When The Dispute Between Chu And Han Dynasties Is Going On: Retail Business Under The Penetration Of Paid Membership System

With the disappearance of flow dividend, the whole retail industry has entered the stock age, and the paid membership system is becoming a new battlefield for retail enterprises.

The input-output ratio of innovation is too low, and promoting and retaining has become the main theme of development. In the stock age, retail enterprises are required to provide more refined and differentiated services than before, more flexible and changeable commodity development strategies, and design link mode based on consumers as the starting point. The flow value driven model has gradually replaced the user growth driven model, and the value development of consumers has become the focus of the market.

As one of the first enterprises to set foot in China's paid membership retail market, Wal Mart's Sam's Club held a brand press conference and member's mark brand new upgrade conference in December, announcing that it would comprehensively upgrade its own brand member's mark, add offline stores, and conduct a new round of online business development.

Andrew miles, President of Sam's club business and vice CEO of Wal Mart in China, said the number of Sam's stores opened and under construction in China would reach 40-45 by the end of 2022. Compared with the past 24 years in China, Sam has only opened 29 stores, among which only 14 stores have been opened in the first 20 years. Membership retail seems to be on the fast track.

On the one hand, the domestic member economy is developing towards a good situation; on the other hand, the number of players in the paid membership market is gradually increasing, and the market competition is intensifying. Since 2015, domestic retail enterprises have tried the paid membership system. In addition to the "number one player" Sam, Costco's entry into China ignited a boom, and the domestic e-commerce giant Alibaba's box Ma Xiansheng also showed a rapid development trend in the near future.

Players play in different ways

On the track of membership retail, each retail enterprise has its own "art of war".

Sam settled in Shenzhen for the first time in 1996, and has penetrated the Chinese market for 24 years. The other two enterprises entered the board relatively late. As the largest chain member store in the United States, Costco (market opener) first store in mainland China opened in August 2019 in Shanghai; HEMA Xiansheng launched the "HEMA x member" program in April 2018.

According to public information, as of this year, Sam has 29 stores deeply rooted in Beijing, Shanghai, Guangzhou, Shenzhen and other mainstream cities, and has 3 million members in China, and 80% of the members with more than 2-3 years of membership renew their cards.

Although Costco has no advantage in terms of the time of entry, Costco was forced to take current restriction measures on the first day when it opened its shop in Shanghai because of the "enthusiasm" of Chinese consumers. Subsequently, Costco's share price soared 56 billion yuan in two days, and more than 100000 members registered in three days. In addition, after more than 10 years of sales in Shenzhen, Sam's stores in Shenzhen have been ranked No.1 in Shenzhen for more than two consecutive years. In Shanghai or Shenzhen, Sam and Costco have shown the momentum of "close combat".

HEMA opened its first warehouse x member store in Shanghai in October. The campaign for the paid membership market has begun quietly.

Compared with general users and general membership system, paid membership system emphasizes more special service relationship. Through differentiated services and more abundant rights and interests, the viscosity of users is enhanced, so that the payment of users is less than the sum of the immediate value and the future value. Differentiation is synonymous with successful paid membership. In today's crowded track, the three players play differently.

Sam adheres to his consistent "Sam philosophy" and takes quality as the main standard of selection. Andrew miles, President of Sam's club business and vice CEO of Wal Mart in China, told 21st century economic news that they had a purchasing team with a strong "obsession" about product quality. To maximize differentiation is the first criterion for Sam's purchasing team when selecting goods. And Sam is a retailer of paid membership mode, "so the evaluation index is mainly based on membership, and we focus on how to achieve quality growth of membership and the renewal rate of members.".

In order to attract high-quality products, we should try our best to attract the best price of products, which is different from the price of products. We should try our best to lower the price of products and lower the price of products.

However, domestic enterprise HEMA abandoned the overall layout of business strategy, adopted the vertical strategy to enter the market, selected its own advantage field, namely fresh field accurate entry, and put forward a new retail idea of "building commodities with fast fashion thinking", and implemented modular development of commodities. While ensuring the quality, the iteration speed of new products was 3-4 times faster than that of the industry. HEMA Xiansheng also has a relatively large number of offline outlets, a wider coverage, and obvious cluster advantages.

Hu Chuncai, a retail expert and founder of Shanghai Shangyi consulting, told the 21st century economic reporter that the import commodities provided by Member System supermarkets such as Sam and Costco account for a considerable proportion of their total volume, which gives them unique competitiveness. And HEMA is not weak in terms of the supply capacity of imported goods, even stronger than the above-mentioned two enterprises from the United States.

However, some people in the industry pointed out that the development mode of Sam and other enterprises is to concentrate on a small number of commodity categories and provide more efficient purchasing experience for medium and high-end customers by reducing SKU (inventory holding unit) by taking advantage of their own precipitated supply chain advantages.

In fact, compared with traditional retail, the unique feature of "paid membership" is that it is a single choice question for consumers, and few people choose to pay for members of multiple brands of the same quality at the same time. Therefore, the key to the success of retail enterprises is to grasp the difference among the three industries.

Dividend continues to drive

The background of consumption upgrading has become an opportunity for the development of membership retail.

