Core Insights - Costco continues to show significant growth despite economic uncertainties, with net sales reaching $269.9 billion and net profit at $8.099 billion for the fiscal year 2025, marking an 8% and 9.9% increase respectively [1][2] - Membership fees contribute significantly to Costco's profitability, accounting for 65.7% of net profit, highlighting its business model as a service provider rather than a traditional retailer [2][3] Membership and Customer Base - The total number of paid members reached 81 million, a 6.3% increase year-over-year, with a high renewal rate of 92.3% in North America and 89.8% globally, indicating strong customer satisfaction [3][4] - Costco's e-commerce segment is the fastest-growing area, with a sales increase of 16.1% year-over-year, attracting a younger demographic [5][6] Premium Membership Strategy - As of Q3 2025, Costco had 37.6 million premium members, representing 47.7% of total paid members and contributing 74.2% of global sales [7][8] - The company has implemented benefits for premium members, such as exclusive shopping hours and discounts on online grocery orders, which have positively impacted sales and member upgrades [8][10] Product Offerings and Brand Loyalty - Costco's iconic $1.50 hot dog and soda combo has remained unchanged for 40 years, symbolizing the company's commitment to value and customer loyalty [11][14] - The Kirkland Signature brand has seen increased penetration, providing members with 15% to 20% more value compared to similar products, which helps mitigate inflationary pressures [11][12] International Expansion and Market Position - Costco is cautiously expanding in China, having opened its seventh store in Nanjing, and is focusing on building relationships with local suppliers to enhance its market presence [15][16] - The company acknowledges the slower pace of international expansion compared to the U.S. market but remains optimistic about future growth opportunities [16][17]

Core Viewpoint - The article discusses the challenges faced by membership stores in China, particularly focusing on the struggles of local brands compared to established foreign players like Sam's Club and Costco. It highlights the need for these stores to adapt to changing consumer demands and improve their product offerings and brand trust. Group 1: Membership Store Challenges - Sam's Club China has faced consumer criticism regarding product quality after introducing brands like Holley and Wangwang, leading to the removal of controversial products from shelves [1] - Hema has closed its last X membership store in several cities, indicating a retreat from the membership model [2] - The rapid expansion of membership stores has not translated into sustainable success, with local brands like Fudi shifting focus to high-end organic supermarkets instead of warehouse membership models [3][4] Group 2: Market Dynamics - The membership store model in China is undergoing a transformation due to deep changes in retail structure and consumer demand, suggesting a potential "value reshaping" for membership stores [5] - The rise of middle-class consumers in China, with a significant increase in GDP and private car ownership, has created a favorable environment for membership stores [30] - However, a trend of consumer downgrading has emerged, with shoppers increasingly prioritizing price and quality, pushing retailers to adapt [31] Group 3: Competitive Landscape - Sam's Club and Costco have established a strong foothold in China, with Sam's Club planning to open 8-10 new stores annually starting in 2025, while Costco faces challenges due to its reliance on imported goods [25][23] - The competition is intensifying, with various retail formats emerging, such as discount community supermarkets and boutique supermarkets, which may replace traditional membership stores [32][35] - Despite challenges, the middle-income group in China remains a solid consumer base for membership stores, with a report indicating that the population of middle-income individuals has reached 109 million [36] Group 4: Operational Insights - Sam's Club has been criticized for quality control issues following rapid expansion, with multiple food safety incidents reported [26][27] - The operational differences between local and foreign membership stores are evident, with foreign brands benefiting from established supply chains and procurement strategies [12][18] - Local membership stores must focus on product quality, service, and brand trust to remain competitive in a rapidly evolving retail landscape [16][37]

Core Viewpoint - The closure of Hema's last X membership store in Shanghai marks the end of its membership store experiment, reflecting a broader trend of membership store failures in China [1][4]. Group 1: Membership Store Closures - Hema's last X membership store will officially close on August 31, 2023, completing the shutdown of all 10 Hema X membership stores nationwide [1]. - Metro has also struggled with its membership model, closing four membership stores in major cities since 2024, indicating a failure to establish a sustainable membership business [3]. - Carrefour has drastically reduced its store count from over 300 to just 4, following its acquisition by Suning, which has seen little success in innovating the brand [3]. Group 2: Comparison with Established Brands - Established membership stores like Sam's Club and Costco have expanded cautiously, with Sam's Club operating around 52 stores in China since 1996, while Costco has only opened 7 stores by 2025 [4]. - In contrast, local brands have aggressively opened membership stores, which has led to high financial demands and unsustainable growth [4]. Group 3: Consumer Behavior and Market Dynamics - Chinese consumers generally prefer free entry and low-margin sales, leading to low acceptance of membership fees, even for established brands like Sam's Club and Costco [4][5]. - The primary consumer base willing to pay for membership is the middle class, but this demographic has shrunk, limiting the potential for large-scale expansion of membership stores [5]. Group 4: Supply Chain and Operational Challenges - The success of membership stores heavily relies on strong global supply chain integration and proprietary brand development, which local brands lack [6][8]. - Local brands often depend on existing supply chains for imported goods, resulting in high product homogeneity and reduced market appeal [8]. - Membership stores typically offer a limited SKU selection to control costs, which can lead to inventory issues if product selection fails [9]. Group 5: Future Outlook - The closures of various membership stores signal a need for local brands to reassess their strategies, focusing on supply chain capabilities, consumer habits, and operational models to potentially develop a successful domestic membership store brand [9].

