Source | Hedgehog Commune "Due to business adjustments, the Beijing Hema X Membership World of Flowers store will cease operations on July 31, 2025." On May 30 this year, a prominent notice board was placed at the entrance of the Hema X Membership store in Daxing District's World of Flowers. Previously, Hema X Membership stores had only opened physical locations in four cities: Beijing, Shanghai, Nanjing, and Suzhou. Similar to Sam's Club, Hema X Membership is a membership-based supermarket that requires a paid membership to shop, with store areas typically ranging from 17,000 to 18,000 square meters, slightly smaller than Sam's Club. At launch, Hema X membership fees were 218 yuan per year, later upgraded to a two-tier system: Gold members at 258 yuan/year and Diamond members at 658 yuan/year, nearly matching Sam's Club's 260 yuan/year regular membership and 680 yuan/year卓越 membership. The benefits for the two membership tiers also differ. Hema X Gold members can enjoy an 8.8% discount on one day from Monday to Thursday, while Diamond members enjoy the discount daily and receive a family sub-card. This sounds similar to Sam's membership system. The difference is that, besides serving as an entry ticket to X stores, Hema X members also enjoy discounts at all Hema stores and on the app, which seems like a benefit to quickly reach more users. However, the less differentiated membership system also laid the groundwork for the eventual exit of X stores. Hema once disclosed that by the end of 2022, its X paid members numbered nearly 3 million. At that time, Sam's Club had only 4 million paid members in China. In the middle-class business, Hema seemed only a step away from Sam's Club, but by 2025, Hema X Membership stores are drifting further away from Sam's Club.

Store Closures Were Foreshadowed

Since the Hema X Membership store in the Dawanglu business district closed at the end of May last year, only one Hema X Membership store remained in Beijing, located in Daxing District. But this year, some members have noticed signs that this store might close. In mid-May this year, a group of regular customers at the Hema X Membership store noticed that some areas were closed, frozen foods were removed, staff no longer promoted membership cards, and even non-members could shop in the store. Attentive customers noticed changes earlier. Bai Qi (pseudonym), a regular customer who lives nearby, said in his own words, "I can reach the store with one press on the accelerator." In February this year, he noticed that the Hema X Membership store might undergo changes. Bai Qi told Hedgehog Commune that in early February, he bought a cheese-filled cod sausage at the store and found it tasty. When he wanted to buy more, every time he asked about the product, the staff said there was no new stock. "Even the snacks currently on sale have the latest date of February this year; after that, nothing new." Bai Qi loves shopping and visits any new store that opens. In the early days of the World of Flowers Hema X store, he visited up to 10 times a month, but after the novelty wore off, he went at most two or three times a month. In the later period before closure, his visits dropped to once or twice a month. "In the early days, there were more customers than staff; in the later period, more staff than customers." Empty Hema X Membership store, photo provided by interviewee Compared to the early days, Bai Qi noticed recent changes that were hard to accept—the cost-performance ratio was visibly declining. For example, fresh produce was expensive at first, but Bai Qi believed it was worth it. He told Hedgehog Commune, "First, it was fresh; second, you didn't have to pick; it was the best on the market. Now, it's just average, like the fruit shops outside. Why would I go there and pay double? It's a cost-performance issue." Declining quality and worse cost-performance were common feelings among many regular customers. In May this year, a Xiaohongshu user posted a complaint saying, "Many big brands have stopped supplying; the good products you can buy are getting fewer and fewer." On May 30 this year, the Hema X Membership store in Daxing, Beijing, finally put up a closure notice. For nearby residents, the closure of a physical supermarket that had operated for three years also signifies changes in lifestyle. Bai Qi was not indifferent to the closure. He told Hedgehog Commune, "Their products had something compared to Sam's; I'm also reluctant to see it close." However, being good at comparing prices and exploring new things, Bai Qi quickly found better and cheaper alternatives. Among the scattered members, some chose convenience supermarkets near home that offer free delivery for orders over 38 yuan, some continued shopping at Hema Fresh or Hema NB stores, and others "fled" to Sam's Club. After learning about the imminent closure, Qin Yue, a former Hema X member, told Hedgehog Commune that she had applied for a Sam's Club membership a week earlier, spending over 600 yuan. The shrinking Hema X Membership stores prove that Hema no longer wants to waste time on the membership warehouse model, while Sam's Club continues to expand, proving that membership warehouse stores are still a good business.

