Hello everyone, and welcome to our podcast! Today, we're going to delve into the recent announcement of Hema X Membership Store's complete cessation of operations. We'll explore the reasons behind this withdrawal and what implications it holds for the retail industry.

Yes, this is indeed a topic worth discussing. Let's get started!

The Hema X Membership Store has completely exited the market in just five short years. What kind of changes in the retail industry does this event reveal, or what lessons does it offer us?

That's right. They opened their first store in 2020, benchmarking Costco, and now, on August 5th, they announced the closure of their Shanghai Senlan store on August 31st, which will be their last. A business once touted as a "second growth curve" has come to such an abrupt halt. It's truly worth digging deep into what happened behind the scenes.

How exactly did Hema's membership store reach this point of complete cessation of operations? Could you walk us through the process?

In fact, store closures have been happening since the beginning of this year. For example, the Zhenru store in Shanghai and the Jianguo Road store in Beijing. Then in April, the Gaoging, Dachang, and Donghongqiao stores in Shanghai also closed. In July, the World Flower store in Beijing, the Xiangcheng store in Suzhou, and the Yanziji store in Nanjing followed suit. Finally, at the end of August, the Senlan store in Shanghai will be the last to close. It's clear that the withdrawal has been gradual but very distinct.

The pace of this withdrawal certainly tells a story.

Yes, and what's even more interesting is that before the closures, for instance, at the World Flower store in Beijing, most of the shelves were empty, and there were very few products. Although they were on discount, customer traffic was sparse. A staff member directly stated that the management had decided to cut the entire membership store business line.

What major development stages did Hema's membership store experience during these five years?

They opened their first store in Pudong, Shanghai, in October 2020. This marked the first time a local Chinese retail enterprise officially entered the warehouse-style membership supermarket sector. At the time, they even boasted that it would become Hema's "second growth curve."

It sounds like they were quite ambitious at first!

Yes, and then in 2021, they started to accelerate. In June of the same year, they entered Beijing, and by the end of the year, they opened four stores in just over a month. By 2023, they had a total of ten stores nationwide, all concentrated in first-tier cities. Their membership system was also well-developed, with gold and diamond tiers, primarily targeting middle-class and high-end consumers. However, when the new management team took over in 2024, they began to shift direction. The membership store business was gradually marginalized, and by 2025, it has completely ceased operations.

Why did Hema's membership store ultimately reach this point of complete cessation of operations?

The main reason is related to the strategic adjustments made by the new management team. The new CEO clearly stated that resources would be concentrated on Hema Fresh and NB (New Business) community stores. This strategic transformation has actually been quite effective; they have already achieved profitability this year and plan to open more Hema Fresh stores in new cities.

Oh, so it was a reallocation of resources.

Exactly. In addition, market competition is also very fierce. In Shanghai alone, you have strong competitors like Sam's Club and Costco, and their membership fee models are also very competitive. Furthermore, Hema's own Fresh stores and community stores have been able to offer products similar to those in membership stores through supply chain upgrades. Coupled with their "Yunxianghui" service, the significance of independent membership stores has further diminished. And with consumers increasingly preferring online shopping and instant retail, that also played a big role in the withdrawal.

What impact will the closure of Hema's membership store business have on the entire retail industry?

First, it reflects the pressure on the entire industry. According to data from the China Chain Store & Franchise Association, in 2024, more than half of supermarket enterprises saw a year-on-year decrease in sales. Traditional supermarkets are facing changes in consumer demographics and habits, and they are seeking transformation. For example, Yonghui Superstores is trying to achieve high-quality retail by significantly renovating its stores.

It seems that industry transformation is inevitable.

Yes, and another point is that the membership-based warehouse supermarket model has encountered some bottlenecks in its development in China. For example, consumers are still very price-sensitive, and their acceptance of membership fees is not yet high. Furthermore, urban living spaces are relatively small, limiting the demand for large-packaged goods, and the habit of online shopping has given people less reason to visit physical stores. In addition, the homogenization of business models is also severe, making it very difficult to achieve differentiation.

What lessons has Hema X Membership Store left for our retail industry during its short five-year journey from market entry to exit?

This five-year journey actually tells us that when retail enterprises innovate new business formats, they must simultaneously consider operational efficiency and find their unique differentiated advantages. This is extremely important in today's world, where consumer needs are becoming increasingly fragmented.

Okay, today we've reviewed the entire process of Hema X Membership Store, from its ambitious entry into the market to its abrupt withdrawal. From this case, we can not only see the fierce competition in the retail industry but also gain many insights into how to balance innovation and efficiency.

That's all for this episode of the podcast. Thank you for listening, and we'll see you next time. Bye-bye!