Sam's Club's Product Predicament: A Wake-Up Call for Global Brands in China

For the truly savvy global brands, there's a palpable void waiting to be filled, an opportunity to capture the discerning hearts and minds of China's consumers.

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This past week, two topics have dominated social media and newsfeeds across China, sparking heated debate and significant social buzz. One is the ongoing product selection crisis at Sam's Club, while the other revolves around the intensifying quick commerce war among the heavyweights: JD.com, Alibaba, and Meituan. In this week's column on trends, culture, and brands, I'll dive into the former – Sam's product selection conundrum – exploring why it has struck such a raw nerve with the already highly sensitive Chinese middle class, and what crucial lessons global brands can extract from this fierce backlash. We'll save the quick commerce war for next week.

The controversy began innocently enough, with a seemingly small, "cute" pie: Orion's low-sugar pie. Yet, this seemingly minor alteration ignited a firestorm, as disgruntled members claimed that since July, Sam's Club had begun stocking its shelves with common, supermarket-variety products, replacing the very "exclusive" and highly sought-after items that members had come to expect. This move infuriated its steadfast fans – the Chinese middle class – prompting them to question loudly whether paying a hefty annual membership fee (260 yuan, approximately $36, for a basic card; 680 yuan, approximately $94, for premium) is truly worth it in an era of consumption "downgrading," where everyone is tightening their purse strings to save more. This product selection misstep has even dragged Sam's Club, a brand that proudly touts an aspirational global lifestyle, into a full-blown trust crisis. Some analysts even commented that Sam's Club's good days are numbered, fearing that its over 5 million Chinese members, who collectively contribute more than 1.3 billion yuan ($182 million) annually, might seriously consider cancelling their memberships.

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If this sentiment truly takes hold, it would deliver a significant blow to Walmart (Sam's Club's parent company) and indeed, to a number of other multinational consumer goods corporations that still enjoy aspirational brand status and play a leading, highly profitable role in this market. So, what exactly does this backlash teach us? And how can global brands learn from it as they navigate fierce competition to remain profitable in China?

The Perilous Tiptoe: Balancing Affordability with Aspiration

It's an exceedingly delicate dance: striking the perfect balance between affordability and maintaining an aspirational brand status. But more than just tiptoeing, global brands must learn to stand firm with their die-hard consumers, unequivocally safeguarding their esteem and dreams.

The root reason for this backlash stems from Sam's Club's perceived aimless pursuit of constant expansion and growth, which, in the eyes of its loyal members, has meant abandoning its firm commitment to uniqueness and exclusivity in product selection. This exclusivity was once seen as reflecting a highly refined, sophisticated taste, touting the global and exotic lifestyle that its middle-class members aspire to and identify with. For many, a Sam's Club membership had become a badge of social identity, a way for the middle class to differentiate themselves from the "tasteless and vulgar masses." When the standard of this exclusivity is compromised, it is perceived as nothing short of a betrayal.

This offers a classic, invaluable lesson for other MNCs. China's middle class, largely comprising Gen X and Millennials, represents the bedrock of support for multinational products and services. How brands choose to stand firm with them – by guarding their self-esteem and aspirations – could very well determine their ultimate fate in China. When confronting the relentless competition and "involution" (内卷) that define the Chinese market, a landscape brimming with promotions and discounts, brands must choose their battles wisely. The primary reason for a consumer to choose a premium brand is never solely the price. The middle class, which constitutes the vast majority of Sam's members, is willing to pay a membership fee first and foremost for a lifestyle that aligns with their values and social identity.

Localization's Double-Edged Sword: The Dangers of Blind Adaptation

Localization can be a dangerous game if executed blindly. This is a common pitfall for global brands attempting to adapt too ruthlessly to Chinese consumers. There exists, however, a critical fine line between preserving global identity and driving local relevance.

While it's universally acknowledged that local consumers have their preferences, particularly concerning food and beverages, Sam's Club's misstep lay in flooding its shelves with local products and snacks that were too familiar. For discerning consumers seeking novelty and an exotic touch when shopping in a store branded as offering an "American" or "global standard high-end lifestyle," this move effectively diminished their appetite for the unique exploration they were accustomed to. This is precisely why they reacted with such fury upon discovering that their beloved American brands or foreign foods and snacks had been replaced by common local alternatives readily available in any ordinary supermarket.

Thus, it is inherently risky to blindly pursue localization without honoring the origin and provenance that a global brand proudly represents. When a global brand contemplates localizing by discontinuing its signature products—those proven popular in its home country—think TWICE. Such a move might squander a rare opportunity to stand out in an increasingly homogeneous market and, worse, dilute its own unique identity and inherent strength.

The Unfilled Vacuum: Massive Opportunities Await the Savvy

Finally, and crucially, I want to impress upon ambitious global brands considering the Chinese market that immense opportunities still exist. A significant vacuum lies waiting to be filled by brands savvy enough to genuinely capture the hearts and minds of discerning Chinese consumers.

As an increasing number of MNCs and global brands choose to scale back or withdraw from the Chinese market, they are inadvertently creating a massive opening. This void is ripe for those astute enough to tell compelling stories and to resonate with the deep yearning for an aspirational lifestyle that embodies global trends. China's deep-pocketed middle class is precisely the cohort poised to support such brands.

Unlike Gen Z, who often gravitate towards Chinese brands for their affordability, national pride, and the revival of local culture, the older generations—Gen X and Millennials (who form the majority of China's vast middle class)—are generally more receptive to Western values, favor exotic cultures, and enthusiastically embrace global lifestyles. They possess the financial means and savings to afford overseas travel and invest significantly in their children's often hefty overseas tuition. This explains the phenomenal success and profitability of brands like Lululemon, Arc'teryx, and other luxury and premium global outdoor brands. The premium sportswear and outdoor gear market is one of the fastest-growing consumer segments in China, presenting an expansive space for brands to thrive and generate substantial revenue.

Meanwhile, the Sam's Club backlash has starkly exposed a once-obvious but easily overlooked truth: no Chinese brand, with the notable exception of Moutai, has yet truly captured the unwavering hearts and loyalty of Chinese consumers as a leading aspirational brand, capable of harvesting the huge premium from this massive market.While it may be too early to make a definitive conclusion for five or ten years from now, it remains evident that Chinese brands have a considerable journey ahead to catch up, requiring sustained and consistent investment in brand building.

To sum up:

Sam's Club's misstep serves as a potent reminder that in China's dynamic consumer landscape, understanding goes far beyond demographics or sales figures. It's about respecting identity, upholding aspiration, and navigating the delicate balance between global appeal and local relevance. While a vacuum exists for truly aspirational brands, very few Chinese brands have managed to fill that space and forge true loyalties with China’s discerning consumers. For global brands, it presents a profound invitation to connect with those consumers on a deeper, more meaningful level. The future of aspiration in China is still being written, and how global brands and MNCs respond to these cultural currents will determine their fates here.