---
title: "Front Warehouse Model Gains Traction Again"
description: "After abandoning the model four years ago, Hema Fresh's relaunch of front warehouses in Shanghai has reignited market interest. The move aims to address areas not covered by its stores in dense cities, improving user experience. Beyond Hema, more retailers are adopting the model, with Miniso launching its '24-hour super store' format this year, and Sam's Club's success in this area serving as a key inspiration."
author: "楚勿留香"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2024-09-18"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/front-warehouse-model-gains-traction-again-a7e5f009/"
markdown: "https://xinjignxiao.com/en/articles/front-warehouse-model-gains-traction-again-a7e5f009.md"
original_source: "https://mp.weixin.qq.com/s/Hc2OH0tWGVENK_wduUMWqQ"
translation: "https://xinjignxiao.com/zh/articles/%E5%89%8D%E7%BD%AE%E4%BB%93%E7%83%AD%E5%BA%A6%E5%86%8D%E8%B5%B7-a7e5f009.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/front-warehouse-model-gains-traction-again-a7e5f009/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Front Warehouse Model Gains Traction Again

> After abandoning the model four years ago, Hema Fresh's relaunch of front warehouses in Shanghai has reignited market interest. The move aims to address areas not covered by its stores in dense cities, improving user experience. Beyond Hema, more retailers are adopting the model, with Miniso launching its '24-hour super store' format this year, and Sam's Club's success in this area serving as a key inspiration.

After abandoning the model four years ago, Hema Fresh's "restart" of front warehouses in Shanghai seems to have made the model a hot commodity again.
Hema stated that this move is to solve the problem of areas not yet covered by its fresh stores in cities with dense store networks, thereby enhancing user experience.
In fact, not only Hema, but more and more retail enterprises, both online and offline, are observing and reflecting on the "front warehouse" model, and some have joined the ranks.
For example, Miniso launched a new business format this year, the "24-hour super store," positioned as a front warehouse rather than a store. It serves consumers within 3-10 kilometers who order online and expect delivery within one hour. It has already opened over 200 such stores.
Currently, the product categories are mainly daily necessities, with an average order value of 30-40 yuan, and it has been integrated with Meituan and Ele.me platforms.
By the second quarter of this year, Xiaoxiang Supermarket, focused on instant retail, had opened over 680 front warehouses, with about 550 located in the four first-tier cities of Beijing, Shanghai, Guangzhou, and Shenzhen.
Previously, Dingdong Maicai, a veteran player in the front warehouse format, achieved a Non-GAAP profit of 45.4 million yuan in 2023 (adjusted profit, excluding employee stock incentives, intangible asset amortization, and deferred costs from acquisitions), turning profitable for the first time.
This has made front warehouses one of the most watched business formats among merchants.
In my opinion, a more core reason might be the success of Sam's Club and others in the front warehouse model, leading many retail and internet companies to believe that front warehouses still have opportunities.
Sam's Club, a leading player in instant retail with both physical membership stores and front warehouses, has established about 400 front warehouses in China (some data suggests 500), contributing over 40 billion yuan in transaction value in 2023.
According to Walmart's second fiscal quarter revenue data, Sam's Club sales saw double-digit year-on-year growth in the second quarter of this year, driving Walmart China's net sales up 17.7% year-on-year to $4.6 billion.
In the first half of 2024, Sam's Club's online sales increased 29% year-on-year, accounting for about 50% of total sales. In other words, half of Sam's Club's sales come from online consumption, with hourly delivery e-commerce orders up 28% year-on-year to 59 million orders.
Sam's Club's success has led more merchants to rethink the "front warehouse" model.
There is a premise here: Sam's Club developed its online business gradually on the basis of thriving physical membership stores.
That is, Sam's Club had a strong online foundation; before going online, Sam's already had a certain brand reputation and accumulated a large number of members.
Sam's killer feature is product strength. Although it has only about 4,000 SKUs, Sam's Club carefully selects products, "choosing the best among the best," helping members pick products they desire, ensuring they can buy satisfactory items at Sam's.
Through strict quality control, Sam's Club has accumulated deep practical experience and shaped a highly differentiated, member-exclusive product system and service standards, earning a good reputation and consumer trust, leading many consumers to become members and renew continuously.
Sam's has thus established strong product selection and development capabilities and supply chain capabilities both domestically and internationally. Additionally, Sam's Club has a large number of private label products, ensuring considerable profits.