Core Insights - Hema X membership stores will completely shut down by the end of August, marking their exit from the market after less than five years of operation [1][8] - The membership store model was initially seen as a potential second growth curve for Hema, aiming to compete with Costco [3][4] - Despite rapid expansion, Hema X faced challenges in differentiating its offerings and maintaining competitive pricing, leading to consumer dissatisfaction [4][6] Group 1: Business Performance - Hema X membership stores opened their first location in Shanghai in October 2020 and expanded to 10 stores across major cities by October 2023 [3] - The average SKU count for Sam's Club is around 4,000, with strict selection criteria, while Hema X struggled with product differentiation [4] - Hema X's pricing strategy faced criticism, with some products priced higher than in regular stores, contradicting the value proposition of membership [4][6] Group 2: Strategic Adjustments - Hema's overall sales contribution from X membership stores remained below 10%, prompting a strategic shift under the current CEO [6] - The company plans to open nearly 100 new Hema Fresh stores by 2025, focusing on county-level markets, and aims to establish 300 Hema NB stores within three years [6] - Hema is not abandoning its membership system; it plans to collaborate with Taobao 88VIP for promotional activities and maintain a selection of exclusive products [8]

Core Insights - The closure of Hema X membership stores marks a strategic shift rather than a mere reduction in scale, focusing on a broader consumer base rather than a limited membership model [2][4] - Hema's rapid expansion of X membership stores initially showed promise, but consumer dissatisfaction and operational challenges led to a decline in sales contribution [3][5] - The retail landscape is shifting towards community-oriented and cost-effective shopping options, with Hema adapting its strategy to target lower-tier cities and broader consumer demographics [7][9] Company Strategy - Hema X membership stores were launched in October 2020, aiming to create a Chinese brand in the warehouse membership model, but faced significant challenges in brand recognition and consumer loyalty [2][3] - The decision to exit the membership store model is seen as a necessary and logical step, given the operational complexities and market challenges faced by similar retailers [4][5] - Hema is now focusing on a dual-track strategy, expanding its Hema Fresh stores and targeting lower-tier cities, with a goal of achieving a GMV of 100 billion yuan in three years [7][8] Market Dynamics - The closure of Hema X stores reflects broader challenges faced by traditional supermarkets and membership models in China, with competitors like Carrefour and Metro also struggling [5][6] - Successful membership models, such as Sam's Club, rely on strong supply chain integration and consumer loyalty, which Hema has struggled to establish [5][6] - The down-market strategy is driven by the significant growth potential in lower-tier cities, where consumer spending is increasing and infrastructure improvements are enhancing shopping convenience [8][9]

Core Insights - Hema has decided to close its X membership stores, with the last store in Shanghai set to shut down on August 31, 2024, following the closure of three other locations on July 31, 2024 [1][2] - The X membership store concept was initially launched in 2020 as a second growth curve for Hema, with plans to open 100 stores within three years, but only 10 stores were opened by October 2023 before the decision to close began [1][4] - Consumer feedback indicates that the X membership stores were perceived as inferior to competitors like Sam's Club, leading to a loss of trust in the membership system due to inconsistent value offerings [1][2][5] Store Closures - The last X membership store in Shanghai, located in Senlan Mall, will close on August 31, 2024, following the closure of stores in Beijing, Suzhou, and Nanjing on July 31, 2024 [2] - Consumer reports from the Shanghai store indicate a lack of inventory and chaotic clearance sales, with no preferential treatment for members during the liquidation process [2] Membership Structure - The X membership program offered two tiers: Gold members at 258 yuan per year and Diamond members at 658 yuan per year [2] - Initial comparisons were made between Hema's X membership stores and Sam's Club, but many consumers found the product quality and delivery speed lacking compared to competitors [2][5] Strategic Shift - By the end of 2024, Hema's CEO announced a strategic focus on its core business lines, Hema Fresh and Hema NB community stores, indicating a shift away from the X membership model [5] - Hema has experimented with various store formats over the years, but the X membership store model has not resonated with consumers as effectively as Hema Fresh [5] Industry Context - The rise of membership stores in China has seen competitors like Sam's Club expand significantly, with their store count increasing from 36 to 47 between 2021 and 2023 [5] - Industry experts emphasize that successful membership models require more than just a fee structure; they must build trust and offer unique value to members [6]

