(Yicai) Aug. 5 -- Freshippo announced the grocery arm of Alibaba Group Holding will shut down its last membership store.

Freshippo’s last members-only supermarket in Shanghai will cease operations on Aug. 31, Yicai learned from employees at the shopping mall where the store is located.

Three Freshippo X membership stores in Beijing, Suzhou, and Nanjing closed at the end of last month.

Freshippo opened its first members-only supermarket in 2020, becoming China’s first local retail brand to launch such a business model that requires customers to pay a membership fee in advance to get into a store and shop.

At its peak, Freshippo had 10 Freshippo X supermarkets. But in 2023, Alibaba split itself into six business groups to support their independent development, and Freshippo adjusted its strategy and allocated more resources toward small-size and normal store expansion.

In March, Freshippo closed three of its members-only stores in Shanghai altogether and announced it would open 100 fresh food supermarkets within this fiscal year and expand its business to dozens of new cities.

Members-only stores require great investments for outlet expansion and warehouse positioning, as well as strong supply chain capabilities to develop and purchase exclusive products with high quality-performance ratios, an industry insider told Yicai.

This asset-heavy business model has an individual store return on investment of eight to 10 years, which is not sustainable for Freshippo’s short-term profitability objective, the insider explained.

Editors: Dou Shicong, Futura Costaglione