Shrinking Hema X, Expanding Sam's

Warehouse membership stores are one of many store formats Hema has tried. Hou Yi, founder of Hema Fresh, once responded to China Business Journal, "For X Membership stores to succeed, they must beat Sam's Club and Costco; if they can't, they won't succeed." This prediction seems to be coming true. Since opening its first X Membership store in Shanghai in 2020, the number of Hema X stores peaked in 2023 at 10, located in economically developed cities like Beijing, Shanghai, and Nanjing. However, X stores soon began to shrink. In March this year, three Hema X Membership stores in Shanghai announced closures. To date, excluding the soon-to-close Beijing World of Flowers store, only four Hema X stores remain nationwide: two in Shanghai, one in Nanjing, and one in Suzhou. This is related to Alibaba's strategic shift. Hema began with Alibaba's new retail strategy to transform physical retail with the internet, with Hou Yi at the helm. Over the years, Hema experimented with various store formats, and Hema X Membership was born during this period. In August 2021, in an interview with tech media LatePost, Hou Yi listed Hema X Membership, Hema Fresh, and Hema Neighborhood as Hema's "three carriages." Until late last year and early this year, Alibaba began selling off retail businesses in bulk, such as Intime Department Store and Gaoxin Retail (parent of RT-Mart), acquired under the new retail strategy. This marked Alibaba's increased focus on its core business, and the new retail strategy began to change. Hema's drastic upheaval occurred earlier when founder Hou Yi announced his retirement, leaving Hema entirely, with CFO Yan Xiaolei concurrently serving as CEO. Hema quickly turned around and entered a new era. At the end of 2024, Yan Xiaolei stated in an internal letter that the company would focus on two core formats: Hema Fresh and Hema NB. To lighten the load, within just three months in the first half of this year, Hema closed three Hema X stores in Shanghai. In May, it announced the closure of the last Hema X store in Beijing. Perhaps due to this focus on core formats, Hema finally achieved full-year profitability from April 2024 to March 2025. As Hema X stores fully exit Beijing, Sam's Club is opening more stores in the capital. In addition to the existing four stores, the under-construction Changping and Yongfeng stores are expected to add shopping options for internet workers in the northwest Fifth Ring area. Additionally, the Fangshan store broke ground early this year, and the Tongzhou store has completed site selection. Photo provided by interviewee Nationwide, in 2012, Sam's Club had only 8 stores in China; by 2020, that number had grown to 32. According to Sam's official website, there are now 48 stores in operation in China. Sam's will accelerate its opening pace. According to New Retail reports, on May 28 this year, Sam's announced new opening plans. After 2025, Sam's will open an average of 8-10 stores per year, a significant increase from the recent pace of about 6 per year, breaking its previously conservative strategy. Sam's new store plan includes new first-tier or second-tier cities like Wuhan, Hefei, and Suzhou, as well as economically developed county-level cities like Zhangjiagang. Strategically, Sam's is moving beyond Beijing, Shanghai, Guangzhou, and Shenzhen to attract a broader user base in wider markets.

Middle-Class Business: Hema Falls Behind?

