At the basement level of Shanghai’s Senlan Shangdu Mall, the shelves of the Hema X Membership Store are being cleared out. On August 31 this year, this final Hema membership store in the country will officially close, marking the complete end of Hema’s five-year experiment to rival Sam’s Club and Costco.
In October 2020, Hema founder Hou Yi opened the first membership store in Shanghai, proclaiming high ambitions to build a “Chinese version of Costco” and directly challenge Sam’s. At the time, he set a bold target: to open 50 Hema X Membership stores within two years and achieve RMB 100 billion (approx. USD 13.8 billion / KRW 19 trillion) in GMV within three years.
Yet five years later, this once-hailed “only competitor to Sam’s Club in China” quietly bows out. In exchange for 3 million members and RMB 600 million (approx. USD 83 million / KRW 114 billion) in annual membership revenue, Hema gained an expensive lesson.
01 Total Withdrawal: The End of an Era
The shutdown of Hema’s membership stores is not a sudden event, but a long-anticipated strategic retreat. On July 31, 2025, stores in Beijing’s World Flower Mall, Suzhou Xiangcheng, and Nanjing Yanziji simultaneously ceased operations. One month later, on August 31, the final remaining location in Shanghai’s Senlan will also close.
This retreat had early signs. In 2024, after Yan Xiaolei became CEO of Hema, the company’s strategy clearly shifted. That year, Shanghai’s Zhenru and Jianguo Road stores closed one after another. On April 1, 2025, the Gaoqing, Dachang, and Donghongqiao stores also suspended operations.
Membership stores were once the core strategy under Hou Yi. In August 2019, Costco’s Shanghai store opening caused a city-wide sensation, sparking a reaction from Hema as a leading player in China’s new retail scene. After research, Hou Yi and his team decided to build from retail fundamentals, fully buying out and customizing their private-label products.
After a year of preparation, the first Hema X Membership Store opened in Shanghai in October 2020. Its early performance was impressive: it turned a profit within two months, with an average transaction value close to RMB 1,000 (approx. USD 138 / KRW 190,000), daily sales exceeding RMB 10 million (approx. USD 1.38 million / KRW 1.9 billion), and annual revenue nearing RMB 1 billion (approx. USD 138 million / KRW 190 billion).
Hou Yi even promoted a strategy to “copy, run, and surpass” Sam’s. At its peak, the store network expanded to 10 locations in cities like Shanghai, Beijing, and Suzhou, drawing in nearly 3 million paid members.
However, beneath the surface prosperity lay fatal flaws—Hema had not truly mastered the core competencies of a membership-based model. As parent company Alibaba began to scale back its retail map, selling off assets like Sun Art Retail and Intime Department Store, Hema’s new CEO Yan Xiaolei opted for strategic focus.
02 Postmortem: Four Fatal Wounds
Ambiguous Positioning, Pleasing No One
Hema’s membership stores fell into a serious identity crisis. They aimed to emulate the premium models of Sam’s and Costco, while also attempting a low-price strategy, which led to severe imbalances between cost and customer experience.
For example, the Jianguo Road store in Beijing shut down just 7 months after opening due to the contradiction between high rent in a CBD area (RMB 15/sqm/day = approx. USD 2.07 / KRW 2,850) and bulk-packaged goods.
Membership pricing also drew complaints: Gold membership at RMB 258/year (USD 35.60 / KRW 49,000), Diamond at RMB 658/year (USD 90.80 / KRW 125,000). Many customers complained that “member prices were more expensive than regular stores.” One customer found the same milk priced RMB 6 higher at the membership store. Other products like jerky seaweed rolls also showed inverted pricing.
Homogeneous Products, No Signature Hits
Hema’s private label “Hema MAX” heavily overlapped with products in its regular stores. Items like jerky seaweed rolls and organic peanuts were made by the same manufacturers, offering little differentiation.
More critically, there was a lack of blockbuster products. Hema copied the large-pack warehouse model but failed to create hits like Sam’s mochi, roast chicken, or Costco’s rotisserie chicken. One member said bluntly: “All the hot items are imitations of Sam’s, but without the price or quality advantage.”
Weak Supply Chain
The heart of a membership store is high-value, differentiated products, but Hema lagged far behind international giants in product selection, quality control, and cost management.
Sam’s boasts a supply chain built over 30 years in China, while Hema’s 5-year effort couldn’t breach that moat. Internet expert Guo Tao aptly noted: “Hema’s supply chain relies on Alibaba’s ecosystem integration and lacks a vertically integrated structure. This leads to high spoilage in fresh goods and a high share of non-standard products, making cost control inferior to international peers.”
