"Let our brand become a label and symbol of contributing to a better life, which is the meaning of retailers' existence."
Carrefour and Wal Mart, which also entered China in the 1990s, have gone to different destinies.
Since the epidemic, Carrefour has successively closed its stores in domestic cities. According to the financial report of the first three quarters of 2023 released by Suning E-shop, as of September 30, 2023, there were only 10 self operated stores of Carrefour China Supermarket.
In contrast, Wal Mart, even though its traditional store model is also facing transformation, its high-end member store brand Sam has accelerated its layout in the Chinese market since 2019. Official data shows that by the end of 2023, Wal Mart has 47 Sam's Club stores in China, and the average number of stores opened in the past four years is nearly five times the average number of stores opened in the 23 years before 2019.
The difference between the two major retail giants seems to be a victory in the membership model, but that's not the whole story.
Carrefour has failed to survive by grafting the membership store model. "Hema" is deeply trapped in the "selling door" at the beginning of 2024. The M member store under Gaoxin Retail has announced that there is no profit plan within three years
The membership store model itself is not a panacea, but there are also ways to eat more and more, such as fudi.
In a brief review of the past thirty years, China's retail industry has undergone three major changes.
The first time came from Carrefour.
In 1995, Carrefour, a French supermarket giant, entered China with a hypermarket model, marking the transformation of Chinese business from a traditional counter to an open chain operation, which is also a real modern retail industry.
The second time comes from e-commerce.
The Internet has broken and extended the time and space of retail, and there is almost no upper limit on product supply and service experience; After the physical rent and information gap are partially erased, the "bottom price" of goods is also exposed to consumers.
In 2012, Jack Ma and Wang Jianlin made a bet on whether the share of e-commerce in the Chinese retail market would exceed 50%, and the online and offline infighting was put on the table. However, the subsequent development did not lead the retail industry towards a binary opposition.
Since 2015, Internet giants have acquired and transformed a large number of physical businesses. Traditional stores that are unwilling to "stand in line" have explored the entrance of e-commerce by themselves, and new species such as Hema that cover online and offline have emerged from the ground. This is the third revolution in Chinese retail - "global retail" has become mainstream amidst countless barriers and disputes.
Interestingly, in the process of competing among different modes, the membership store seems to be isolated.
Sam entered China in 1996 and is the pioneer of membership stores in the Chinese market. However, in the 23 years from its establishment to 2019, Sam's membership stores only opened 26 stores in single digit cities in China, most of which were on the verge of closure due to poor management.
The most commonly mentioned reason is "unfamiliarity with the environment". Consumers have to pay entry fees, which is unreasonable for most Chinese people who are frugal throughout their lives. As for the high-quality vendors corresponding to membership fees, they can only impress a small group of small business customers. Not to mention that many member stores are far from the central business district, this location strategy is not in line with the living and purchasing habits of Chinese consumers.
Ultimately, the overall "money shortage" in the Chinese market not only makes it difficult to support member stores, but also implicates a group of high-end supermarkets. Before most people became wealthy, the online and offline struggles were not important for Sam.
Fortunately, the trend of consumer upgrading has still reached the member stores.
After 2015, the main consumer force in the Chinese market began to turn into groups such as the 90 and 00 with high consumption awareness, ability, and willingness. The new group's attention to product quality and added value has supported high-quality domestic supply.
The most prominent sign appeared in 2019- China entered an era of per capita GDP exceeding $10000. The membership stores, which have been choked by consumer spending, are also waiting for spring at this time.
In 2019, Costco's Minhang store in Shanghai opened with great success; In 2020, the first Hema X membership store opened and declared profitability after only two months of operation; The Sam's Club, which has been dormant for many years, has also expanded at a rate of 5-6 new branches per year since 2020, with a double-digit sales growth rate.
The upgrade of consumption has lifted the seal of insufficient market carrying capacity of member stores for many years, and the transformation of public consumption habits during the epidemic is further fueling the trend of offline hoarding, which has shown more users the value of member stores. Fudi happened to enter at this stage.
According to Fudi founder Wang Xingshui, Fudi has been preparing since Costco entered China in early 2019, and its first store opened in 2021. For over two years, Fudi has opened four member stores in Beijing.
"First, strive to become China's Costco," said Wang Xingshui.
Fudi learned from Costco.
From the perspective of spatial construction
According to Wang Xingshui, the ideal standard store area for Fudi member stores is 15000 square meters, with a floor height of 9 meters and 1000 parking spaces. By comparison, Costco's store in Minhang District, Shanghai covers an area of 20000 square meters, with a shopping area of 14000 square meters.
