Freshippo, Alibaba Group Holding Ltd.’s offline grocery business, is pulling the plug on its warehouse-style, premium X Member stores, marking a full retreat from its ambitious bid to emulate the success of American retail giants Costco and Sam’s Club.
The last remaining X Member store, located in Shanghai’s Pudong district, will close on Aug. 31, according to a store notice. The move concludes a four-year experiment aimed at building a membership-based, bulk-buying format in China — a market that has proved difficult for domestic entrants despite increasing consumer interest in value-driven retail.
Also known as Hema, Freshippo began phasing out the X Member brand in February. Stores in Beijing, Suzhou and Nanjing closed in July.
The move comes as the company sharpens its focus on its core business: Freshippo Fresh supermarkets and Neighbour Business (NB) discount stores, and aligns with its parent Alibaba’s strategy to divest non-core assets and prioritize profit-generating operations.
Withdrawal from the membership-based, warehouse store market underscores the challenges Chinese retailers face in adapting the U.S.-style membership model, which relies heavily on tight supply-chain management and consumer loyalty. Analysts say cultural and logistical barriers — including the reluctance of Chinese consumers to pay annual membership fees together with their preference for neighborhood shopping — hampered adoption.
According to one industry analyst, most Chinese cities are only able to accommodate one or two warehouse stores due to limited market space and fierce competition. It is difficult for new domestic entrants to secure prime locations and poach members from foreign brands, he added.
Launched in October 2020, the X Member chain expanded to 10 locations by the end of 2023, with six in Shanghai alone. A source familiar with the matter said customers would be offered either a refund or the option to transfer their membership benefits to other Freshippo stores.
The strategic recalibration stems from a “discounting reform” launched in October 2023, aimed at cutting prices through tighter vertical integration and leaner operations. In a letter to employees in late 2024, chief executive officer Yan Xiaolei said the company would double down on its Freshippo Fresh supermarket business and the NB discount stores.
Freshippo operates more than 420 Fresh supermarkets across nearly 50 cities as of the end of the first quarter of 2025. In 2024, 72 new Fresh stores were opened, a third of which were in second- and third-tier cities and counties.
The NB business, meanwhile, consists of smaller discount outlets catering to more price-sensitive consumers. The division primarily sells near-expiry products from nearby Freshippo Fresh stores and is expanding its own private-label offerings.
Freshippo recently recorded nine consecutive months of profitability and double-digit growth, culminating in full-year operating profit for fiscal 2025. Parent Alibaba reported that Freshippo’s gross merchandise volume surpassed 75 billion yuan ($10.4 billion).
After a sweeping business revamp, Alibaba said in May 2023 that Freshippo would pursue an initial public offering. However, by November, the plan was put on hold, citing the need to assess market conditions.
Alibaba has since increased its focus on its core e-commerce and cloud computing businesses, divesting noncore assets such as Sun Art Retail and Intime Department Store over the past year. While Freshippo was rumored to be a candidate for sale, Alibaba chief financial officer Toby Xu said during an earnings call in February that there was no plan to sell the business, citing its growth and profitability. He added that the group would consider other ways to reflect Freshippo’s value, such as bringing in strategic investors.
In a bid to fuel its next phase of growth, Freshippo is tightening its integration with its parent company. In a new initiative, members of Taobao's 88VIP loyalty program can now claim a 90-day trial of a Freshippo membership, a move designed to use Alibaba's vast e-commerce ecosystem to acquire new customers for its streamlined grocery business.
Contact reporter Han Wei (weihan@caixin.com)