Hema X stores are retreating step by step, while Sam's advances. The question is: why is there such a gap in their fortunes despite both using a model of curated products plus private labels? Is the foreign "monk" really better at chanting sutras? We might get a glimpse from the differences in their membership service systems and product structures. In terms of membership services, Hema X stores share members with Hema Fresh stores, causing conflicts between the two formats, leading to "left foot stepping on right foot" and confusing consumers. Bai Qi told us, "I basically don't use the X store benefits, but at Fresh stores, they give away vegetables every time, and on member days there's an 8.8% discount, which is quite good. At X stores, I mainly buy specific products, so I don't care about saving a few yuan on benefits." Additionally, Bai Qi mentioned, "There's a lot of product overlap between Hema X and Fresh stores. Now I go to X stores only two or three times a month, but to Fresh stores maybe five or six times." Unlike Sam's stable and well-established membership system, Hema's paid member benefits have also been challenged. In October 2023, Hema launched a discount reform, lowering prices on over 5,000 products in offline stores and setting "offline exclusive prices," but these prices couldn't be combined with member discounts, sometimes making member prices higher than non-member offline exclusive prices, undermining member benefits. Moreover, to fully promote the discount transformation and allow all consumers to buy higher cost-performance products without barriers, the Hema app even adjusted its membership policy, temporarily stopping new paid memberships, which only resumed after six months. Beyond the membership system, product structure and supply chain issues may also be reasons for Hema X's retreat. Hema's cooked food and fresh products have strong market competitiveness. Bai Qi often buys seafood and cooked food at Hema X stores. "They do it well; it's tasty. Why do I like this store? Because many products are in southern style, like crabs; they make flower-carved wine crabs, which northern stores don't. Later, Sam's also introduced this item." A research report from Huachuang Securities mentioned that in terms of category structure, Sam's fresh food accounts for about 40%-45%, and dry goods about 30%. Compared to Hema, Sam's does not supply live aquatic products, and non-food items account for about 30%, higher than Hema. As is well known, Sam's doesn't sell live seafood but "frozen fresh," making live seafood a differentiating selling point for Hema. The problem is that most live seafood is also available at Hema Fresh stores, so users seeking live aquatic products don't need to pay extra for an X store membership. More accurately, the differentiating selling point belongs to Hema Fresh, and there is no space left for Hema X stores between Hema Fresh and Sam's. In the more core battle of cost-performance, Hema has become more aggressive. Since the discount reform in 2023, Hema's main artery has been disturbed—the pressure of low prices has been transmitted to the supply chain, indirectly causing Hema X stores' product selection and quality to no longer align with Sam's. Hedgehog Commune learned from some Hema suppliers that in the first half of 2024, due to pricing strategies, Hema removed many SKUs and endlessly pressured prices, causing many suppliers to withdraw from Hema. Zhang Ning, a supplier who has long provided certain fresh categories to Hema, Sam's, and Costco, told Hedgehog Commune, "When Hou Yi hadn't left Hema, the difference between Hema and Sam's wasn't significant; Hema just had more categories, while Sam's had fewer." During that period, he specifically compared the same fresh product from Hema X, Sam's, Costco, and Metro under the same supplier, and found that Hema was the cheapest and had the best quality. Zhang Ning mentioned that since 2024, Hema's supplier selection criteria have become more price-oriented. "They no longer consider so-called quality; whoever quotes the lowest price gets to supply the product. This competition causes suppliers in this category to either lower prices or high-quality suppliers leave. Normally, suppliers choose the former." In contrast, Sam's "competition" is still about quality. Zhang Ning further noted, "Sam's quality control is very clear. Their buyers go to competitors' factories for research, and procurement and quality inspectors regularly check suppliers. They know the entire chain well. They don't suppress suppliers endlessly; they even know more than we do." In the industry, there's a story that if a supplier supplies several supermarkets simultaneously, the supplier will have a dedicated area called "Sam's exclusive warehouse," where raw materials are only for Sam's, while others are labeled "others," like RT-Mart or Hema. "Blindly choosing" and "never stepping on a mine" are key phrases for Sam's popularity among middle- and high-income groups, and they are the core reasons why they are willing to pay for entry. When Hema chose to compete on cost-performance overall, the mission of X stores was declared over. But if Hema can achieve better quality-price ratio in a more affordable system, it could be another silver lining. 🔺 7th China FMCG Conference Details Scan QR code for ticket inquiries