Yonghui Urges Sam’s Club to End Supplier Coercion in China

On March 17, a leading Chinese supermarket chain issued an open letter urging the U.S.-based retail giant to ensure their private label, Member’s Mark, operates fairly. The letter called for the company to prevent suppliers from being forced into a “pick one” position—a practice where a dominant retailer exploits its market power to compel suppliers to choose between it and competitors. Instead, suppliers should be able to collaborate with multiple retailers without restriction.

This unexpected move stems from intensifying competition among retailers over supply chain resources, leading to rising tensions that have now come to a head, according to multiple sources familiar with the situation.

An insider close to the Chinese retailer noted that, given the ongoing race to secure supply chain advantages, this open letter was issued only after considerable provocation. It appears the company may have encountered concrete instances where suppliers were forced to “pick one,” resulting in operational setbacks and increased pressure.

“Pick one” refers to a scenario where a major retailer uses its dominant market position to pressure suppliers into selecting between that retailer and competing ones. Laws in China prohibit companies from coercing suppliers into such exclusive arrangements without valid reasons.

Attempts to contact the U.S. retail chain, known for owning Sam’s Club, regarding this issue were made, but no response had been received as of press time.

“Shoppers are now more interested in value and unique products, prompting major supermarket brands to seek out high-quality, distinctive suppliers to enhance their private label offerings. In this competitive environment, multiple retailers often target the same suppliers,” explained an industry veteran with extensive procurement experience.

Private brands and exclusive products constitute a core strength for membership stores. For instance, private label sales at Sam’s Club account for over 20% of total sales, whereas in Chinese membership stores and supermarkets, this figure tends to be less than 10%.

“As consumer expectations and cost pressures increase, retailers are raising their standards for suppliers and actively seeking exclusive relationships with key suppliers,” said senior retail analyst Shen Jun. “This naturally leads to more disputes over exclusivity among competitors.”

Without clear evidence, it’s difficult to determine whether accusations of forcing suppliers to “pick one” are completely justified, as such conflicts often stem from competing interests, according to another industry source. Suppliers generally favor working with retailers that have higher sales capabilities and quicker payment cycles. Regardless, retailers are expected to compete within legal boundaries and avoid coercive tactics that restrict suppliers’ options, the insider added.

This isn’t the first time the retailer has been accused of pressuring suppliers to “pick one.” In October 2021, during the opening of a hypermarket chain’s first membership store in China, some suppliers collectively bought back their products. Shortly thereafter, similar incidents occurred involving a prominent grocery chain affiliated with a major e-commerce company. Both companies alleged that the retail giant was secretly pressuring suppliers behind the scenes.