Why Sam’s Club is in a sweet spot as China faces consumption worries

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Latest data from China showed a key gauge on consumption falling to its weakest level in nearly three years. But it does not capture the full story.

American membership warehouse clubs are telling something more nuanced: they are finding success in drawing consumers who are willing to pay a hefty membership fee in exchange for premium goods at reasonable prices. On top of that, those stores provide no-frill “treasure-hunt” shopping experiences to sweeten the deal.

Sam’s Club, the membership-based warehouse retail arm of Walmart, opened its new store in Beijing last month, followed by another one in Shanghai on Tuesday. They drew large crowds, snarling traffic for hours and keeping consumers in long queues.

Walmart plans to open 10 new Sam’s Club outlets in China this year — its fastest expansion ever — and is on track to reach this target, with its 10th store opening in Guangzhou next week.

Such warehouse stores have long been known as places to buy large quantities of household staples at cheaper prices.

Even though it’s less typical in China, where grocery habits have historically skewed toward high-frequency, smaller-basket shopping, this retail model is starting to find its customers.

“Here they do buy it because of the value and niche products,” said Cameron Johnson, Shanghai-based senior partner at consulting firm Tidal Wave Solutions. He said residents in his compound often ask in group chats whether others want to split oversized packs.

Sam’s Club has leaned into that proposition: a shopping experience and product lineup distinct from conventional supermarkets and online retailers, paired with annual membership fees ranging from 260 yuan to 680 yuan ($37-$97). Shoppers get modest discounts — but the bigger draw is access to curated merchandise that they can’t find elsewhere.

“It’s a membership model that consumers pay the membership fee upfront, and as a result, they get a full set of services,” said Weiwen Han, a Hong Kong-based partner at Bain & Company.

Walmart’s success

Walmart entered China in 1996 with its first hypermarket and Sam’s Club warehouse chain in Shenzhen.

But the hypermarket format — which combines a supermarket and department store — has lost momentum as digital retail took off. Sprawling online marketplaces, such as Alibaba and JD.com, with their aggressive discounts and convenience, have squeezed out traditional grocers and foreign players such as France-based Carrefour.

Walmart has closed almost 150 hypermarkets in China since 2020, with just 279 stores operational as of July, down from 412 in 2020.

But Sam’s Club has proven an…