(Yicai) March 4 -- Freshippo plans to shut more of its large membership stores and open more smaller outlets, in a possible sign that Alibaba Group Holding’s grocery chain has set aside its ambition to compete with Sam's Club in China and is instead focusing on profitability.

Freshippo will open nearly 100 new fresh food supermarkets and enter dozens of new cities in the current fiscal year, according to a plan the Shanghai-based company released yesterday.

That follows an announcement on Feb. 28 that it will close three Freshippo X membership stores in Shanghai, reducing their ranks to just five nationwide. These stores, which need large premises and target well-heeled consumers, were once seen as Freshippo's attempt to emulate Sam's Club, but are as yet unprofitable.

Freshippo has struggled to make these large stores profitable because they are essentially an extension of its small-store business model, with shoppers perceiving a quality gap between Freshippo X and big-box retailer Sam’s Club, according to Zhang Yi, chief executive and chief analyst at iiMedia Research.

Most of the products on sale at Freshippo X stores can also be found in any fresh food supermarket, which somewhat diminishes the perceived value of paying for membership access, a customer pointed out.

Against the backdrop of competition with well-established peers and Alibaba's expectations for Freshippo's profitability, the fresh food retailer is distancing itself from the trial-and-error approach to focus more on profit metrics, Zhang said.

Last year, Freshippo was profitable for nine consecutive months and maintained double-digit growth, after having opened a total of 72 fresh food stores and entered 21 new Chinese cities, according to Chief Executive Yan Xiaolei.

Editor: Futura Costaglione