Core Viewpoint - Sam's Club has misjudged the demand in the Chinese market, leading to a significant trust crisis among its members due to recent product selection changes [1][19]. Group 1: Product Selection and Consumer Reaction - The introduction of low-sugar products from brands like Holley and Wei Long, while removing popular items, has sparked outrage among consumers who feel they are not receiving value for their membership fees [2][5][11]. - Consumers have expressed dissatisfaction with the perceived decline in product quality, particularly regarding the new low-sugar Holley pie, which contains unhealthy ingredients [2][4]. - The removal of imported products, such as Chilean seedless plums, has further fueled complaints, as members expected exclusive access to high-quality goods [4][5]. Group 2: Management Changes and Strategic Shifts - The retirement of Andrew Miles, the former president of Sam's Club China, has led to a shift in strategy under new leadership, focusing more on profit and less on consumer interests [7][10]. - The restructuring of management and the expansion of store locations have been linked to the changes in product selection and quality, raising concerns about the company's commitment to maintaining high standards [11][33]. Group 3: Membership Value and Brand Perception - The perception of Sam's Club as a premium shopping destination is being challenged as members question the value of their membership when faced with more common, easily accessible products [11][29]. - The company's rapid expansion and increased membership base have raised concerns about maintaining product quality and customer satisfaction, with complaints about food safety and product freshness becoming more frequent [33][34]. Group 4: Supply Chain and Operational Challenges - The need for a stable supply chain to support rapid growth has led Sam's Club to source from larger, more mainstream suppliers, which may dilute the unique shopping experience that members expect [20][34]. - The shift towards a more standardized supply chain may compromise the perceived exclusivity and quality that originally attracted consumers to Sam's Club [20][31].

Core Insights - The decline of Hema X membership stores reflects broader challenges in the Chinese membership store industry, highlighting strategic missteps and operational inefficiencies [2][3][11] - Hema's overall business is thriving, with plans to open 100 new Hema Fresh stores in the upcoming fiscal year, contrasting sharply with the struggles of its membership store segment [3][10] - The membership store model requires a long-term commitment and a strong supply chain, which Hema has failed to establish effectively [14][15] Group 1: Membership Store Performance - Hema X membership stores have seen a rapid decline, with closures of multiple locations in a short period, indicating a failure to attract sufficient customer traffic [2][3] - Consumer dissatisfaction has grown due to perceived diminishing value of membership benefits, with over 60% of members feeling that their rights do not match the annual fee [4][5] - The membership store's operational model has been criticized for its lack of unique offerings compared to Hema Fresh, leading to confusion among consumers [6][8] Group 2: Competitive Landscape - Hema X membership stores face intense competition from established players like Sam's Club, which has a robust supply chain and a successful business model in China [10][11] - Sam's Club has achieved significant sales growth and high renewal rates, leveraging its extensive data and customer insights to enhance service offerings [10][11] - The competitive advantage of Sam's Club stems from its long-term investment in the Chinese market, contrasting with Hema's short-term focus [10][13] Group 3: Strategic Misalignment - Hema's management has exhibited inconsistent strategies regarding the membership store, oscillating between expansion and contraction, which reflects a lack of clear direction [6][7] - The company's attempt to replicate the rapid delivery model of Hema Fresh in the membership store context has proven ineffective, as the two business models have fundamentally different operational needs [13][14] - Hema's failure to cultivate a unique identity for its membership stores has resulted in a lack of differentiation in a crowded market [6][9] Group 4: Industry Challenges - The membership store model in China is facing collective challenges, with both foreign and domestic players struggling to adapt to local consumer preferences [11][12] - The rise of discount retail formats has further complicated the landscape for membership stores, as consumers gravitate towards lower-priced options [12] - The overall market for membership stores in China remains underdeveloped, with varying levels of consumer acceptance and understanding of the model [12][11]

Core Insights - The contraction of Hema X membership stores reflects intense competition in the retail sector and signals a shift towards cost-effectiveness in response to changing economic conditions [2][4][8] Group 1: Store Performance and Closure - Hema X membership store in Daxing, Beijing, has seen empty shelves and reduced product offerings, indicating a decline in customer traffic [3][4] - The Daxing store is the only Hema X location in Beijing, and it has not received any closure notifications despite the ongoing shrinkage of the membership store format [3][4] - Hema X membership stores have closed multiple locations, including three in Shanghai as of April 1, leaving only five stores nationwide [4][5] Group 2: Strategic Shift and Market Position - Hema X was initially viewed as a significant growth driver for Hema, but the rapid expansion has not met expectations, leading to a reevaluation of its business model [4][6] - The shift towards discount stores aligns with current consumer trends favoring cost-effectiveness, as Hema seeks to enhance its market presence amid increasing competition from established players like Sam's Club and Costco [5][7][8] - Hema's CEO has indicated a focus on core business areas, particularly Hema Fresh and Hema Neighborhood (NB), aiming for significant growth and expansion in these segments [6][8] Group 3: Competitive Landscape - Competitors like Sam's Club and Costco continue to expand aggressively in China, with Sam's Club planning to open eight new stores this year [5][6] - The membership store model's challenges stem from a mismatch between Hema's original online-focused strategy and the offline experience demanded by membership store customers [5][6][8] - The retail landscape is evolving, with a clear need for Hema to adapt its strategies to meet diverse consumer demands across different market segments [8]