The huge store size is a standard feature for warehouse member stores, providing a spacious and comfortable experience, but it also to some extent restricts the expansion speed of member stores.
"Fudi member stores have relatively high requirements for property management, unlike boutique stores that can open hundreds of stores nationwide. Our member stores can open five or six in a big city, which satisfies us. Costco has only had over 800 stores since its establishment in 1983, and has been steadily expanding outward," said Wang Xingshui.
From a product perspective
"Selected products+great value experience" is the foundation of a membership store.
Public information shows that the SKU of Fudi member stores is around 5000, which is similar to Costco and Sam's, while the SKU of hypermarkets usually starts at 10000. "For example, bottled water doesn't actually require that much, just choose a few good brands, and at most release two popular products," said Wang Xingshui.
Selected categories bring high-quality quality control and effectively shorten the purchasing decision-making process.
Also benefiting is the price. Selected SKUs enable member stores to bypass intermediate links and attract members with product prices close to cost. Today Costco can achieve a comprehensive gross profit margin of 14% -17%, which is much lower than the traditional store's around 25%, while Fudi has directly publicly promised a comprehensive gross profit margin of "no more than 10%.".
Wang Xingshui referred to it as an A-grade product with a C-grade price.
"Today, many supermarkets are selling A-grade products at A-grade prices based on C-grade quality, and there are also many selling A-grade products at A-grade prices. Fudi is currently committed to selling A-grade products at C-grade prices. Here, C-grade is not a narrow definition of low prices, but rather a reasonable price based on quality control for consumers."
High quality and low price have hit the consumer psychology of the new middle class, which is that they can buy expensive things but cannot buy expensive anymore. As a result, member stores have gained a high-quality profit model with high average customer price, high repurchase rate, and high turnover rate.
"Fudi's current average customer price has reached over 400 yuan, and in the future, the annual sales of a single store model will reach over one billion yuan. Currently, we rely entirely on our own funds to open stores," said Wang Xingshui. According to industry insiders, Costco's single store revenue in China is estimated to be over 1.5 billion yuan.
With sufficient funds, member stores can continuously invest in upgrading the production chain, pushing their operations into a positive cycle of continuously optimizing the "quality price ratio", continuously attracting traffic, and continuously reducing gross profit. When resources enter the source of the supply chain, the probability of large single products appearing also increases. For example, Sam's China has a super single product called Swiss rolls, Costco has a perennial popular internet celebrity named Beiguo, and Fudi has also broken through on social media with cheese cinnamon rolls and nut cheese packs.
Going further, we have reached the stage of establishing our own brand.
"Consumers can enjoy both the highest quality products currently available on the market and the best proprietary brands we have innovatively developed. In other words, enjoying the best in all categories while providing consumers with comparability is the significance of Fudi's inclusion in proprietary brand development."
According to Wang Xingshui's plan, Fudi will create a separate brand name for its own brand, which will account for 35% -40% of the total SKU in the future, close to the proportion of Costco's own brand Kirkland Signature.
Whether it is selection or ownership, it will ultimately push back the supply chain capability, and this is precisely the factor that determines the success or failure of the membership store model.
A different story
The overseas brands represented by Costco and Sam generally have global supply chain resources, and find the most cost-effective suppliers for each industry link of the goods, in order to build a set of high cost-effective solutions for global procurement and multi country collaboration.
After being listed, popular products quickly form economies of scale, further enhancing the bargaining power of member stores in the supply chain. A typical example is Sam's Swiss rolls, which claim to have an annual sales of 1 billion yuan and once accounted for nearly 10% of the monthly revenue of some Sam's China stores. According to industry insiders, if other stores want to use the same raw materials as this product and ensure sufficient profits, they need to increase the selling price by at least 30%.
From the surface logic of the supply chain, there are no secrets in member stores or even the entire retail industry. It's just that every tiny difference in execution details can lead to a thousand miles of loss in the final outcome.
For example, "Some domestic member stores develop their own brands closer to OEM, resulting in sacrificing both quality and profit, which is meaningless," Wang Xingshui pointed out.
Even relatively mature overseas member stores have their own limitations.
Industry insiders have pointed out that Sam prefers frozen products rather than perishable fresh produce; Meat is mainly focused on beef, rather than pork, which is the main food consumed by Chinese people. The popular China-Chic new consumer brand in recent years was also rejected by Sams because of its high price and little profit space.
Products that are not grounded enough may reflect the shortcomings of overseas member stores in the local supply system, which is actually an opportunity for Fudi.
