3 Dec 2015
Supermarkets Turn to Membership Stores to Ride Out Retail Downturn
With online sales threatening the profitability of supermarkets, the membership model is increasingly finding favour.
In recent years, the retail sector has faced a wave of store closures, but one group seems to be defying this trend. Yonghui Superstores, a Fujian-based chainstore operator, has now announced plans to accelerate its expansion plans across China.
In November this year, the company also introduced a new retail format – membership stores. The first Yonghui membership store opened for business in Shanghai's Yangpu district on 18 November. Although the store only occupies a floor area of some 200 square metres, it still aims to offer a comprehensive range of safe, healthy and value-for-money imported foods. Just a week later, the group's Bravo YH store at the Changjiang International Commercial Shopping Centre was also upgraded to membership store status.
Yonghui's Shanghai membership store is located close to a number of higher education institutions, notably Shanghai's Fudan and Tongji Universities. Its overall design and decoration is stylish simple and clean. Its 1,000-plus product range of mainly fresh and imported foods are all premium items, specially selected from Yonghui's stock.
Bravo YH, Yonghui's premium superstore which opened in April this year, was only upgraded to become a membership store after undergoing substantial restructuring and renovation. The store now has a business area of more than 10,000 square metres, as well as parking for 300 shoppers.
The store now imports a substantial amount of specialty products from the US, Japan, Korea and Taiwan, as well as live seafood and premium fruit and vegetables from Australia, Alaska and a number of other sources. As part of its launch promotion, the store offered a number of special deals to shoppers, including two free imported apples for all customers who bought online between 25 November and 1 December. The store also offered a discount of Rmb18 on any purchase of Rmb88 or more.
In April this year, Yonghui also opened its first "global shopping" experiential store. Covering an area of more than 1,200 square metres, this new outlet is based in the Fuzhou Area of the China (Fujian) Pilot Free Trade Zone. To date, the store has average daily sales in excess of Rmb150,000.
In line with Yonghui's overall plan, imported goods will make up 50% of the product mix of its membership stores, while the proportion of fresh and live foods will increase from the current 25% to 30% in the near future. Primarily, these stores target medium to high-end consumers and hope to attract specific market segments, notably office workers and expats who tend to prefer high-end stores, while having a reluctance to visit hypermarkets.
By offering a number of benefits and privileges to prospective members, Yonghui managed to attract more than 3,000 sign-ups in its first trading week. As part of its strategy, the group has also sought to integrate its online and offline shopping experiences, encouraging offline customers to visit its weidian (WeChat) mobile app store.
Over recent years, many of the large supermarkets chains have also adopted the membership store model. Walmart, for instance, has plans to open six to seven Sam's Clubs in China over the next three years, while Metro, another overseas-backed warehouse-style membership store, is also accelerating its store opening programme. In May this year, Wumart, too, opened its first membership store, now trading under the Shangjia brand.
Kelly Dai, Shanghai Office