The new retail has established a people-centered experiential consumption. In the past, the operation of enterprises running horse and enclosure is no longer effective. Quantity, single frequency contact and short-term relationship are no longer the focus of the industry. Quality, renewal and long-term contact have taken the core position instead. Starting from the needs and pain points of users, it is the breakthrough of the industry competition to explore the subdivision market under the membership mode and form its own private traffic.

Hu Chuncai pointed out to the 21st century economic reporter that with the upgrading of domestic consumption, the scale of high-income groups in China's first and second tier cities and the middle class will grow faster than other groups, which will promote the expansion of the retail industry's paid membership market in the future. In this context, pay membership bonus is obvious.

According to the public information, by June 2020, there were 555 direct mining sites for HEMA commodities, more than 1000 private brand and exclusive customized SKUs, and the proportion of imported goods exceeded 30%. In the past 12 months, more than 6000 new commodity brands were introduced.

On the one hand, payment itself is a screening threshold, which can screen high net worth users for enterprises. The reason why the stores of the above three enterprises are mostly located in the first and second tier cities is that the consumer markets in these cities are relatively mature, consumers have a higher degree of pursuit of high-quality and excellent experience, and have relatively good economic strength, and the acceptance of fee membership system is more extensive.

On the other hand, the paid membership system enables retail enterprises to select high-quality consumers from the vast number of consumers for strong binding, so as to ensure their future development and stable operation. When users have money or emotional investment in the brand and products, the cost of leaving will be relatively higher, so it can ultimately achieve the effect of sticking users, improving user activity and reducing the user churn rate.

Moreover, with the upgrading of domestic consumption, the layered and diversified characteristics of consumer demand are obvious. The paid membership system can improve the ARPU value of users through the formulation of a series of differentiation strategies and accurate and high-quality user services, and increase the overall revenue with the member enabling products, or obtain profits from the membership fee itself. With the above dividends, when the bottleneck of retail industry development is coming, enterprises will rush to leverage the new blue ocean of paid membership system.

Omni channel development trend

With the huge market scale of retail industry and the current consumption upgrading, the depression of traditional retail industry and the slowdown of online shopping retail growth, major e-commerce giants and traditional retail brand enterprises have explored new retail. As far as the distribution of retail channels is concerned, it is not to expand the distribution channels of the existing and future paid enterprises.

Not only that, the epidemic also put a severe test on the rational judgment of Shangchao. In many enterprises, even the original product quality is difficult to guarantee, the higher requirements of member users for quality has become a new challenge for related enterprises in the industry. In this context, the "one inventory" model has developed rapidly and has been widely used in Sam's and HEMA's paid membership supermarkets.

The epidemic also makes us feel that "the strong are always strong". Sam is famous for his quality. In the epidemic stage, when people are worried about safety, Sam, who is famous for his quality, will gain more trust. This advantage will be magnified more incisively and vividly under the epidemic situation. The fastest growth rate is also the time when the epidemic is more serious.

Wenande told reporters that there were several obvious changes in the behavior of members after the outbreak: when the outbreak started, members were worried about food safety and quality. Members have higher requirements for shopping environment. During the epidemic period, they will prefer to have spacious shopping space. Members' shopping habits will favor the use of e-commerce.

Take Sam's one-hour "super express" service for members as an example, which provides online shopping members with the same quality of goods as offline shopping in the mode of "store + cloud warehouse".

Cloud warehouse is the front warehouse. The location of front-end warehouse is generally located in the place where enterprise members and potential members are relatively concentrated, and the area is relatively large. The commodities in the front warehouse are daily commodities and food with high repurchase rate in offline stores, so as to meet the relatively urgent real-time consumption scenario. There is no difference in the quality of goods sold with offline stores. Front end warehouse is an important supplement to offline stores, not a substitute.

"One inventory" mode not only promotes the omni-channel layout of paid membership retail enterprises, but also breaks the separation of online logistics and offline logistics, provides intuitive guarantee for service and product quality, further optimizes the consumption experience of members, and in turn promotes the development of paid membership system.

From the perspective of "online and offline" inventory management system, we can realize the "online and offline" intelligent inventory management system from the perspective of "multi-channel, Omni channel, integrated operation, etc, In the fastest way to reach consumers.

In a word, "one inventory" mode is to ensure quality, improve efficiency and reduce costs on the basis of all channels. Compared with the traditional Omni channel layout strategy, the "one inventory" mode is more optimized and has more advantages in improving the efficiency of the supply chain, reconstructing the consumption experience and extending the real-time consumption scenarios.

Paid membership system has been infiltrated in China for a long time, but its market demand has only begun to show in recent years. From the present point of view, the main market is the Chu Han dispute between Sam and Costco. As for the outcome of the battle between Chu and Han, it remains to be seen whether Costco will become a rising star.

However, no matter which enterprise occupies the highland this time, the struggle within the "paid membership system" of the retail industry will not stop. In the process of development, more and more "Sam" will win the first prize, and there will be a steady stream of "Costco" trying to catch up. Thinking about change and survival is the basic guarantee for enterprises to survive in the paid membership market and even the whole retail industry.