Freshippo, the grocery retail chain of Chinese e-commerce giant Alibaba, will open its first membership store in Shanghai on Thursday, challenging the American membership-only warehouse chain store Costco and Walmart’s wholesale division Sam’s Club in the city.
“We hope we can improve our capabilities quickly and effectively via directly competing with Costco and Sam’s Club,” said Hou Yi, president of Freshippo in a statement on Monday.
Freshippo, known as “Hema” in Chinese, also launched its own private brand Hema MAX, which sells a variety of products including rice, cooking oil, yogurt and nuts. Over 40 per cent of the products in the membership-only X store are Freshippo’s exclusive products, including those from Hema MAX, with 10 per cent from overseas factories, according to a company statement on Monday.
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Goods bought in the X store can be delivered within half a day to customers living within a 20-kilometre radius of the store. Products bought in other Freshippo stores can be delivered to customers living within a 3 kilometres radius of a store and the delivery time can be as short as 30 minutes.
Freshippo is an important part of Alibaba’s “New Retail” initiative, which aims to combine the best elements of the online and offline shopping experience. The coronavirus pandemic and associated social distancing measures have also led to a surge in online consumption in China, with fewer people browsing stores in physical malls.
For the quarter ended June, over 60 per cent of Freshippo’s gross merchandise value was generated online, according to the latest quarterly financial report from Alibaba, which owns the South China Morning Post.
Freshippo opened its first bricks and mortar store in Shanghai in 2016. Two years later, it launched the X membership plan with an annual fee of 258 yuan (US$38) in the same city and then gradually expanded its footprint to Beijing, Xi’an and Chengdu in 2019.
By the end of June, there were 214 Freshippo stores across China, primarily located in tier 1 and tier 2 cities. In Shanghai alone, there are about 500,000 X members so far.
Membership-only warehouse chain stores Costo and Sam’s Club, which sell products in bulk at lower prices, are also beefing up their presence in the world’s most populous country as China’s rapidly-expanding middle class continues to seek good-quality products at affordable prices.
Costco opened its first physical store in China last August in Shanghai with crowds of aggressive shoppers forcing it to close early on the first day amid chaotic scenes.
Sam’s Club ran 27 stores in China as of June, serving more than 2.8 million members across the country, doubling the number from 2015. The company plans to have 40 to 45 stores in operation or under construction by the end of 2022, according to information from the official website of Walmart China.
This article Alibaba’s Freshippo opens first membership-only store in Shanghai, challenging Costco and Sam’s Club first appeared on South China Morning Post