Core Viewpoint - Hema has decided to close all of its Hema X membership stores, marking a strategic shift away from its warehouse-style membership model, which was intended to compete with Costco. The closure signifies the end of a business experiment that began in 2020, while Hema Fresh and community discount stores continue to operate and expand [1][3][15]. Group 1: Business Strategy and Performance - Hema X membership stores were launched in October 2020, with membership fees set at 258 yuan/year for gold members and 658 yuan/year for diamond members, targeting middle-class and high-end consumers [3][5]. - At its peak, Hema X had 10 stores nationwide and claimed over 3 million paid members, generating nearly 600 million yuan in annual revenue [7]. - The closure of Hema X is seen as a necessary move to refocus on core businesses, with Hema Fresh operating over 420 stores and planning to open nearly 100 more in 2025, aiming for profitability with a GMV exceeding 75 billion yuan [15][29]. Group 2: Challenges Faced by Hema X - Hema X faced a dual identity crisis, trying to replicate the warehouse model of Sam's Club and Costco while also maintaining its fresh supermarket roots, leading to a confusing product structure with over 5,000 SKUs [8][10]. - The membership store's pricing strategy did not offer significant advantages, with self-branded products making up only 20%-40% of offerings, and many items being priced higher than in regular stores, causing consumer dissatisfaction [11][12]. - Hema's supply chain challenges included high cold chain costs and weak bargaining power, with only 35% of products sourced globally, limiting its ability to compete on price [12][13]. Group 3: Market Context and Competitors - The closure of Hema X highlights the competitive landscape of China's membership retail market, where Sam's Club and local players like Fudi are expanding successfully by focusing on product differentiation and understanding local consumer preferences [17][18]. - Sam's Club has effectively targeted middle-class families with a clear membership structure and a focus on high-demand products, while Fudi has adopted a more flexible membership model and established a strong supply chain [22][24]. - The failure of Hema X serves as a reminder that success in the retail sector requires a deep understanding of product quality, supply chain efficiency, and respect for local consumer habits [25][28].