My recent foray into Sam’s Club in China begs the question of whether it can survive. On a Thursday morning, I joined a small crew waiting for a bus outside of Citygate, a lush shopping complex atop a subway station in Tung Chung, a 120,000-resident-strong new town in Hong Kong out by the airport. Boasting excellent connectivity and stuffed with over 150 high-end brands, Citygate—which has the audacity to call itself an outlet mall—has long been a must-shop stop for most international tourists and local day trippers. Faced with sagging consumer sales, Citygate is slowly becoming a departure point as much as a destination, using its status as a convenient transit hub to attract shoppers seeking more value for money over the Hong Kong-Shenzhen border.
Shopping for bulk and value have become novelties that are catering to local tastes and sensitivities and, by degrees, packaging size. This is not transformative, but as the growth of overstock shop chains like 759 and 365 (along with a number of other three-digit discounters) reveals, these notions can be integrated into the rhythms of traditional Chinese retail without completely disrupting them.
Sam’s Shopping Spree
Most of my fellow commuters were well-poised—or rather, well-prepared — to load up on provisions once over the border. Nearly everyone dragged an empty ribbed, faux-Rimowa wheelie bag behind them, and I saw at least one Yeti cooler bag, the sort that intrepid explorers toss in the back of their sea kayaks. Scores of day trippers hauling empty bags north to Shenzhen have been a marked feature of Hong Kong’s retail landscape for a while now, although with all the hype around the consumer exodus, Your Humble Correspondent AKA me, expected the bus to be standing room only and the border crossing to be a thronging mess. Instead, the bus was mostly empty and a thin trickle of wheelie bags went through immigration, suggesting that Hong Kong retailers haven’t completely lost the battle.
The destination — Sam’s Club in China— would not be an exotic trip for the average American shoppers, but is a big draw for thrifty Greater Bay Area shoppers. Discount big box stores, along with online-to-offline shops like Alibaba’s Hippofresh, are the looming bêtes noires of Hong Kong’s retailers. These retailers at scale are seen as sucking out the dwindling pools of disposable income, even offering home delivery to cut out the arduous (only in the eyes of convenience-obsessed Hong Kong travelers) journey. These big boxes are also becoming one of the few ways physical retailers in China can position themselves competitively against the country’s online behemoths. Walmart recently sold out of its entire stake in JD.com—one of China’s three largest ecommerce platforms, together with Alibaba and Pinduodou—so that it can focus on expanding Sam’s Club and other brands in its phygital footprint in China.
Best Practices
Sam’s and other warehouse clubs in China follow the global practice of charging an annual membership fee to create a ring-fenced sense of loyalty and value; occasional cross-border bargain hunters from Hong Kong are thus usually deterred. However, in China’s rich tradition of working around inconvenient rules, alternative channels emerged for Sam’s Club shoppers. Several shoppers interviewed for this piece reported that they would enlist official Club members hanging around outside the store to accompany them inside. These guides would shop on their behalf, in exchange for a fee based on the volume of their purchases, as well as keeping the rebates and coupons earned if they have a Premium membership.
Middlemen and agents have become something a fixture in the Hong Kong-Shenzhen day-tripping shopping ecosystem this year, as the Renminbi remains weak against the U.S. dollar (and thus the greenback-pegged Hong Kong dollar) and Hong Kong consumer outlook has remained poor. In recent weeks, however, Sam’s Club has reportedly clamped down on the practice of fixers, and when your humble correspondent arrived, there was not a single member enabler to be seen.
On-Site Visit
Thus, I was forced to enter the club via a legitimate route. I was whisked away to customer service—or rather, my phone was whisked away: customer service in China generally involves having others massage two to four new apps into your smartphone so you can enter a physical shop. The process was completed in a brisk ten minutes and might have taken less time, had I already installed Alipay, WeChat or any other of China’s super-apps.
Once in Sam’s, I had a plan of attack (or the rudiments thereof) and a quasi-rigorous methodology that would guide this shopping safari. I would look for staple products my family would usually keep in the pantry and select only those that were at least 30 percent cheaper than at home. I would multiply the cost savings relative to their Hong Kong prices by the square root of the pain in the ass I would incur in hauling them home for an hour on public transportation (I was, foolishly, sans wheelie-bag).
Sam’s Club’s cavernous interior is indistinguishable from its counterparts in the U.S., and this is likely the point. The exception might be its long, languid and stair-free people movers which haul shoppers and their carts from the first floor to the second (few commercial footprints in China are large enough to accommodate the uniquely American all-on-one-floor warehouse experience). Classic stacks of impulse purchase items lined the entrance, nearly all of them aimed at younger shoppers. A lovingly constructed pyramid of Zootopia costumes seemed oddly out of date until I recalled that the hit remains the highest-grossing animated feature in China’s cinematic history, and Zootopia 2 is hitting Chinese theaters next year.
