Freshippo, the Alibaba-backed grocery chain better known in China as Hema, has clawed its way to profitability—its first full-year profit since launch. The milestone, marked at the close of its fiscal year ending March 2025, comes after a bruising period of leadership turnover, store closures, and shifting strategies.
The comeback is largely credited to Yan Xiaolei, who stepped into the CEO role in March 2024. Known internally by her alias, Bai He, Yan had previously served as Freshippo’s CFO. In her first year at the helm, she pushed through sweeping reforms, slashed underperforming units, and doubled down on formats that could scale fast or root deep into local neighborhoods.
Under her direction, Freshippo streamlined its operations into four core pillars: local store operations, online channels, procurement, and logistics. Each head now reports directly to her. The central aim? Speed, clarity, and better execution.
Yan’s clearest stamp has been on the company’s retail mix. Two store formats are now front and center. The first, Hema Fresh, is a large-format model that the company wants to replicate across cities like clockwork. The second, Hema NB, leans hyperlocal, designed to embed into neighborhoods and build a daily shopping habit. On the flip side, one former growth engine, the Freshippo X member club, has quietly shrunk into obscurity. In late March, three more Freshippo X stores were shuttered in Shanghai, leaving only five across the country.
But under Yan’s leadership, Freshippo has returned to expansion mode. In 2024 alone, the company opened 72 new stores, bringing its Hema Fresh total to 430—a footprint that now surpasses Walmart’s in China. Internal planning documents seen by 36Kr show the company is gearing up to open nearly 100 more stores this fiscal year and push into dozens of new cities.
This expansion is playing out on two fronts. First, Freshippo is digging deeper into lower-tier markets. About one-third of its new store openings are in tier-two and tier-three cities, or even counties. Just within the Yangtze River Delta, it planted fresh flags in Changshu, Tongxiang, Yiwu, Zhuji, Deqing, and Zhangjiagang.
Second, it’s pushing north. Although most of Freshippo’s footprint still hugs the Yangtze and Pearl River Deltas—with more than 60 locations in Shanghai alone—the company is finally setting its sights on northern China. A new store is expected to open in Tianjin this May, potentially laying groundwork for broader moves into Beijing and beyond.
Inside the stores, change is visible. Freshippo has reconfigured nearly half of its Hema Fresh locations and revamped its delivery algorithms. It’s also breathing new life into an old idea: the “1+N” layout, where small frontend warehouses are paired with flagship stores to boost delivery density. The target is 30-minute fulfillment within a three-kilometer radius, a strategy that mirrors the logistical finesse behind Sam’s Club’s recent gains in China.
On the supply side, the company is drawing sharper lines between its formats. Hema Fresh and Hema NB now operate with distinct merchandise ecosystems. Private label products are taking up more shelf space too, especially under Freshippo’s health-conscious brand, Hebubu. As of now, in-house brands make up about 35% of the company’s SKUs.
In her year-end memo, Yan set an ambitious north star: drive Freshippo’s revenue past RMB 100 billion (USD 14 billion) and make it China’s top retail brand.
Once hailed as a trailblazer of quick commerce, Freshippo is attempting a reboot. Co-founder Zhao Jiayu, one of the company’s early architects, quietly stepped away from the company earlier this year.
Still, the market remains an unforgiving one. Global players like Aldi and Sam’s Club continue to draw Chinese consumers with no-frills value and member perks, while local operators such as Yonghui Superstores, Dingdong Maicai, Pangdonglai, and Xiaoxiang Supermarket are steadily carving out their own niches.
For Alibaba, Freshippo’s first profitable year will be viewed largely as a financial milestone. But it’s also a proof of concept—and perhaps the beginning of a second act.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Peng Qian for 36Kr.