CEO of Alibaba’s Freshippo grocery retail chain, Hou Yi, has announced expansion plans to open 10 more Freshippo X Stores in 2021.
The first store is profitable within two months of the store opening
The first X Store, Alibaba’s membership-only wholesale store, opened in October last year in Shanghai. Hou Yi revealed that the store is making profit by end of 2020, merely two months from the store opening. Average customer spend per trip is around CNY1,000 (US$155).
“Freshippo X Member Store and Freshippo complement each other in terms of meeting the customer needs, and both are loved by consumers in Shanghai,” said Hou Yi.
|Source: Retail Information, China
Supported by a strong supply chain
The core value of membership-only stores is to serve paying members with quality products at the best prices. Behind this is a strong global supply chain.
Freshippo X Store now carries more than 3,000 SKUs, nearly 30% are exclusive products available only to its members. The sourcing team has 100 buyers, working with more than 500 suppliers around the world.
Roll out cross-region expansion plan and open 10 more new stores in 2021
“10 new X Member Stores will be opened this year to create Freshippo's second growth trajectory. We will accelerate the category structure and use Costco as our benchmark,” Hou Yi announced.
The first Freshippo X Store in Beijing will open in June. The Chengdu branch will open later in the year. The stores will be managed by the headquarter directly. The retailer will not set up regional management teams.
Store locations will be inside shopping malls, targeting high spending customers
Freshippo X Store has entered a relatively mature market, with both Sam’s Club and Costco increasing the speed of opening stores and making localised changes.
Therefor Freshippo X Store needs to acquire consumers and enhance its brand influence quickly in order to compete. For this reason, the retailer has developed a systematic plan in terms of store location and customer targeting:
- Store location:
- Locations of Freshippo X stores will be primarily inside shopping malls, with average store area of about 10,000 square meters. It reduces the difficulty of site selection and speeds up store openings. By being physically close to consumers, it also serves those who do not drive
- Whereas Sam’s Clubs are often located in suburbs or new urban areas that are under development. It enables the retailer to save costs on land and properties and pass on the savings to cusotmers
- Customer targeting:
- In addition to parameters such as consumers’ monthly income, housing prices, and demographics, Freshippo X Store pays great attention to consumption power. It targets high spending cusotmers rather than those with high income. Its big data shows that high income does not mean high consumption
“For each new store location, we use the Freshippo Big Data, Taobao Big Data, X Member Big Data and other reference indicators to evaluate whether the average expenditure of residents in this area can support the member store,” said Freshippo.
Great opportunity in the membership market
The membership market in China has great growth opportunity. As of the end of 2020, Sam’s Club has 2.88m paying members, an increase of 30.9% from the 2.2m in 2018.
Membership stores, e.g. Sam’s Club, Costco and Freshippo X Store, focus more on private labels, member experience and value-added services to differentiate from other physical retail formats.
Freshippo X store hopes to establish itself as customers’ first choice for family leisure shopping over the weekends. In April, it opened its first optician centre at the Shanghai store, providing free eye test, glasses cleaning, adjustment and maintenance services for its members.
Seamless online-offline integration and home delivery will continue to be Freshippo’s key strengths. Customers living 20km from the store can have the goods delivered.