warehouse member stores have entered an explosive period in China, and the warehouse member supermarket industry has always been in a very lively state. As a brand that established the first warehouse style wholesale club in the United States as early as 1976, we are very happy to see a hundred flowers blooming in the industry."
Recently, the first quarter financial report for the 2024 fiscal year released by Kaishike showed that Kaishike's revenue in the first quarter was $57.8 billion, a year-on-year increase of 6.2%, with a net profit of $1.589 billion and $1.364 billion in the same period last year, both higher than market expectations. At present, the company has over 870 stores in 14 regions, with a global membership of 120 million people, making it the largest warehouse style member supermarket in the world with the most stores. On January 7th, Kaishike announced that it achieved a net sales revenue of $26.15 billion in December 2023, a year-on-year increase of 9.9%.
How much chance of winning?
Stepping out of the Kaishi Ke Longhua store and strolling around within a 3-4 kilometer radius, you will find that the surrounding area is filled with supermarkets from various brands, including Sam's Longhua store, Hema, RT Mart, Renrenle, Tianhong, etc. The competition in offline supermarkets has long been on the table. How many cakes can the latecomers get among them?
The view of market opening customers on competition is quite polite, and at the same time, it expresses confidence in providing better service and value in a competitive environment. "The Chinese market is large enough for everyone to participate." Zhang Shuyun believes that as the penetration rate of membership based supermarkets in the market continues to increase, consumers' recognition and demand for membership based supermarkets will also continue to increase.
On the other hand, based on the performance of the 2023 Double Eleven shopping festival, "low prices rampant" has become a powerful tool for e-commerce hand to hand combat, which of course is also a huge challenge for offline sales.
Regarding this, Zhang Shuyun pointed out that people's consumption concepts have undergone a transformation. For today's consumers, they have learned to "consume smarter", which is a rational and effective consumption that understands their real needs, and in a sense, it is also a consumption "upgrade".
Entering this big battle, although the market makers may seem calm and composed, their ambition to continue expanding has been revealed. The company recently released its first quarter financial report for the 2024 fiscal year. CEO Richard Galanti stated at the performance meeting that Costco is expected to open 33 stores in the 2024 fiscal year, with a net increase of 31, higher than the 23 stores in the 2023 fiscal year.
Regarding the topic of "price war", Zhang Yi pointed out that the price advantage of warehouse membership stores should not be the focus of competition. It creates a new type of consumer format that matches the fashion shopping style of the middle class and even high net worth population. It is more about the uniqueness of products, the quality of product selection, and even this is an offline social way. "Residents' consumption behavior has gradually shifted from quantity oriented and extensive to quality oriented, and quality consumption has become a new hot trend. However, it can be affirmed that in the warehousing member consumption market, a new round of competition has emerged."
Zhang Shuyun revealed that China has always been an important strategic market and will continue to deeply cultivate the Chinese market. After the Shenzhen store, the next stop for opening a store is Nanjing, and Guangzhou is also a very important site selection consideration. She also stated that in order to cater to the trend of online consumption in the digital age, the online shopping experience for market opening customers will gradually open for trial operation within the year.