In order to control costs, Hema is undergoing a round of organizational streamlining.
A Hema person told alphabet that this year, Hema has undergone great changes in its organizational structure, including the abolition and integration of some departments, such as the direct merger of the regional operation head into the district general manager.
Of course, layoffs cannot be avoided.
According to 36kr, Hema is carrying out layoffs, the overall proportion of layoffs will reach 20%, of which market operations are the main positions of layoffs, and the layoff score will be completed at the end of March. Employees above Hema P8 have a salary reduction of up to 30%. However, according to a source close to Hema, the 30% salary drop may be exchanged for Hema options. Regarding the layoffs of Hema, Hema did not reply.
In fact, Hema's salary adjustment has been foreshadowed before. In early January, Hou Yi, CEO of Hema Fresh, sent an internal letter pointing out that Hema's goal is to improve from the current single store profit to full profitability. In addition, the internal organizational mechanism and compensation and welfare mechanism of Hema that are compatible with this will be formulated to temporarily "tighten the belt of the pants", but more front-line employees will share the growth results of Hema by expanding the scope of option issuance.
This adjustment has been interpreted by many Hema employees as hema will replace cash compensation with options with unknown cash time.
A few days ago, Hou Yi also posted in the circle of friends, saying that the investors who buy vegetables in Dingdong are also anxious, and it is estimated that they will soon burst the position, "Relying on the disorderly expansion of the investor's capital, price subsidies, winning the market is not long, winter is coming, who is swimming naked?" ”
Hema's own life is actually not easy. Hema, which was still sprinting towards the goal of 300 stores nationwide before New Year's Day in 2022, began to close stores only two months later.
Recently, Hema Nanjing Xinjiekou store announced in the store that the store closed at 22:00 on February 28, and the other 4 stores of Hema Fresh in Nanjing, Qingdao, Chengdu and Guangzhou were closed on the same day.
Behind the closure of the store, there is the strategic theme of "self-financing" of Hema .
In early January, Bloomberg quoted sources familiar with the matter as saying that Ali's Hema Fresh will consider financing at a valuation of $10 billion, and the financing may be launched in February. Hema officials did not respond to this news.
According to the alphabet list, Ali's business is currently divided into kernel companies, ring companies, ecological companies, brother companies, etc., and Cainiao, Local Life, Ali Pictures, Ali Health, Lazada and Hema belong to the ring company. Self-financing is one of the important characteristics of Ring Road Company.
Ali's doing so is the result of the situation. The latest quarterly financial report shows that Ali's revenue increased by only 10% year-on-year, the slowest year-on-year growth rate since its listing, and net profit fell by 25% year-on-year. The slowdown in the growth of the Amoy e-commerce business has made it difficult for profit growth to cover the loss growth of non-mature businesses as easily as in the past.
In short, once Ali decides to throttle, the box horses can no longer exchange losses for scale as before. With that comes the end of the "iterative" strategy.
In 2019, in the face of the question of "Lianshang Network", "What is the core capability of Hema?" Hou Yi, CEO of Hema, replied, "Hema's biggest ability now is that it can continue to iterate, you can see what your peers do, they have done well, we can also learn it." ”
Indeed, as Hou Yi said, in the past few years, Hema has been constantly trying new business forms. From the earliest Hema fresh shop, to Hema MINI, Hema Neighborhood, Hema X member store, Hema has tried nearly 10 formats, and every time a gust of wind blows in the industry, Hema will follow.
Fickle, on the one hand, shows that Hema still has the vitality of start-ups, but it also shows that Hema strategy is volatile, and the root cause is that the business model dilemma has not been completely solved.
In 2016, Hema turned out to be the No. 1 project of Ali New Retail. From RT-Mart to Yonghui, from JD.com to Meituan, retail giants are not only "horses" who are the first to look forward and innovate according to the hema model; but with the passage of time, the hema imitation show has long been stopped, and the hema that has been unable to achieve full profitability has long become the "student" of the supermarket, not only learning the new formats emerging in the industry, but also "tuition" the old tradition of refined operation in the retail industry.
