Wal-Mart's Sam's Club Ready for Debut in Beijing

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Last updated at: (Beijing Time) Friday, July 11, 2003

Wal-Mart's Sam's Club Ready for Debut in Beijing

The members-only warehouse Sam's Club, part of the United States retail chain Wal-Mart, is to open with a grand ceremony in Beijing today.

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The members-only warehouse Sam's Club, part of the United States retail chain Wal-Mart, is to open with a grand ceremony in Beijing today.

The city's first Sam's Club is in Shijingshan District by the West Fifth Ring Road. It has a business area of 18,000 square metres.

The store offers 4,000 kinds of commodities, and it costs 150 yuan (US$18) to join.

Many insiders have adopted a wait-and-see attitude to the new shop and have questioned whether the world retailing giant can prove that the membership system will do well in Beijing.

Membership supermarkets such as PriceSmart and Makro have not fared very well in Beijing so far.

PriceSmart, the world's leading operator of membership stores, has already decided to change two of its six membership stores in Beijing into chain supermarkets.

But Tom McLaughlin, vice-president of merchandising and marketing for the Wal-Mart China Co Ltd, said he believed the Sam's Club would be an exception, supported by the company's powerful strength.

Wal-Mart's extensive purchasing network and smooth logistical operations can ensure low prices and high quality, McLaughlin said.

Sam's Club operates by selling high volumes of merchandise for very low profit margins and it offers exceptional value on brand-name merchandise, he said.

He said Beijing is a good place in China for membership stores because residents have higher incomes and own more cars.

Wal-Mart has opened four Sam's Club stores in Shenzhen in South China's Guangdong Province, Fuzhou in East China's Fujian Province, Kunming in Southwest China's Yunnan Province and Changchun in Northeast China's Jilin Province.

He said Sam's Club membership cards have already proved popular in Beijing.

"We chose Sam's Club as Wal-Mart's pioneer in Beijing after detailed market research," he added.

Wal-Mart also plans to launch three superstores in Beijing.

Experts said most consumers still prefer regular supermarkets to membership stores.

Guo Geping, president of the China Chainstore and Franchise Association, attributed this preference to the different buying habits of customers in China.

"To become a member of such a store, a consumer has to spend 200 yuan (US$24) to 300 yuan (US$36) to get a card, which is difficult for Chinese people to accept," said Guo.

So far, only Makro has offered membership card to customers free of charge, which has attracted more members to it than to its competitors.

Guo added: "In addition, the different buying habits of Chinese people have made membership stores less popular in China."

Chinese people often use chain stores and supermarkets to buy everyday items such as soap, biscuits and paper tissues, while they buy clothes in department stores and TV sets in electronic goods shops.

"As a result, the preferential treatment offered by cheaper prices in membership stores cannot cover their travelling expenses to the stores, which are far from the city centre," Guo said.

The distant location also does not fit in with the shopping habits of Chinese consumers, who buy fresh vegetables, meat and seafood every day, unlike customers in the United States and Europe who buy a lot of frozen and processed food.

But Guo said he believed the membership system will gain in popularity in China as some young people change their habits.

"The different goods offered by the membership stores will also attract the growing middle class in China," Guo said.

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