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” published an open letter to Member’s Mark (MM) of Sam’s Club, proposing the “One No, Six Musts” principles.

The letter emphasizes that Sam’s MM should not force suppliers into a “choose one” situation, strongly opposes unfair competition, and calls for team conduct standards to be maintained, focusing on quality development.

It also advocates for the “Six Musts” to promote industry growth: “to produce better quality, to develop clean formulas, to offer great prices, to empower employees, to promote ESG, and to continue innovating.” The goal is to develop more diverse and higher-quality products and effectively protect consumer rights.

The targeted brand, Member’s Mark (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 premium origins, developed innovative products exclusively, or matched the quality of well-known brands, with highly competitive prices. Only suppliers who pass strict quality 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 public call in the open letter. However, it suggests that Yonghui may be facing some suppliers’ “choose one” dilemma.

In May 2024, with support from the founder of Pang Dong Lai, Yu Donglai, and his team, Yonghui Supermarket began restructuring its nationwide stores through two models: Pang Dong Lai assistance and learning from Pang Dong Lai’s independent reform. Yonghui initially aimed to complete all store renovations by June 2026, with store closures largely concluded.

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

Yonghui repeatedly emphasizes that upgrading product quality is the top priority of the restructuring. 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 intends to launch over 60 private brands by 2025, and in the next five years, create 500 private brand products. Currently, the team’s capacity is insufficient to support many local specialty products, so they will start with high-traffic basic products to train the team. It is expected that within three years or less, more private brand specialty 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 procurement 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 hard-discount models like Aulixi, private brands need to account for 80-90%. In the medium to long term, Yonghui plans to increase the share of private brands to 30-40%, which is relatively reasonable, but short-term growth will not be used as a performance indicator.

She also pointed out that traditional hypermarkets rely on selling shelves or channels for profit, but healthy, high-quality players like Pang Dong Lai, Sam’s, and Costco make money through product sales and profit margins. To earn front-end gross profit from product sales, high standards for products are necessary, and confidence is key. Yonghui is actively shifting in this direction.

However, store restructuring has led to further widening of Yonghui’s annual losses. According to Yonghui Supermarket’s (601933.SH) earnings forecast released in late January, the company expects a net loss attributable to shareholders of -2.14 billion yuan in 2025, representing a more than 40% increase in losses year-over-year. The net loss in Q4 2024 is estimated at 1.43 billion yuan, up 0.3% from the previous year.

The main reasons cited for the forecasted losses include significant strategic adjustments last year. In terms of store layout, Yonghui restructured 315 stores and closed 381 stores that no longer aligned with its future strategic positioning. In terms of product strategy, Yonghui first overhauled its supply chain through systematic measures to address traditional supply chain pain points. This caused short-term issues like stock shortages and declining gross margins, impacting revenue, but these effects are gradually diminishing as supply chain reforms deepen.

Currently, China’s retail supermarket industry is in a “collective transformation period.” Yonghui is still experiencing early pains from its restructuring. Previously, Yonghui announced that store renovations involve closures, remodeling, new equipment investment, asset disposal, reopening expenses, and staff skill upgrades. During closures, costs such as lease compensation, staff layoffs, product clearance, and asset write-offs are incurred.

In recent years, challenges in China’s retail sector have become more apparent, with many domestic supermarkets undergoing 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 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 Walmart China Supplier Summit in 2025, 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, emphasizing quality, differentiation, and stable large-scale supply. Walmart China is committed to building honest, equal, and mutually beneficial relationships with suppliers, advocating for close cooperation centered on “Customer First, Member First,” and implementing initiatives such as quality prioritization, exceeding expectations with products, everyday low prices, and supply chain security to deliver high-quality products to customers and members.

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

Pengpai News Reporter Shao Bingyan