Hou Yi
At present, Hema has completely changed the development route of focusing on online in the past. In an internal letter in early January, Hou Yi pointed out that Hema Xiansheng should change from "online development as the mainstay and offline development as a supplement" to a two-wheel strategy of "online and offline common development".
Hema said to the alphabet list that the proportion of online and offline sales of Hema is now about 6:4, Beijing can reach 7:3, and now Hema hopes to increase the proportion offline from 30% to 50%.
In quantum mechanics, "is light a wave or a particle?" This controversy has lasted for hundreds of years. The logic of the problem that Hema is facing today is similar to this: Is Hema a new retail or an old retail?
Say it is new retail, as Hou Yi said, the share of hema online revenue will continue to shrink, if you go to profit, the contraction may be far more than 50%, so that the "new" of new retail will undoubtedly be greatly discounted;
If the box horse is defined as a traditional supermarket, a box horse that has always flaunted the Internet gene, the completeness of the supply chain and the efficiency of refined operation, can it reach the peak like RT-Mart or Yonghui? And, once it returns to the traditional supermarket, doesn't hema's new retail experiment fail?
There is no doubt that it is as early as declaring failure for Hema as it is declaring success. As we have long understood, light is both a wave and a particle; the properties of the box horse may not be either-or, but both are and are - both new retail and old retail; online and offline are not primary and secondary, but complement each other. Maybe retail, like light, has the same duality?
But Hou Yi must prove it. To prove wave-particle duality, physicists spent hundreds of years. Hema's time will obviously not be so abundant.
It is not surprising that Hema has changed its online-based business strategy.
"If the proportion of online revenue is very high, there is no need to rent a store, just make a warehouse." A person close to Hema believes that for Hema that adopts the front-end store instead of the front-end warehouse model, the offline business is also a waste of resources. "Online orders require more payment of delivery fees, the cost is higher; and the location and decoration of stores that occupy a large amount of money, store personnel can not play a role, it is difficult to open up the gap with dingdong to buy vegetables, daily excellent fresh and other companies."
The cost of online business is higher, which is doomed to be that once the proportion of online is too high, it is inevitable that the business will fall into long-term losses, and the delay in making profits of fresh e-commerce such as Dingdong grocery shopping and daily excellent fresh is evidenced by this. Even the traditional supermarkets with refined operations are also facing the risk of loss after increasing the proportion of online business.
Yonghui Supermarket expects its net profit (after deducting non-recurring gains and losses) to decrease by 4.47 billion yuan and a net loss of 3.89 billion yuan in 2021, which is the first annual loss recorded by Yonghui after its listing in 2010.
Yonghui pointed out that one of the reasons for the loss is that around the core strategy of omni-channel digital retail, 670 million yuan was invested in science and technology and 840 million yuan was lost in online business. This amount of loss is based on the fact that Yonghui Online accounts for no more than 15% (in the first half of 2021, Yonghui Online sales accounted for 14.1%, and the data for 2021Q3 was 13.9%).
In April last year, in a conversation with Huang Mingduan, then executive chairman and CEO of Gaoxin Retail, RT-Mart China CEO Lin Xiaohai made it clear that if the online proportion reached 70%, the business would not be established, "The reason why [the business] can be profitable is actually based on the situation that there are 76% of the performance offline." ”
Coincidentally, at the beginning of its establishment, Hema took the high proportion of online as one of its selling points. In July 2018, Hema announced that its online share exceeded 60%, far exceeding other peers; in September 2020, Hou Yi announced that Hema had accounted for more than 75% of the online in Beijing and Shanghai, and it is expected to reach 90% in 2021.