In other words, Sam's transformation began with seriously making products.
In 2018, Sam's began opening front warehouses and launched the "Extreme Speed Delivery" service—selecting 1,000 high-repurchase, instant-consumption SKUs, using a "store + cloud warehouse" model, achieving full coverage in many cities.
Currently, Sam's Club has established a relatively solid foundation both online and offline.
Offline, Sam's Club's expansion is in full swing. According to Sam's plans, 6-7 new stores will open each year in the future. Currently, Sam's Club has 48 stores, and according to disclosed information, it is expected to exceed 60 stores by 2026.
Online, Sam's Club's front warehouse performance is particularly outstanding, with online average order value exceeding 200 yuan, far surpassing competitors. Hema Fresh's online average order value is about 90 yuan, and Dingdong Maicai's is 72 yuan.
The offline and online development complement each other, resulting in impressive performance, making Sam's a model for many merchants to imitate and learn from.
But Sam's Club is somewhat "unconventional" in the entire front warehouse format. Because the front warehouse model is a logistics distribution method that sets up multiple small and medium-sized warehouses in cities to achieve rapid delivery. This model helps improve delivery efficiency and shorten delivery times.
According to an analysis by Pinzhi PLSC, Sam's stores and front warehouses are at the same level; from a logistics perspective, they both belong to secondary logistics distribution. The essence of the relationship between Sam's stores and front warehouses is actually the independent yet parallel relationship between the same retailer's store business and e-commerce business. This is also the most classic proposition in current retail transformation.
But more crucially, the two achieve good synergy, meeting consumers' online and offline needs.
Sam's stores have about 4,000 SKUs, but front warehouses are further refined to about 2,000, focusing on high-frequency fresh produce, fresh food, food, and fast-moving consumer goods.
It is worth noting that from a product assortment perspective, Sam's front warehouse selection logic is not fundamentally different from traditional front warehouses like Dingdong Maicai.
But traditional front warehouses are mostly self-operated with their own apps, including PUPU Supermarket, Dingdong Maicai, and Xiaoxiang Supermarket. Although they have warehouses offline, they mainly serve and meet online demand.
Of course, today's front warehouses are no longer what they initially were.
First, in terms of categories, they all started with fresh produce and gradually expanded to more categories. As categories expanded, warehouses also grew to some extent.
The reason for this change is not complicated: more and more players have found that relying solely on fresh produce not only fails to achieve profitability but even breaks even is difficult, and they basically all incur losses. Therefore, they expand into categories with higher gross margins.
Second, on the basis of expanding categories, they continuously develop "private label" products, including prepared dishes, and extend upstream in the supply chain.
Whether it's PUPU Supermarket, Dingdong Maicai, or Xiaoxiang Supermarket, all have taken the path of expanding categories and developing private labels.
Taking PUPU Supermarket as an example, in 2024 it focused on private labels. Its app has launched a "PUPU Exclusive" channel with multiple private label products, covering household cleaning, personal care, rice, flour, oil, snacks, etc., with over 350 SKUs.
Earlier, in 2020, Dingdong Maicai began laying out private labels. In 2022, Meituan Maicai (now Xiaoxiang Supermarket) also launched private label products like Xiang Dàchú and Xiang Yōuxuǎn.
Additionally, unlike Dingdong Maicai and Xiaoxiang Supermarket, "large warehouse model" is a more obvious label for PUPU Supermarket, meaning warehouse area is about 800 square meters, while the former two have single warehouse areas ranging from 300-500 square meters.
Later, Xiaoxiang Supermarket also began learning from PUPU Supermarket, expanding front warehouses from 400-500 square meters to 800-1000 square meters, and SKUs from 3000-4000 to 6000-8000.
Expanded SKUs can cover more people's needs and introduce more high-margin products like daily necessities. To some extent, they also achieve traffic generation through fresh produce and fast-moving consumer goods, and profit from high-margin products like general merchandise.
In terms of category proportion, PUPU Supermarket's fresh produce accounts for about 30%, with 50% being standard products, while Xiaoxiang Supermarket and Dingdong Maicai's fresh produce sales account for 50%.
Dingdong Maicai, to improve gross margins, played the private label and prepared dishes card early on. Founder Liang Changlin bluntly said, "Our future may be a food company."
