On February 28, three Freshippo X membership stores in Shanghai announced that they would cease operations from April 1, while still supporting online orders and delivery. With this closure, only five Freshippo X membership stores remain in operation nationwide. Freshippo stated that the store closures represent a proactive business adjustment.
Why it matters: Alibaba’s Freshippo is shifting away from its warehouse-style membership store model, marking a retreat from an ambitious attempt to challenge Sam’s Club and Costco in China. While Freshippo X downsizes, the company is honing in on its core businesses – Freshippo Fresh and Freshippo Neighborhood Business. The move also underscores the difficulties of competing in China’s membership-based wholesale sector. Due to transportation habits and lifestyle choices, Chinese consumers tend to favor smaller packaged goods that are easier to carry and consume.
Details: The contraction of X Membership Store is also a reflection of Freshippo’s years of development. Over the past eight years, Freshippo has experimented with more than ten different formats, including Freshippo Fresh, Freshippo F2, Freshippo MINI, Freshippo Li, Freshippo Station, Freshippo Market, Freshippo Pick’n Go, Freshippo X Membership Store, Freshippo Neighborhood, and Freshippo Fresh Outlet.
- In 2024, Freshippo achieved double-digit growth after nine consecutive months of overall profitability, expanding into 21 cities and opening 72 Fresh stores.
- Consumers’ recognition of X Membership Club is significantly lower than that of its competitors, Sam’s Club and Costco. Sam’s Club’s core competitive advantage lies in its global supply chain and exclusive products, with 30% of its offerings under its private label, Member’s Mark, which has a supply chain deeply involved in the production process. In contrast, Freshippo’s early X Membership Club had only 15% exclusive products, with most items private-label goods priced just RMB 3–5 cheaper than non-member options.
Context: In recent months, Alibaba has sold off Intime Department Store and Sun Art Retail to focus on its core business. This has led many to believe that Alibaba’s new retail business is in trouble. However, since February, Jack Ma has repeatedly visited Freshippo stores, from Changsha to Shanghai, showing his support. To some extent, this may reflect his endorsement of the company’s new strategy.
