Yonghui Supermarket's Private Brand Challenges Sam's Club: Don't Force Suppliers Into "Choosing Sides"

On March 16, Pengpai News learned that Yonghui Supermarket’s private brand “Quality Yonghui” issued an open letter to Sam’s Member’s Mark (referred to as Sam’s MM), proposing the “One No, Six Musts” principles.

The letter mainly urges Sam’s MM not to force suppliers into “choose one,” firmly oppose unfair competition practices, and to regulate their team’s conduct standards, focusing on their own quality development.

The letter also calls for adhering to the “Six Musts” to promote industry development: “must deliver better quality, must have clean formulas, must offer great prices, must empower employees, must promote ESG, and must continue innovation.” It emphasizes developing richer, better quality products to effectively protect consumer rights.

The targeted brand in this statement, Sam’s Member’s Mark (referred to as Sam’s MM), is an exclusive private label under Walmart’s Sam’s Club. According to Sam’s official information, during the early development phase, Sam’s leveraged global procurement resources to select origin-based products, developed some innovative items exclusively, or matched the quality of well-known brands, with highly competitive prices. Only suppliers who pass strict factory inspections are qualified to cooperate with Sam’s. During production, Sam’s enforces strict quality control and attention to detail. After products are launched, Sam’s conducts continuous random inspections to ensure effective supervision and quality control.

Yonghui did not specify the background or reasons for this call-out in the open letter. However, it is clear from the statement that Yonghui may be facing some suppliers’ “choose one” dilemma.

In May 2024, with the support of Yu Donglai, founder of Pang Donglai, Yonghui Supermarket began adjusting its nationwide stores through two models: Pang Donglai’s assistance and learning from Pang Donglai’s independent reform. Yonghui initially aimed to complete all store adjustments by June 2026. Meanwhile, store closures are expected to be mostly finished.

Yonghui CEO and national reform leader Wang Shoucheng mentioned in a speech last October, “Ten years ago, Yonghui was thriving with good profits, then we started rapid expansion, introduced a wolf culture, and once thought we were very strong, the retail king. Over the past ten years, Sam’s has continuously improved member experience and increased membership fees, while Pang Donglai focuses on service. In the future, Yonghui will steadfastly align with the long-term visions of Sam’s and Pang Donglai.”

Yonghui repeatedly emphasizes that upgrading product quality is the top priority of future reforms. In October last year, Yonghui’s Chief Merchandising Officer (CMO) She Xianping stated in media interviews that Yonghui aims to lock in 200 core strategic partners within three years and develop 100 billion-yuan-level key products. The “Quality Yonghui” plan aims to launch over 60 private brands by 2025, and in the next five years, develop 500 private brand products. “Currently, the team’s capacity is not enough to support many regional特色 products, so we will start with high-traffic basic products to train the team; within three years or less, more private brand特色 products will appear in Yonghui stores nationwide.”

According to reports, She Xianping was appointed last year as Yonghui’s Chief Merchandising Officer, a new position responsible for procurement and supply chain management. He previously held management roles related to purchasing and products at Sam’s China, Hema, and RT-Mart.

Regarding Yonghui’s plan for private brand sales share, She Xianping told Pengpai News that, for example, in hard-discount models like Aldi, private brands need to account for 80-90%. For Yonghui’s business model, a medium- to long-term target of 30-40% private brand share is considered relatively reasonable, though short-term increases will not be performance indicators.

She Xianping also pointed out that traditional hypermarkets rely on selling shelf space or channels for profit, but truly healthy high-quality players like Pang Donglai, Sam’s, and Costco make money through商品交易差价 (product margin). To dare to earn gross profit from商品, high standards for products are necessary, along with confidence. Yonghui is actively shifting in this direction.

However, store adjustments have led to further widening of Yonghui’s annual losses. According to Yonghui Supermarket (601933.SH)’s late January announcement of a forecasted loss for 2025, the company expects a net profit attributable to parent of -2.14 billion yuan, a more than 40% increase in loss year-over-year. The net loss in Q4 2024 is estimated at 1.43 billion yuan, with a 0.3% increase compared to the previous year.

The main reasons cited include a major strategic adjustment in operations. Last year, Yonghui restructured 315 stores and closed 381 stores that did not align with its future strategic positioning. On the product side, Yonghui first reformed its supply chain through systematic measures to address traditional supply chain pain points. In the short term, this caused stock shortages and a decline in gross margin, impacting revenue. As the supply chain reform deepened, these effects have gradually diminished.

Currently, China’s retail supermarket industry is in a “collective transformation period.” Yonghui is still experiencing early pains from its reform efforts. Previously, Yonghui announced that store adjustments involve closures, renovations, new equipment investments, asset disposals, re-openings, and staff skill upgrades. During closures, costs such as lease compensation, staff compensation, product clearance, and asset disposal are incurred.

In recent years, challenges and difficulties in China’s retail industry have become evident. Many domestic supermarkets are undergoing concentrated adjustments and transformations, learning from quality retail models like Sam’s. Sam’s membership fee model’s core strength lies in its strong supply chain system and strict product selection standards, offering members relatively exclusive products. The first Sam’s in China opened in Shenzhen in August 1996, and now there are over 60 stores in more than 30 cities.

At the 2025 Walmart China Supplier Summit, Walmart China President and CEO Zhu Xiaojing noted that Walmart China has maintained strong growth recently. Since 2021, the company’s net sales have achieved double-digit growth, and e-commerce accounts for nearly 50%. As the business grows rapidly, Sam’s will continue to raise standards, strengthen quality, differentiation, and stable scale supply. Walmart China is committed to building honest, equal, mutually beneficial relationships with suppliers, advocating close cooperation centered on “Customer First, Member First,” and implementing quality-first, exceeding expectations in products, everyday low prices, and supply chain security to bring high-quality products to customers and members.

As of press time, Sam’s has not responded to Yonghui’s open letter.