Alibaba Group opened two more stores in its members-only hypermarket chain ‘Store X’ on Friday to serve a burgeoning class of affluent families in Chinese cities.
The company said it plans to add eight more Store X locations this year, bringing the total to 11 since its launch of the chain last October.
The move comes as families across China grow wealthier and as Beijing allows couples to have up to three children. The first Shanghai store turned profitable within two months of opening.
Store X is the latest big-box format at Alibaba’s grocery retailer Freshippo and is part of the group’s strategy to combine the best practices from both online and offline shopping. Alibaba has pioneered this concept and coined the term ‘New Retail’ to describe the trend.
[Video: Learn about Freshippo’s various store formats in China]
“Store X offers a membership-driven experience on top of existing Freshippo supermarkets. The combination of different store formats can complement one another to serve a city’s fast-moving and upgraded consumption needs,” said Freshippo CEO Hou Yi.
China’s Growing Adoption of Big-Box Stores
The first Store X opened in Shanghai last October. Spanning more than 18,000 square meters, it is roughly twice the size of a regular Freshippo store. Its own branded products make up over 40% of the store’s offerings, ranging from general merchandise and fresh produce to premium imports.
The emergence of warehouse stores in the U.S. during the 1970s was driven by Americans’ booming personal and household acquisitiveness, research shows.
Now middle-class families in China have more to spend. Disposable income per capita in the country grew by around 700% from 2000 to 2020, according to Statista. Moreover, urban consumers in China have accumulated surplus savings for premium and luxury purchases as the country’s inflation rate hovers in the single digits.
Members spend an average of RMB1,000 (US$152) per visit to a Store X, outpacing purchases at a conventional store, according to Freshippo’s latest statistics in February.
“Store X isn’t just a direct copy of the U.S. model. It is a much more localized take on hypermarkets in China. Built on top of the Freshippo app, Store X targets a group of highly affluent and young shoppers who are digitally savvy and are willing to spend more for better services and shopping experiences. It is a consumption upgrade in many ways,” said Jiong-Jiong Yu, a senior retail analyst at UK-based research firm IGD.
The future of the stores looks bright, given China’s adjustment to its strict family planning policy. Last month, China officially loosened up its reinforcement of the two-child policy following a nationwide population census, allowing Chinese couples to have up to three children.
“This is playing into Freshippo Store X’s favor. In China, shopping is part of leisure, and it is also a family-oriented concept. To this end, club stores like Store X are giving every member of the family a reason to visit,” said Yu.
Localizing the Experience for Chinese Consumers
Freshippo members can redeem a slew of benefits and peripheral services, such as free deliveries, VIP customer support, a car wash and optician services, for RMB258 (US$40) a year.
By working directly with China’s largest cross-border marketplace Tmall Global and its existing cross-border supply chain, Store X has created a showroom for imports offering the latest and some of the most popular products online to Store X members.
To place an order, shoppers can scan the product’s QR code using the Freshippo app and pay online. Then, within 30 minutes or less, purchases will clear customs and be available for pick up via Alibaba’s smart lockers.
[Video: Insider’s tour of Store X Shanghai]
The store also features a wide selection of agricultural produce, akin to shopping at fresh goods fairs, called wet markets in China. By working with Alibaba’s leading e-commerce platforms Tmall and Taobao, Store X sources organic produce directly from farms across China.
Wet markets have traditionally been an integral part of life in China, even in megacities like Shanghai, Hou said. To meet shoppers’ demand for freshness, a dedicated R&D team analyzes in-store consumption patterns and leverages data to inform and improve its private-labeled products and organic offerings, considering different seasonality, regional cooking styles and dietary preferences. As a result, data-informed flavors such as bamboo shoots filled buns and Peking duck flavored products are exclusively available in Store X.
Produce comes in smaller packages to fit into the relatively smaller storage space in Chinese consumers’ homes, Freshippo’s Hou explained. Additionally, the store taps Alibaba’s e-commerce insights to inform its omnichannel strategies, including sales and campaigns, packaging sizes, product selection and in-store displays.
Finally, Store X wouldn’t be complete without digital-driven convenience. Shoppers can get the same experience in stores online and enjoy half-day delivery if they live within a 20-km radius of the store. In addition, Store X can deliver orders with items purchased from regular Freshippo stores, some as fast as 30 minutes or less.
Looking ahead, Freshippo will continue to upgrade its products, services and supply chain to cater to its paid members, Hou said. Adding that the stores doubled down on its private-label goods this May to bring 100 new brands to its one million paid members.
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