FOR ALIBABA’S HEMA (FRESHIPPO), X DOES NOT MARK THE SPOT (PART 2)

Just three months ago, I wrote about how Hema was closing down some of its Hema X membership stores, reducing the total from 10 to 5. It has just been announced that two more stores in Shanghai and Beijing are also closing on June 30th. The three remaining stores are now in Nanjing, Suzhou and Shanghai (Senlan Shangdu).

As I mentioned earlier, I don’t think they can survive into 2026. Earlier this week, some people had already shared on social media that the shelves in the Shanghai Senlan Shangdu store were very empty, with many products unavailable.

According to Lianshang, the reasons for the failure of Hema X are:

▶️ Unclear positioning: insufficient differentiation from Hema Xian Sheng (Freshippo) stores, resulting in a 60% overlap in assortment, which makes it challenging to highlight the advantages of the membership model. This results in a mismatch of target groups as Hema X appeals to neither middle-class families nor young consumers.

▶️ Lack of focus and resource allocation. Membership stores typically require 3-5 years of incubation time and substantial investments in terms of capital, staffing, and technology research and development. Hema already started closing them after 2 years, showing a lack of patience and determination.

▶️ Insufficient global procurement system. An independently global procurement team was never established, and most imported goods relied on Hema Xian Sheng. Result: lack of direct sourcing, product differentiation and price advantage compared to Sam’s Club.

▶️ Weak performance of localised innovation: no real development of customised speciality products based on members' needs and shopping habits. The reduction in SKUs led to a decrease in repurchasing. Meanwhile, Sam’s Club launches hundreds of new products every year, including nearly 30% regional products.

▶️ Failing to provide members with more valuable services and experiences besides basic shopping functions, resulting in insufficient member life cycle value, making it difficult to attract and retain members, and gradually losing out in the competition with international giants such as Sam's Club.

In his infamous boldness, former CEO Hou Yi had claimed that there would be 50 Hema X stores within two years. It never progressed beyond 10 in 3 years. And now there will be only 3 left.

Meanwhile, Sam’s Club is growing fast, and Costco isn’t doing badly either. While Hema X collapses, eight of Sam’s Club stores have annual sales exceeding $500. German discounter ALDI is also expanding its store presence outside Shanghai.

In its unbridled expansion of business formats a few years ago, Hema tried to be everything, including a Sam’s Club. As such, I don’t have high hopes for RT-Mart’s M stores, which are trying the same thing.

Hema's new CEO has clearly come to the conclusion that two formats, Hema Xian Sheng and Hema Neighbourhood, are enough and focus is needed.

Source: Lianshang