Some impulse purchase items appear selected without much understanding of local demographics. These include a six-foot tall inflatable unicorn which doubles as a lawn sprinkler, a curious sell in a market where the average shopper lives in a (lawn-less) high-rise apartment of roughly 700 square feet with two to three other family members. That said, your correspondent saw many shoppers grab giant Winnie-the-Pooh plushies off of a ten-foot pile and slap them on top of their hauls as if they were taking pains to disprove the long-held rumor that the beloved bear is banned in China.
Cross Culture
While the form factor of the warehouse club has some slight novelty appeal for Chinese consumers, most shoppers seemed overly familiar with their surroundings, perfunctorily patrolling the aisles as regulars, not tourists. The only area with some buzz about it was the hot food cases containing the signature dish of American warehouse clubs: rotisserie chicken. The flock of excited shoppers hauling out steaming clamshells suggests that they knew the drill. This familiarity was also on display whenever a tasting station was set up: neat orderly queues formed magically behind every steamed bun and fried chicken handout, and instantly dissolved the moment samples ran out. Most of the stations had signage that featured the Jade Rabbit, an increasingly fashionable symbol of the upcoming Mid-Autumn Festival—even though fried chicken is not a traditional holiday treat.
Mooncakes — chunky pastries usually filled with red bean paste and salted duck egg yolks to symbolize the harvest moon— however, are a big part of the festivities. Exchanging fancy, decorated boxes of mooncakes is a tradition during the fall holiday that has (as many have) gotten more out of hand over the years. Here, Sam’s Club’s in-store displays revealed a neat synergy between the discount warehouse model and modern Chinese holiday shopping habits. Massive stacks of colorful boxes (often festooned with Disney characters or other international IP) were arranged with Minecraft precision across the warehouse floor—mooncake packaging seems to be the perfect form factor for the retail space with fulfillment center sensibilities.
Despite the distinctly American warehouse club shopping experience, Sam’s Club distinctly caters to local tastes in China. As with all warehouse clubs, canned and boxed staple foods were a popular draw, even if Shenzheners or Hong Kongers do not have two-car garages to store pallets of cans of single-serving Spam and cases of tuna and corn porridge. Health food made up a large part of Sam’s Club private label offerings, adding a measure of authenticity and validation to the family-sized bags of organic, “farm to table” cordyceps, mushrooms and other traditional Chinese medicine ingredients that stocked an entire warehouse aisle.
Meat was largely imported and heavily promoted. An in-store demonstration of many ways to prepare U.S. ribeye was being filmed by a large crew (also with the Mid-Autumn festival branding, although once again, the contemplative night sky gazing holiday has little to do with cookouts) and large slabs of Norwegian salmon took up considerable real estate in the seafood chillers. Notably, however, few people were stocking up: “We don’t have deep freezer chests at home, and it takes 90 minutes or more to get home,” one Hong Kong day tripper told me, and while most Shenzhen residents have shorter commutes (and cars), they also mostly lack the storage space.
No Resistance to Temptation
Your humble correspondent, upon doing the math, wound up with a 3 kg tub of chia seed-infused oatmeal (at the other end of the health food aisle from the mushrooms and the cordyceps) and two liters of reduced salt soy sauce. I was craving neither and did not relish toting a big bag out of the big box, but these were the only items that I could find that were real apples-to-apples bargains—and I had room for at home.
It’s the Economy
Hong Kong’s Shenzhen day trippers have found a convenient, if fleeting, arbitrage window to help them alleviate their current level of poor consumer confidence. Similarly, Chinese consumers, also hard-pressed by a sluggish economy, are keen to peruse the wide aisles and towers of mooncakes looking for bargains. However, warehouse clubs are unlikely to kill off traditional retail on either side of the border in the Pearl River Delta. Not much of what is on offer in Sam’s Club offers massive savings for a Chinese consumer—unless they themselves have a warehouse in which to hoard the palettes. Big box retail is unlikely to creep over the border in Hong Kong directly—despite the property slump, a roomy warehouse-style retail concept would not make much commercial sense. However, as these brands expand their phyigital tendrils (Sam’s Club just announced plans to offer online shopping and delivery to Hong Kong), some sense of the Warehouse Life will continue to creep in.
Shopping for bulk and value have become novelties that are catering to local tastes and sensitivities and, by degrees, packaging size. This is not transformative, but as the growth of overstock shop chains like 759 and Best Mart 360 (along with a number of other three-digit discounters) reveal, these notions can be integrated into the rhythms of traditional Chinese retail without completely disrupting them.
Image Credit: Robert – stock.adobe.com