Mismatch with Chinese Consumption Habits
Bulk-pack goods clashed with the trend of shrinking Chinese households. Chinese shoppers prefer “small portions, near-field and instant delivery.”
The rise of Sam’s “personal shoppers” who split large packs already highlights this contradiction, yet Hema failed to adjust.
Customer service also lagged. Sam’s offers 2-hour express delivery, while Hema required a minimum order of RMB 199 (approx. USD 27.50 / KRW 38,000) for free delivery, with significantly slower fulfillment.
03 Strategic Shift: From Scale Illusion to Efficiency First
The downfall of Hema’s membership stores is a microcosm of China’s retail industry blindly worshiping overseas models. Over five years, Hema spent massive sums copying Sam’s “form” but ignored the “soul” of a membership system—solid supply chains, product uniqueness, and stable customer contracts.
CEO Yan Xiaolei’s appointment marked a fundamental shift. With a finance background, she set a clear target: achieve RMB 100 billion in GMV within three years, focusing on two core models—“Hema Fresh” and “Hema NB.”
- Hema Fresh aims to replicate mature business models quickly, with 100 new stores planned for 2025. It will strengthen the fresh supply chain and instant delivery advantage.
- Hema NB (Neighborhood Business) focuses on community services, operating cost-effective stores where private labels make up 60% of SKUs, prices are 50% lower than supermarkets, and the goal is 1,000 stores this year.
This shift addresses the industry’s core truth. As Walmart founder Sam Walton said: “The customer is the boss.” Hema has finally realized that Chinese consumers don’t need another Sam’s—they want localized services with high value and strict quality control.
04 Industry Lesson: Return to Retail Fundamentals
Hema’s failed membership experiment is a wake-up call for China’s retail sector.
Initially, the business modeled itself on Sam’s and Costco, betting everything on rapid expansion while ignoring operational efficiency. But Sam’s success in China was built over nearly 30 years of localization.
A prime example: In 2016, Sam’s raised its membership fees to better filter target users—this kind of deep operation requires time and patience, not short-term cash burns.
Membership systems must create real, irreplaceable value—not just wear the label of exclusivity. One expert summed it up: Hema’s problem was its “fake membership model”—it never answered the customer’s core question: “Why should I pay this annual fee?” Surface-level imitation cannot address value alignment.
The unique conditions of the Chinese market demand tailored retail solutions.
Warehouse-style stores promoting bulk goods clash with China’s smaller family structures and growing desire for instant, fragmented shopping.
In contrast, smaller, more agile community stores—combined with efficient express delivery—better serve the high-frequency, convenience-seeking local customer base.
Hema has shrunk from exploring 12 formats at its peak to just its core business now. This painful slimming process reflects the industry’s return to pragmatism.
Retail’s long-term game is still a competition of fundamentals:
- Can supply chain efficiency improve?
- Can products truly differentiate?
- Is the customer experience solid and thoughtful?
Having shed the burden of membership stores, Hema’s challenges aren’t over—they may, in fact, intensify.
Instant retail is fiercely competitive: JD’s 7Fresh delivers in 30 minutes with prices 10–15% lower, leveraging JD’s logistics. Meituan Maicai is pushing into lower-tier markets, squeezing Hema NB’s survival space.
And with low-price strategies come quality risks. Hema NB has already faced complaints about poor quality. Sacrificing standards for price could destroy the trust it has painstakingly built.
Past food safety incidents—like live frogs and moldy goods—underscore the urgent need for systemic quality control.
New CEO Yan Xiaolei carries heavy responsibilities. Under siege by JD and Meituan, whether she can build an efficient regional procurement network to reduce costs and boost efficiency will determine whether Hema can survive this brutal cycle.
Future competitiveness must come from multiple angles:
- Leveraging its decade-long fresh supply chain foundation.
- Expanding into lower-tier markets via Hema NB.
- Creating synergy through format collaboration: Hema Fresh covering the 3km life radius, while Hema NB embeds into community veins—ultimately weaving a “big store + small store” grid-based service system.
As the final light goes out at the last Hema membership store, the transformation of China’s retail industry continues.
Sam’s Asia President recently stated in an internal meeting:
“Chinese consumers may be the most demanding globally. They want quality and value, experience and efficiency.”
This 10-billion-yuan experiment proved: In China, the key isn’t “who you become”, but “who you exist for.”
As the last truck leaves Shanghai’s Senlan store, Hema’s membership dream ends—yet the journey to retail’s true essence is just beginning.
[Disclaimer]: The above content reflects analysis of publicly available information, expert insights, and BCC research. It does not constitute investment advice. BCC is not responsible for any losses resulting from reliance on the views expressed herein. Investors should exercise caution.