"All Fudi's products have undergone strict screening and have been overcome one by one when setting standards. For example, many of our customized planting products, such as strawberries and vegetables supplied to Hong Kong, strictly follow GAP standards for soil management, fertilizer management, irrigation and fertilization, harvest treatment, pesticide residue testing, etc. to ensure traceability and safety."
In addition, grafting branded products is also an important strategy for Fudi's product development.
Industry insiders have pointed out that from a global perspective, "landmark brands" are symbols of high quality, such as French Bordeaux red wine, Danish blue cheese, Sicilian blood orange, Norwegian salmon, Russian king crab, Japanese Vietnamese rice, Spanish Iberian ham, and so on. With the official signing of the China Europe Geographical Indication Agreement by the leaders of China and Europe in 2020, the quality of China's landmark products began to be recognized worldwide, thus possessing the potential to become a world-renowned brand.
The high-quality source supply chain determines the high quality, localization, and differentiation of channel categories, ultimately forming the exclusive advantage of the channel and forming a true channel brand.
Fudi, who is well versed in this field, is now exporting more products that are popular among Chinese consumers.
"For example, hairtail, let's go to Zhoushan to find the best brands, as well as seafood from Dalian and Yantai, including the best crayfish brands," said Wang Xingshui.
In the framework of landmark products, Fudi does more than just products.
"The things on people's dining tables are too important. Our corporate mission is to build a food ecosystem and create a sweet life. Fudi aims to benefit producers, suppliers, shareholders, employees, and consumers."
In Wang Xingshui's view, the pursuit of a better life for 1.4 billion people in China and even 8 billion people worldwide should not only be Fudi's vision, but also the vision of China's food ecology.
"Let our brand become a label and symbol of contributing to a better life, which is the meaning of retailers' existence."
Looking at fudi again
Compared to any member store in the Chinese market today, the huge building structure of Fudi Mint Green Ice Cream, which is crispy like a shell, has absolute recognition. The fresh and bold theme park style has allowed Fudi, which currently only has four member stores, to take over 10000 notes on Xiaohongshu.
Before leaving Beijing, Fudi has become a popular check-in destination for consumers nationwide.
The interior decoration also takes into account almost every detail - whether it's the display of shelves that cure OCD or the eco-friendly shopping bags around cultural and creative areas, they are all looking for the intersection of art, trends, and interaction.
Just by the name "fudi", Wang Xingshui has been pondering for over a year.
According to the official introduction, fudi comes from the English word foodie, which is a general term for people who love food in English. It is an attitude towards food and represents a dual perspective of local and international brands. When it comes to consumers, they are more willing to refer to Fudi as a "blessing", and their desire for a better life and brand positioning tend to converge.
As a feedback to young fans, Fudi has also made innovations in membership rights.
"The principle of Fudi members is to experience first and then pay, and any dissatisfaction will be refunded in the middle. The annual fee for home users starts at 365 yuan, with free parking, car wash benefits, oral care and other benefits. In addition, for some consumers who have a preference for lightweight and rigid consumption habits, a more 'lightweight' 188 member has been launched, mainly to meet the needs of online and offline omnichannel purchases." Wang Xingshui said.
Fudi's strong ability to fulfill contracts is what complements online business. "We are currently cooperating with SF Express, and only their services are worthy of Fudi's services."
"Fudi is not just a sales platform, but also a leader in lifestyle. The atmosphere of the store space, music, and even the restroom should be clean and comfortable. As the saying goes, we make money from the perspective of consumers' interests, which is the standard for being a person and a business. Selling conscience is Fudi's original intention."
Returning to the proposition of retail in China.
In the thirty years since you finished singing and I appeared, China has not yet developed a truly sustainable and strong retail brand of its own. Becoming a benchmark for Chinese retail requires both uniqueness and the ability to cross cycles, and the conditions are certainly strict.
It needs to have a unique aesthetic, a stable customer base, localized and high-quality products, rich emotional interaction and service experience, efficient industrial operation and ecosystem construction, and a business model and organizational core that drives sustainable development at the bottom level
At present, shifting the budget for fashion consumption to member stores for food purchases that often exceed three digits reflects a subtle consumption trend, which is a market opportunity for Chinese retail.
Yonghui, which has been established for more than 20 years, has made a preliminary demonstration of the transformation of traditional supermarkets across the entire region. The "new species of retail" are about to enter their first decade, and Pangdonglai, Wenheyou, and Zhengjia Square have become distinctive local samples. There are also more eager candidates showcasing their strengths in this endless and vibrant competition track.
They are attempting to use the name "Chinese retail", and the Chinese membership store brand represented by Fudi is also becoming such a possibility.