Wal-Mart's Sam's Club: A bright spot in China
By ANNE D'INNOCENZIO, AP Retail Writer
SHENZHEN, China (AP) — Wal-Mart's Sam's Club took a gamble in China almost two years ago. It changed the way it sells meat and fish, putting them in packages instead of letting Chinese shoppers physically inspect cuts of meat or live fish in tanks the way they're used to.
The new approach is paying off.
The affluent Chinese customers Sam's Club attracts are well-traveled and used to the way shopping works in the West.
"I really trust the store," said Huang Liu, who shops here once a week. She doesn't mind that the meat or seafood is packaged: "Even though it's not live, it is very fresh."
That move is counter to the rest of the Wal-Mart experience in China where its namesake stores highlight live crabs and frogs as well as piles of fish with bulging eyeballs. That's because many Chinese want to touch and feel the products as a way to determine they're fresh. That's different from the U.S. where customers prefer products packaged. But in many ways, the world's wealthy shoppers are perhaps more similar to each other than their own countrymen. And Wal-Mart sees this move to introduce more Western ways of merchandising in China as a way to attract high-income shoppers like Liu.
Wal-Mart Sam's Club is also expanding its array of foreign imports and spicing up the offerings with eye-catching fancy TVs. That strategy has helped turn Sam's Club stores into Wal-Mart's biggest success in China.
Wal-Mart has 800 of the members-only stores worldwide, and four of the top 10 are in China. The No. 1 Sam's Club is in Shenzhen, a status it's enjoyed since 2008. The company plans to add seven or so Sam's Clubs to the 13 now in China by 2017, offsetting sluggish sales at its namesake store.
Wal-Mart's Sam's Club is just starting to focus on wooing the affluent in the United States as a way to set itself further apart from its namesake stores, which generally cater to lower-income shoppers. It hopes to lure well-off American shoppers to Sam's Club and away from industry leader Costco Wholesale Corp., which has consistently beat the U.S. clubs on a key sales measure. Sam's Club is opening stores in wealthier areas in the U.S. and improving its food brands.
In China, Sam's Club has a big advantage. It faces no direct rivals in the club business. Costco has only a small presence in China; it's launched an online store with China's online giant Alibaba.
Still, it's a big feat to convince the Chinese to purchase food in bulk; many Chinese shoppers like to buy a little at a time every day. And to keep track of what's selling — and to ensure better control quality in the wake of food scares — Wal-Mart wanted to persuade customers to buy pre-packed goods.
Andrew Miles, chief operating officer at Sam's Club China, admitted he was a bit nervous about the switch to all packaged meat and seafood. Customers liked it, though some still like to open up boxes of fruit and other items to check their quality.
So Sam's Club decided to make the changes slowly. It first used transparent bottoms of the meat and fish packaging and then switched to opaque ones.
Sam's Club is also bringing in more foreign imports, such as top quality roasted seaweed from Korea and apple pie from the Netherlands, and packaging them under its warehouse private brand Member's Mark.
Sam's Club shoppers' habits are changing. They used to shop every day for fresh food; now they shop every 10 days and spend more, Miles says. That's compared to Wal-Mart shoppers who now go to a Wal-Mart store in China five times a month.
Sam's Club also highlights some eye-catching items to set the upscale tone. On a recent tour of the top-performing Shenzhen store, a reporter spotted an LG 105-inch 5K-TV for 768,888 yuan (about $117,200). Nearby, a female worker was showing a customer how to use a clothing steamer from Laurastar that's priced at 28,888 yuan ($4,400). It comes with free four-hour training.
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Her work can be found at http://bigstory.ap.org/content/anne-dinnocenzioAssociated Press