Sam’s Club model is the only sustainable model in social and live commerce?

This is written by a Hangzhou-based retail veteran in the Momentum Works community, on the occasion of the opening of Sam’s Club’s 51st store in China. Translated into English by the MW team. You can also reference this article (Sam’s Club is the real winner in China’s new retail war?) 

On November 22, the Sam’s Club in Shaoxing officially opened its doors. This is the 51st Sam’s Club store in China and the largest in East China.

I’ve always been a strong advocate of the Sam’s Club business model. Since moving to Hangzhou in 2016, I have been committed to promoting and implementing this model in the ecommerce space, particularly in supply chain operations. In fact, I consider myself an evangelist for the Sam’s Club approach. From my early days at Beibei.com to my later work in social commerce, where I developed and incubated a series of products with annual sales in the hundreds of millions, I’ve witnessed Sam’s Club grow from about RMB 30 billion in nationwide sales in 2018 to over RMB 80 billion in 2023. This remarkable growth was achieved with the same 4-5000 SKUs, without adding more.

The logic of Sam’s Club focusing on blockbuster products aligns perfectly with my experiences in social commerce. This principle can also be applied to live commerce. In fact, I firmly believe this is the only sustainable and scalable operational model in both social and live commerce. Recently, many players in private domain ecommerce (selling through direct social groups rather than through platforms) have started proclaiming their ambition to build a “Sam’s Club of private domain ecommerce.” I can confidently say that anyone using this slogan in their PowerPoint presentations is following my lead, as many of them have learned from my training courses. If anyone has doubts, feel free to confront me—I’ll gladly show you when I first introduced this concept to the industry. 😉

What is the core and soul of Sam’s Club?

1. No Big Secrets in Retail: Retail is not rocket science. Designing a pastry or sourcing beef is nowhere near as complex as developing cutting-edge microchips or building an e-commerce platform serving hundreds of millions.
2. Low Costs for High Quality: Success in retail, whether for Sam’s Club or others, lies in producing the best possible products at the lowest possible cost. Achieving scale and cost-efficiency often requires forgoing a portion of the market. Sam’s Club adheres to the principle of “broad SPUs, narrow SKUs.” This means offering a wide range of product categories but only a limited selection (usually 1-3 choices) within each category. In contrast, typical supermarkets or new retail channels often offer dozens of choices for the same product. Sam’s leverages scale to gain pricing power, expand cost advantages, and create a formidable competitive moat.
3. Expert Procurement and Supply Chain Teams: Sam’s Club employs highly specialised procurement and supply chain teams who are acutely cost-sensitive and deeply knowledgeable about every step of the process, from raw materials to production. They understand the cost model of “raw materials + waste + logistics + fulfillment + supplier margin + packaging” and continually optimise to reduce supply costs.
4. Trust-Based Supplier Relationships: Sam’s rigorously screens suppliers before establishing partnerships. Once partnered, it builds long-term, trust-based collaborations. Unlike some retailers that split orders among multiple suppliers to save costs, Sam’s prefers working with large suppliers to ensure optimal scale, cost efficiency, and product consistency. With its robust global supply chain and R&D-driven approach, Sam’s delivers reliable products at competitive costs.
5. Continuous Iteration and Optimisation: Launching a product is just the beginning for Sam’s Club. Once a product reaches a certain scale, the procurement team collaborates with suppliers to further improve efficiency and save costs, ensuring members benefit from even better value.

The Competitive Landscape for Sam’s Club

For now, Sam’s Club’s main competitor is itself. Within its segment, Sam’s already has scale and first-mover advantages. If it further drives prices to the extreme and solidifies its industry barriers, competitors will find it increasingly difficult to catch up.

However, in a market that is not yet fully competitive, Sam’s Club faces a critical strategic question: Should it yield to the temptation of high profit margins or stick to low margins to maximise long-term member value? This remains the great challenge ahead for Sam’s Club.