Introduction
In March, Freshippo(Hema) X Membership Store announced that three of its Shanghai stores would cease operations starting April 1. After these closures, the total number of Freshippo X Membership Stores nationwide will shrink from a peak of ten to just five, located in Beijing, Shanghai, Nanjing, and Suzhou. Moving forward, Freshippo’s strategic focus will shift toward its two core business models: Freshippo Fresh and Freshippo NB.
Membership-Based Warehouse Supermarkets: A Business Model Difficult for Chinese Brands to Replicate
In 1996, Sam’s Club opened its first store in Shenzhen’s Futian district, introducing the warehouse membership supermarket model to the Chinese market. In 2019, Costco opened its first mainland China store in Shanghai’s Minhang district, drawing massive crowds, with 160,000 membership sign-ups in a single day. After 2020, the membership-based warehouse supermarket market in China entered a phase of diversified competition. In October 2020, Freshippo X Membership Store opened its first store in Shanghai, becoming a key representative of domestic brands. By 2021, other retailers, including Metro, Fudi, Yonghui, and Carrefour, had also entered the membership-based warehouse supermarket sector, driving rapid market expansion.
From 2020 to 2024, Sam’s Club expanded at a steady pace, opening five to six new stores annually, growing from 28 to 53 stores across China. By 2025, five additional stores were already in the pre-opening stage, with plans to continue expanding at a rate of six to seven stores per year over the next three years. Their strategy involves extending coverage from first- and second-tier cities to third-tier markets, maintaining an aggressive growth trajectory. Costco, in contrast, has been more cautious in its expansion, reaching just seven stores in China by the end of 2024.
Freshippo X Membership Store, however, followed a different path. After opening its first store in 2020, it initially pursued aggressive expansion, opening four new stores between December 2021 and January 2022. By October 2023, the total number of stores had peaked at ten. However, in 2024, it began closing locations as part of a strategic restructuring.
For years, Chinese domestic brands have attempted to replicate Sam’s warehouse membership store model but have struggled to achieve similar success.
- Brand Influence and Market Perception
Sam’s Club has been in the Chinese market for nearly 30 years, successfully establishing itself as a premium membership-based supermarket with a highly loyal customer base. In contrast, domestic brands lack the same heritage, making it harder to build consumer trust and loyalty. - Membership System and Services
Sam’s Club boasts a massive membership base—8.6 million paid members—with a high monthly repurchase rate exceeding 60%. The club offers extensive member benefits, including private-label products, free car washes, eye exams, and appliance installation services, significantly enhancing customer retention. Domestic brands, on the other hand, offer more limited services, primarily focusing on points redemption and shopping discounts. At its peak, Freshippo X Membership Store had around 3 million members, but its value-added services were notably lacking. - Operational Management
Sam’s Club has developed an efficient operational model, from warehouse layout to employee training. Its integrated “cloud warehouse-store” system and AI technology further enhance operational efficiency and user experience. Domestic brands, however, have relatively less experience in managing warehouse-style operations. - Site Selection Strategy
Sam’s Club locations are typically in suburban areas, where costs are lower, store sizes are larger, and ample parking space is available—ideal for bulk shopping. Domestic brands, however, often choose city center locations, where rent costs account for over 30% of operational expenses, squeezing profit margins. Additionally, urban locations struggle to provide large-scale shopping and parking spaces. - Supply Chain Management
Sam’s Club leverages its global procurement network and robust supply chain system to offer high-quality products at competitive prices. Domestic brands, meanwhile, rely mainly on domestic procurement channels, with less developed logistics and distribution systems. As a result, product variety and freshness suffer, and quality control issues frequently arise. - Market Share and Competitive Landscape
Sam’s Club and Costco together dominate the majority of China’s warehouse membership store market, forming a near-duopoly with strong brand influence and market competitiveness. Domestic brands hold smaller market shares, struggling to break through against international giants.
That said, given time to learn and grow, local brands still have a place in the warehouse membership store market. For instance, RT-Mart’s M Membership Store has taken a different approach by focusing entirely on second- and third-tier cities. In 2025, the company plans to add five new stores, targeting county-level cities as part of a market penetration strategy. Over the next three years, RT-Mart aims to expand to 15 locations. As first-tier cities become saturated, warehouse membership supermarkets, including Sam’s Club, are shifting their focus to second- and third-tier cities as well as affluent county-level markets.
Refocusing on Core Strengths
On December 31, 2024, Freshippo CEO Yan Xiaolei stated in an internal memo that the company’s strategic focus would now center on Freshippo Fresh and Freshippo NB, with the former scaling a proven business model and the latter refining its best approach.
In 2024, Freshippo made significant strides in store expansion, user value optimization, and online-offline integration. The company opened 72 new Fresh stores at a pace of one store every five days—the fastest expansion rate in the past five years. Nearly half of all Freshippo Fresh stores nationwide underwent renovations, with improved lighting, wider aisles, and cleaner store layouts, significantly enhancing customer experience. Additionally, through algorithm upgrades, the percentage of orders delivered within 30 minutes steadily increased.
In 2025, Freshippo Fresh will continue its aggressive expansion strategy, planning to open nearly 100 new stores in emerging cities. Freshippo Fresh will continue catering to high-net-worth customers in first- and second-tier cities, while Freshippo NB will focus on penetrating lower-tier markets with budget-friendly pricing. The company is also actively strengthening its product capabilities, supply chain infrastructure, and digital transformation efforts.
- Product Enhancement
Freshippo will continue developing customized products and strengthening quality control to boost private-label competitiveness. Currently, private-label products account for nearly 50% of sales across fresh produce, general merchandise, and ready-to-eat/ready-to-heat meals. Pre-packaged foods will remain a key area of focus, with the company building a dedicated ecosystem that integrates production, research, marketing, and distribution. Freshippo’s pre-packaged meal selection now exceeds 1,000 SKUs per month. Additionally, the company is expanding its product categories beyond fresh foods to include beauty products, home appliances, and cross-border goods. Freshippo Cloud Super now covers over 20 categories, providing consumers with a one-stop shopping experience. - Supply Chain Overhaul and Global Expansion
Freshippo plans to establish eight international procurement centers, increasing its global direct sourcing ratio (currently at 35%) to reduce procurement costs while meeting consumer demand for high-quality, diverse products. The company is also abandoning the traditional “entry fee” model used in retail, shifting to a buyer-based approach that fosters closer collaboration with suppliers to enhance supply chain efficiency and drive mutual value creation. - Digitalization and Smart Technology Integration
Freshippo is pursuing full-chain digitalization, from product development to logistics, leveraging big data analytics to optimize product selection and marketing strategies. AI and big data will also enhance inventory management, reducing waste and aiming to cut supply chain costs by an additional 10%.
Conclusion
China’s retail landscape is becoming increasingly diverse, with supermarkets branching into multiple business formats. While warehouse membership supermarkets gain traction, other models are also thriving. Retail giant Fat Donglai continues to expand its store renovations, Lawson is piloting “Lawson Mini” stores to upgrade mom-and-pop shops, and discount snack chains like Snack Youming are transitioning into wholesale supermarket models. With this growing competition, all players must leverage their unique strengths, adapt to market shifts, and continuously optimize their offerings to meet evolving consumer demands.
Disclaimer: The above content reflects a summary of related events and does not constitute investment advice. The information is based on publicly available materials, expert opinions, and BCC research. BCC is not liable for any losses resulting from reliance on this information. Investments involve risks; proceed with caution.