In October 2020, Hou Yi, the founder of Hema, opened the company’s first membership store in Shanghai, boldly declaring his ambition to create the “Chinese version of Costco” and directly challenge Sam’s Club. At the time, he set an ambitious goal: to open 50 Hema X Membership Stores within two years and reach RMB 100 billion in GMV within three years. However, just five years later, all Hema membership stores across China will officially close on August 31, marking the end of Hema’s costly five-year experiment to rival Sam’s and Costco. The result: 3 million members and RMB 600 million in annual membership fees, in exchange for an expensive lesson.
The shutdown was not sudden but rather the culmination of a long-anticipated strategic retreat. On July 31, 2025, stores in Beijing’s World Flower Mall, Suzhou Xiangcheng, and Nanjing Yanziji closed simultaneously. One month later, on August 31, the last remaining location—Shanghai Senlan—will also close its doors. Signs of this retreat had already emerged in 2024, when Yan Xiaolei replaced Hou Yi as CEO and began shifting the company’s strategy. That year, the Shanghai Zhenru and Jianguo Road stores closed one after another; on April 1, 2025, the Gaoqing, Dachang, and Donghongqiao stores were also shut down.
The membership store concept was once the centerpiece of Hema’s former CEO’s strategy. In August 2019, Costco’s Shanghai debut drew enormous crowds and proved the appeal of the model, inspiring Hema to act. After a year of preparation, the first Hema X Membership Store opened in October 2020. Early performance was dazzling: profits within two months, an average basket size close to RMB 1,000, daily sales exceeding RMB 10 million, and projected annual revenue near RMB 1 billion. At its peak, the chain grew to 10 stores in Shanghai, Beijing, Suzhou, and other cities, attracting nearly 3 million paying members. Yet beneath the surface, Hema had not mastered the true fundamentals of the membership model. As parent company Alibaba scaled back its retail operations, the new CEO opted for a survival strategy—at the cost of shutting down the entire membership business.
Hema’s biggest challenge was its unclear positioning. It tried to emulate the premium membership model of Sam’s and Costco while also pursuing aggressive low-price strategies, which threw cost structure and customer experience out of balance. In Beijing, high rent clashed with large-package, low-price goods, leading one store to shut down just seven months after opening. Worse, some member-only prices were higher than in Hema’s regular stores—for instance, one brand of milk cost RMB 6 more in the membership store—creating customer backlash.
Another pillar of membership retail is exclusive, high-value products, but Hema’s assortment, quality control, and cost management fell short of its rivals. Sam’s has spent 30 years building its supply chain in China; Hema could not bridge that gap in five years. Experts point out that Hema’s supply chain relied heavily on Alibaba’s ecosystem rather than building its own vertical system, resulting in high fresh-food spoilage rates, a large proportion of non-standardized goods, and weaker cost control. Without a robust, efficient supply chain—and lacking access to the same low-cost suppliers and integrated logistics—Hema could not match its competitors in either price or quality, ultimately sealing the fate of its membership store venture.
