What Will It Take For Sam’s Club To Be Successful In China?

What Will It Take For Sam’s Club To Be Successful In China?

Sometimes you have to go up market in order to be successful
Sometimes you have to go up market in order to be successful
Image Credit: Mike Mozart

In the world of shopping in bulk, you have choices. Specifically, when you need a huge amount of toilet paper or paper towels, you can choose to go to either Sam’s Club or Costco.Where do you choose to go? If you are like most people, if you have a choice you generally choose go to Costco. It’s not clear why we make this choice. I suspect that one of the reasons is because Sam’s Club is so closely tied to Walmart that most of us really don’t want to go there. You would think that the Sam’s Club product managers would have a real challenge on their hands when they went to China. However, it turns out that was not a problem.

Sam’s Club Goes To China

In the U.S., Sam’s Club has had a rough time. What they would like to be able to do is to attract more of the higher-income customers that they would like to have. However, they have not been able to do this. Instead, those customers seem to head over to Costco when they want to do their bulk shopping. One of the big problems that Sam’s Club is dealing with is that when people think of Sam’s Club, they think of Walmart which is closely associated with budget-minded individuals.

Where things get interesting is when you take a look at China. China is the home to three of Sam’s Club’s top five world-wide performing stores. Clearly the China Sam’s Club product managers have been using the right product development definition. So how did the Sam’s Club product managers pull this off? In China the Sam’s Club stores have positioned themselves as providers of imported goods and high-quality foods. This is in contrast to the U.S. stores which are mainly known for having closeouts and bulk items. Something else that has helped Sam’s Club do well in China is that over there they are not facing the same competition that they are in the U.S.: Costco does not have stores in China.

In the U.S. the Sam’s Club stores just have not been able to attract the well-off shoppers who buy a lot of goods. Instead, these are the people who are helping to keep Costco running. Making things a bit more difficult for Sam’s Clubs is the fact that they are heavily concentrated in the U.S. Southeast. This is in contract to Costco which is is concentrated along the more affluent West coast. The Sam’s Club product managers learned from their U.S. experiences when they went to China. The Sam’s Club stores in China are located in some of the country’s most affluent and densely populated cities. Shoppers view the products offered by Sam’s Club as having guaranteed quality while normal Chinese products are not trustworthy. All of this can look very good on a product manager resume.

What’s Next For Sam’s In China

The Sam’s Clubs in China know exactly who they would like to be selling their goods to: affluent mothers. These are the types of shoppers who view Sam’s Clubs as providing imported products that they are not going to be able to get at Chinese stores. The Sam’s Club model is to get customers to sign up to be members. In China, 1.9 million people have gone to the effort to sign up in order to be able to shop at Sam’s Clubs. The Sam’s Club empire currently consists of 866 stores. Of these, 19 are located in China. Most of the members of Sam’s Club have joined up in the past 5 years. The reason that they joined was because Sam’s Club was able to add more stores and they were able to make what they were carrying appeal more to affluent women with young children.

The customer that Sam’s Club is going after is a mother who is between 35-40 years old. This customer is searching for better quality products and is concerned about both food safety and the quality of the food that they are buying. This type of customer is willing to pay for premium products; however, she is going to insist on getting value for what she purchases. The success that Sam’s Club has had in China needs to serve as a reminder for product managers. We need to take the time to tailor what brands and products we are offering our customers in order to meet the needs of specific groups of customers. In the case of Sam’s Clubs, the product managers have done and excellent job of segmenting the market, determining the right places to open stores, and being careful about who they want to market to.

The Sam’s Club product managers in China have been sharing what has been working for them with the Sam’s Club product managers in the U.S. What this means is that the U.S. stores are going to start to sharpen their focus. What the U.S. product managers have started to realize is that they have been trying to serve too many types of customers. Going forward the plan is to focus on suburban families with incomes between $75,000 and $125,000 per year. It turns out that this is the fastest growing segment of its membership. Although they don’t pose a threat in China right now, Costco has operated in Taiwan for over 20 years. At the same time, in China Sam’s Club is going to have to deal with online rivals. In order to deal with these challenges, the Sam’s Club product managers plan on doing more. They are going to double the number of Sam’s Clubs in China by 2020. Sam’s Clubs also plans on offering more of their products online. Sam’s Clubs did see their membership number slip last year when they doubled their membership fee. However, these numbers have recovered. One of the most important features of a successful Sam’s Club store that the product managers have discovered is ample parking.

What All Of This Means For You

When it’s time to load up on large quantities of items, here in the U.S. we have many choices about where we’d like to go. Sam’s Club is one of them, but there are other options that are often more attractive to us. It turns out that over in China, the Sam’s Clubs there are the attractive places that people want to go to when they want to load up. What have the Sam’s Club China product managers done to be so successful?

In the U.S., Sam’s Club has had difficulty attracting the high-end type of customer that they seek. Since Sam’s Club is so closely tied to Walmart stores people tend to think of Sam’s Club as just being another discount outlet. In China the Sam’s Club stores have positioned themselves as providers of imported goods and high-quality foods. Something else that is helping Sam’s Club to be successful in China is that they are not facing any competition from Costco over there. In the U.S. Sam’s Clubs struggle to attract the right type of customer because of where the stores are located. In China, the stores have been positioned in the largest cities with the greatest number of potential customers. The Sam’s Clubs in China know exactly who they would like to be selling their goods to: affluent mothers. Most of the members of the Sam’s Clubs in China have signed up in the past 5 years. The customer that Sam’s Club is going after is a mother who is between 35-40 years old. This should serve as a reminder to us product managers that we need to target our customers. In the U.S., Sam’s Clubs are going to start to tighten their focus on who they are selling to.

The Sam’s Clubs product managers in China have studied their product manager job description and done an excellent job. They have placed their stores close to their target customers and they have stocked the stores with the types of products that these customers want to buy. They have been lucky because they have not had much competition so far. As things start to heat up in China, these product managers are going to have to react and find ways to make Sam’s Club stores in China even more attractive to their customers.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think that Sam’s Club in China should focus on opening new stores or getting more people to shop at the stores that they already have?

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What We’ll Be Talking About Next Time

Retail giants Amazon and Walmart really, really want to start selling a great deal in India. In fact, they are willing to spend billions to set up shop there. However, their success is not guaranteed. It turns out that they are going to be battling the countless number of mom-and-pop stores that are already there and these stores are not going away any time soon. How is this battle going to sort itself out?

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