Specialist
Executive at Shanghai Hema Network Technology Co Ltd
Agenda
- Impacts of the regional pandemic resurgence on membership stores’ business forms in China, highlighting development status quo of Sam’s Club and Costco (NASDAQ: COST)
- Sam’s Club vs Costco – store unit economics, business operations, profitability, store quantity and development potential
- Supply chain system development and management – procurement models, supply channels, models of cooperation with suppliers, bargaining power and cooperation stability
Questions
1.
What positive or negative impacts has the regional pandemic resurgence had on membership stores in China? What about the challenges and opportunities brought by the regional pandemic resurgence?
2.
Has any membership store chain, say, Sam’s Club or Costco, performed particularly well amid this round of pandemic resurgence? What are the main reasons behind its good performance?
3.
After this round of pandemic resurgence is over, which form of retail businesses, including membership stores, fresh food retail stores and supermarkets, will be more popular among consumers in China?
4.
Let us take a look at membership store chains’ business models. Costco only has a few outlets in China, but its outlet in Shanghai has acquired more than 200,000 registered members, the highest record in Costco’s 35-year history. Can you compare Sam’s Club and Costco in terms of their performance in China in Q1 2022? Can you explain their store unit economics?
5.
You mentioned that Costco’s outlet in Shanghai has an annual revenue of RMB 2.4bn-3bn and there will be a growth of 20% in the future. Do you mean a 20% growth in sales revenue or in the number of outlets?
6.
Sam’s Club’s outlets in Shenzhen have reached the revenue scale of RMB 3bn after several years of operations, with the average per-outlet revenue of RMB 1bn-1.5bn. What is its future trend?
7.
What are the differences between Sam’s Club and Costco regarding the operational indicators and overall cost split?
8.
An important indicator you have just mentioned is the product turnover periods. In the same region, Sam’s Club’s turnover period is about 10 days longer than that of Costco. Is the longer period caused by its product structures or bigger store volumes?
9.
All links are critical in running membership stores. Many local and foreign players with certain financial resources and operation accumulation, such as Metro, Fudi and Yonghui, are trying the membership model. How difficult it is for them to reach Sam’s Club’s and Costco’s operational levels? Can they replicate Costco’s and Sam’s Club’s membership models?
10.
Could you compare the supply chains of Sam’s Club and Costco in China in terms of product category coverage, procurement prices and the proportions of exclusive suppliers?
11.
What contract terms do Sam’s Club and Costco usually sign with suppliers such as Aokun Food? What about the gross margins they offer to suppliers? Will they find 1-2 suppliers for the same product category to make them compete with each other so as to reduce suppliers’ gross margins?
12.
Sam’s Club has once been accused of requiring suppliers to establish exclusive cooperation with it, making players that want to enter the segment face big problems. Does this practice still exist in the industry? Is this still a serious phenomenon?
13.
This year, membership stores have set clear store opening targets. At present, most of their outlets are opened in tier 1 cities, and they just start to make store opening planning in tier 2 cities. What is the ceiling facing various membership stores in terms of this store opening model? Can they achieve their store opening targets this year?
14.
What about membership stores’ gross margins and net profit?
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