This article was written by a friend of Momentum Works who has more than 25 years experience in retail and supply chain management in China, and once served as GM for a retail chain in the country. Translated into English by the Momentum Works team. The opinions expressed in the article are those of the author and not Momentum Works.
You can also refer to this article “Sam’s Club is the real winner in China’s new retail war?” for perspectives explaining the Walmart subsidiary’s success in China.
I predict that Sam’s Club’s good days in China are numbered—only three years left.
In 2024, Sam’s Club in China made history by surpassing 100 billion yuan in sales, and growing its member base to over 8.6 million members. The annual membership fee alone rakes in a staggering 2.2 billion yuan (US$300 million). The first stores in Shenzhen and Shanghai are the highest-grossing and most profitable Walmart stores globally, with some stores achieving annual sales exceeding 3 billion yuan (US$414 million).
To date, Sam’s Club has already opened 55 membership stores and over 300 fulfillment centers across China, with expansion plans still underway.
These achievements are largely attributed to the key figure behind Sam’s Club in China—President Andrew Miles. Having led Sam’s Club China for 12 years, he is set to retire on 31 January this year (2025).
Walmart China’s announcement of Andrew Miles’ retirement
The success of Sam’s Club in China owes much to this tall, lean Brit, who has even made the Chinese operations a learning model for the company’s U.S. headquarters.
When he joined in 2012, Sam’s Club had been in China for 16 years but had only opened 8 stores and was facing pressure from the U.S. headquarters to exit the Chinese market. In 2017, when he took the top position, he implemented his signature “three-pronged strategy.”
First move: He drastically reduced the SKU count from the previous management’s fluctuating numbers to 4,000, sticking to the principle of “broad categories, narrow selection.” This approach dug deep into the supply chain, truly differentiating Sam’s Club from Walmart. Customers who want Sam’s products can only get them at Sam’s Club, justifying the membership fee by pre-selecting brands and quality for members.
Second move: He optimised membership management with a “satisfaction guarantee” and pushed for the first membership fee increase in 20 years, from 150 yuan to 260 yuan (US$36), and later to 680 yuan (US$94) for premium membership, aiming to precisely target high-net-worth individuals.
Third move: He launched quick commerce, introducing a “ecommerce + membership” model. With 1,000 frequently purchased items and 8-10 fulfillment centers per store, he established a robust fulfilment ecosystem. Additionally, he opened online stores on JD.com to validate product sales, eventually achieving 55% of Sam’s Club sales through online channels.
Sam’s Club’s quick delivery rider fleet
Based on these three strategies, Andrew Miles rapidly expanded the store count to 32 within three years—three times the number before he joined.
Miles’ wife is of Chinese descent, which helped him master the language and culture. However, beyond his language skills and business acumen, his luck has been remarkable—making me curious to check his horoscope.
He worked at Watsons for 20 years, serving as CEO of the Asia region from 2003 to 2008, overseeing 1,500 stores across 11 countries during its peak. From 2008 to 2012, he served as the distribution president of Alghanim Industries, one of the largest private companies in the Middle East, before joining Sam’s Club in its struggling phase in 2012 and rising to the top in 2017.
Andrew Miles, who adopted a Chinese name 文安德 (Wen Ande)
China’s rising middle-class consumption upgrades before 2020 helped him, and the pandemic further boosted Sam’s Club’s popularity.
Every step he took was perfectly timed, making him the Warren Buffett of retail.
Walmart China CEO Christina Zhu once said in an internal meeting that Hema (Freshippo) is Sam’s Club’s only competitor in China because its innovative business model poses a potential threat.
However, Sam’s Club actually faces far more threats than just Hema.
First threat: Slowing growth. Whether it’s total sales, net sales, or e-commerce business, all key indicators are showing declining growth rates. With each store requiring heavy investment and manpower, expansion into second-tier cities will not be easy.
Second threat: Fierce competition from local retail brands in four key areas.
- Traditional retail giants like the hugely popular Fat Dong Lai (胖东来), which is forming an upgraded ecosystem under the leadership of its visionary founder, Yu Donglai, using a strategy akin to “rural encircling the cities.”
- Online fresh grocery platforms such as Meituan’s Xiaoxiang Supermarket(小象超市), Dingdong Maicai(叮咚买菜), and Pupu Supermarket(朴朴超市), with Hema leading the charge. Hema discovered through internal data that 43% of its users overlap with Sam’s Club members, prompting it to directly compete with Sam’s Club using a localized membership model.
- Traditional ecommerce giants like Alibaba, JD.com, and Pinduoduo, which are now emphasizing paid membership models in their financial reports.
- Live-streaming ecommerce, including platforms like East Buy(东方甄选) and Xinbada(辛巴优选), which aim to establish a “membership-based” system similar to Sam’s Club. These companies are already generating hundreds of billions in revenue through their live commerce operations.
- Lastly, there’s Costco, the originator of the membership store concept. Although Costco currently operates in its own niche, it has previously driven Sam’s Club out of Canada and continues to outperform it in the U.S. market.
The situation between Sam’s Club and Costco in China is beginning to mirror the early days of KFC and McDonald’s, where KFC entered first and became synonymous with American fast food in China, but McDonald’s dominates in the U.S.
Andrew Miles’ successor, Jane Ewing, has been appointed as interim president rather than full president, indicating a transitional period.
Ewing emphasized four months ago that the supply chain remains Sam’s core strength, which raises concerns.
Because despite Sam’s rapid growth over the past seven years, several hidden risks have emerged:
- Quality control issues, with reports of foreign objects in food, improper labeling, and questionable practices in supply chain management, which could erode consumer trust.
- Conflict with members, where high gross margins alongside membership fees create doubts. Unlike Costco’s transparent 14% gross margin, Sam’s Club has higher margins on some items, making members question the value proposition.
- Lack of comprehensive membership benefits, as the current membership mainly serves as an entry pass rather than offering lifestyle-encompassing benefits like Costco in the U.S.
The Chinese middle class is far larger than 10 million people, but maintaining and expanding the member base amid economic uncertainty remains a challenge for Sam’s Club.
If these issues persist, Sam’s Club’s good days in China may not last beyond three years.