In Dingdong Maicai's Q4 2023 financial report, private label products, mainly prepared dishes, exceeded 20% of total GMV for the first time in Q4, up 3.1%. Among them, non-fresh private label products accounted for 34.3% of non-fresh GMV, up 7.7 percentage points from the same period in 2022. In other words, private labels and non-fresh categories enabled Dingdong Maicai to achieve profitability.
At that time, Dingdong Maicai had established 12 self-owned factories and launched over 20 private labels, covering prepared dishes, meat, rice, noodles, and soy products. Through deep cooperation with upstream food factories and suppliers, Dingdong Maicai's private labels enhanced platform competitiveness and improved profit margins.
Additionally, in 2024, Dingdong Maicai is also trying more category extensions, moving from the label of selling vegetables to broader scenarios like coffee table leisure, camping, late-night snacks, and even novel, emergency, and more youthful, life-oriented scenarios, supplementing and covering categories.
This has brought considerable results. In Q1 2024, sales of coffee table leisure scenario categories including fruits, dairy, alcohol, beverages, leisure merchandise, and bakery exceeded 100 million yuan; sales of four categories—fresh beef, organic vegetables, black pork, and chilled aquatic products—exceeded 400 million yuan, up about 40% year-on-year.
Furthermore, front warehouses on instant retail platforms also occupy a very important position. These instant retail platforms include Meituan, Ele.me, and JD Daojia.
Meituan's total transaction value in instant retail in 2023 was on the order of 200 billion yuan, and its Flash Purchase business currently has about 9,000 lightning warehouses.
Ele.me recently launched a new merchant support plan for warehouse stores—the "Qinglan Plan"—to fully support new small and medium-sized merchants to start quickly. This includes high commission rebates, multiple traffic benefits, business district product suggestions, exclusive marketing subsidies, new warehouse location suggestions, exclusive material support, more channel exposure, and single-store operation guidance.
For example, under the cash incentive policy, the "Qinglan Plan" specially introduces a "tiered order incentive" for new merchants, with a maximum cash incentive of 30,000 yuan per store; for marketing activities, the platform will also provide up to 70% platform subsidies to help new merchants start quickly.
Of course, looking at small and medium-sized front warehouse players on instant retail platforms, their categories rarely involve fresh produce, and even if they do, it's minimal and concentrated, mainly focusing on fast-moving consumer goods, daily necessities, mother and baby, pet, and snacks.
Taking a front warehouse merchant on the Ele.me platform as an example, this merchant has about 9,000 SKUs, covering alcoholic beverages, leisure food, 3C digital, clothing, shoes and socks, daily necessities, washing and care products, fruits and vegetables, fresh produce, mobile communication supplies, hotel travel supplies, beauty and skincare, nail and hair care, daily necessities, pet life, mother and baby products, hardware, sports and entertainment, etc. Therefore, sufficient SKU breadth and price advantage are among the most critical factors.
The merchant believes that products are the first priority, and selection must be accurate to match surrounding needs; secondly, prices must have an advantage. "As long as your product selection is precise enough and prices are advantageous enough, you basically don't need to do anything; traffic will come naturally."
This store has very few fresh products, mainly standard products. "Mainly use fast-moving consumer goods to attract traffic, and make money from general merchandise and high-value items."
Compared with traditional e-commerce and offline stores, the instant nature of front warehouses is more attractive: what you see is what you get, and delivery can be made within 30-60 minutes.
More crucially, the maturity of instant delivery has also provided more convenient conditions for the development of instant retail. Front warehouses solve the problem of mismatch between online consumer demand and offline products; consumer needs that offline stores cannot meet can be fulfilled through efficient fulfillment by warehouse stores.
Even some industry insiders believe that front warehouse = convenience store (+ department store) + pure online sales + hourly/half-hour delivery.
Of course, with category expansion, strengthened private label products, and improved fulfillment efficiency, front warehouse players on instant retail platforms have more possibilities.
Some industry insiders also analyze that whether front warehouses/convenience warehouses on instant retail platforms can make money depends to some extent on the intensity of competition among warehouses.
Taking a county town with a population of 500,000 and decent consumption capacity as an example, if no one does front warehouses/convenience warehouses locally, "we can do it and make money. But the question is how long we can make money; it's not guaranteed. Because once a second competitor enters, a price war will start. After 3, 5, or 10 competitors enter the market, it will definitely not be profitable," the analyst said.
**Recommended Reading**


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671