But when Ali stopped delivering backup fuel to Hema, this strategy of exchanging losses for growth was unsustainable. In the organizational restructuring in August last year, Dai Shan, who was the president of the B2B business group and the MMC business group at the time, was no longer in charge of Hema, and Hou Yi, president of the Hema business group, reported to the Daniel Zhang. Hou Yi later described this change as "running from the inner ring to the first ring", and Hema had more autonomy, but correspondingly, Hema also had to take on operational responsibilities independently.
Also in the interview of Lianshang Network, Hou Yi was asked, "What does Ali think about the loss?" ”
Hou Yi replied: We never use the word loss, we think this is an investment. There must be investment in innovation, and how can it be done without investment. "The more you invest, the more you do, the greater the investment."
The other side of this is that when Ali reduces investment and requires Hema to bear its own profits and losses, Hema has to reduce its scale, and the engine of this commercial experiment will give way from innovation at any cost to the learning of traditional experience.
Hema once defined itself as an Internet company, and at that time, the store opened more attention to the full coverage of the network and the number of people around the single store. However, the common problem opened by these stores is that the physical store (offline) business is not good, because the traffic is not convenient enough and the flow of people is not enough.
At the end of last year, Hou Yi admitted in an interview with China Business Daily that the company's network-wide layout at that time was not right today. "Today back to the essence of retail, opening the store needed by the retail industry is not the store with the balanced layout of the network that the original e-commerce wants, which is the lesson of the past 5 years."
Going around, Hema walked back to the road of learning from traditional supermarkets.
But the box horse that returns to the supermarket is not pure. We can easily judge that Dingdong buys vegetables and daily excellent fresh is online e-commerce, Yonghui supermarket and Wal-Mart are traditional supermarkets, but hoping to achieve a 5:5 ratio of online and offline hema is a vague face.
Even if you do not consider the philosophical question of "who is Hema exactly", although 50% of the online proportion can make Hema ahead of the times, it still cannot help Hema solve the problem of breakeven in the short term, learn from the supermarket, and new problems follow: the set of refined management methods that the traditional supermarket has been building for decades, and the Box horse, which is born on the Internet and eager to make a profit, can accept that it may be a long and high time cost?
In early January, Hou Yi sent an internal letter pointing out that Hema's goal is to upgrade from the current single store profit to full profitability. In addition, we will formulate an internal organizational mechanism and compensation and welfare mechanism that are compatible with this, and temporarily "tighten the belt of the pants".
A person close to Hema told the alphabet that since the end of last year, it can be clearly felt that the company's requirements for cost and gross profit margin are more stringent.
"In the past, Hema was more like a money-burning Internet company, focusing on traffic and turnover, but when Hema changed from Ali's inner ring business to a ring business, it had to be responsible for its own profits and losses, and the previous pure traffic business strategy would definitely be abandoned." The above-mentioned person said, "Hema is now more like a business-oriented enterprise, focusing on costs and profits.
In March 2020, Hema established the 3R Business Unit (3R=Ready to cook, Ready to heat, Ready to eat), with the aim of opening up the gap between differentiated goods and traditional hypermarkets.
Large supermarkets have successful experience in attracting customers through baked goods, and Sam's supermarket's Swiss rolls and mochi have become the traffic password of the store, and even feed a number of purchasing agents. Another advantage of processed products such as bakery and catering over standard products is that the price is more opaque, the premium and the gross profit margin are higher.
Alphabet List learned that in this year's business plan, Hema plans to increase the proportion of revenue in the 3R business to increase profits.
Another Hema person said that Hema still has places that can improve the level of operation in many links, and this year will mainly do lean management and control loss.
But it is not easy to truly achieve refined management. Wu Jingqing, former financial director of Gaoxin Retail Group, said, "RT-Mart is a company strategically positioned at low cost, which is also the key to the success of hypermarkets", for the retail industry, the importance of cost control dares to say second, no other dares to say first.
Whether Hema can enter the refined management mode from the traffic management mode still needs to be questioned.
As Hou Yi said, "Doing retail is to copy and copy, learn from each other, why don't I learn from others", not only at the channel level, in terms of business model and format, Hema, which was once ahead of the industry, has also begun to learn from other commercial entities, mini stores are the best examples.
At the end of 2018, Yonghui began to test the water of Yonghui mini, turning large stores into small stores, mini is a store close to the doorstep. According to Yonghui's later statement, Yonghui Supermarket is a business model of "big store" + "small store", "arrival store" + "home", that is, mini store and Bravo store form a complementary business model and organically fill the existing regional gap.
In 2019, Hema, which was the first to focus on hema fresh standard stores, also embarked on the road of increasing the density of stores and reducing the threshold for opening stores, and began to try the hema mini of the front-end warehouse model and the small shop model.
However, in March of the following year, Hou Yi called off the Hema station, which is closer to the e-commerce model, "We believe that hema mini is the ultimate goal of fresh e-commerce, because he can open wider and open faster and deeper." "Hema mini is used as another new form of retail after Hema fresh stores.
In the second half of 2020, Hema launched the Hema X Club against Costco and Sam. Hema has gradually drifted away from the box horse that was born in 2016 and dared to be the first in the industry. Keeping up with the footsteps of peers and learning from their peers has also made Hema bear a lot of trial and error costs.
"Hema's style has always been to constantly start new projects, and it will give up after poor operation. The impact of self-financing may be that new projects will be more cautious when starting new projects, and more decisive in shutting down problematic projects. The above-mentioned people close to Hema speculated.
Hema said to the alphabet list that the main format of Hema is "3+1", "3" is Hema Fresh, Hema X Member Store, Hema Neighborhood, Hema Fresh Ole is mainly used as a supplement to these three major formats, reducing waste and strengthening supply chain efficiency.
The box horse that has been swinging for nearly 6 years seems to have temporarily figured it out, but there is still a long way to go before the overall profitability of the box horse. At the head of the task of self-financing, Hema, which is still difficult to make a profit, has to embark on the road of independent financing.
According to Bloomberg, Hema will consider financing at a valuation of $10 billion. But in the current black iron era of the Internet industry, the difficulty of financing can be imagined.
At the close of trading on March 16, the market value of Yonghui Supermarket was 38.297 billion yuan, in the first three quarters of last year, Yonghui Supermarket's revenue was 69.835 billion yuan, and the net loss attributable to the shareholders of the parent company was 2.179 billion yuan; The market value of Gaoxin Retail was 28.715 billion Hong Kong dollars, and the total revenue in the second and third quarters of last year was 41.534 billion yuan, and the net profit was 112 million yuan.
In addition, according to the statistics of forward-looking economists, Yonghui Supermarket has a total of 1066 stores including large stores and mini stores, with a total operating area of more than 8 million square meters; Gaoxin Retail has a total of 565 stores with a total operating area of 13.68 million square meters.
Hema has previously said that in December, Hema will usher in a wave of stores, and by the end of 2021, the number of Hema fresh stores will exceed 300. Even if other formats are counted, the number of hema stores and operating area will probably not exceed Yonghui Supermarket and Gaoxin Retail, at least not too much. In contrast, the valuation of $10 billion is not too cheap for the current capital market and the box horse at this time.
In 2019, Hou Yi was asked by the media whether the new retail limelight is in decline? "No, why go downhill?" As long as Hema can be successful, new retail is successful. "Now, what Hou Yi needs to do is to prove that Hema can succeed."
Resources:
1. "Hema first announced profit data: online orders exceeded 60%", in September 2018, the restaurant owner internal reference
2. "Hema Houyi's 5-year "Reflection": Running from Ali Inner Ring to First Ring and Still Not Optimistic About the Front Position", December 2021, China Business Daily
3. "Hema Accelerates the Pace of Development Hema Mini or Becomes the Second New Retail Model", March 2020, Global Tech
4. "Hema closed the store for the first time in three years of opening", April 2019, Lianshang Network
5. "The box horse continues to run wildly, but Hou Yi says that the protagonist is not "box horse fresh"", March 2020, Tiger Sniff