Ignition Dimension (ID: chaintruth) original
Produced by Burning Finance
Author 丨 Xie Zhongxiu
Editor 丨Rao Xiafei
Hema is still expanding violently outside the "five rings".
"There are now three Hema Oleai stores in Beijing, and two more are ready to open, and our store is expected to open in May." On April 12, an employee who was promoting the upcoming Hema Fresh Ole (Sun Palace store) told Burning Finance.
Saddled with profit targets, Hema is moving towards a smaller (storefront) and a deeper (market), violently attacking the "outside the five rings" market, and thus deriving a variety of formats such as Hema mini, Hema Neighborhood, hema Aolei and so on. From the current situation, the Oleai store seems to be the focus of a new round of attempts by Hema.
In October 2021, Hema opened the first Hema Fresh Olei store in Shanghai, focusing on fresh discounts, low prices and saving money, and selecting a "suburban" site for the community. Since then, the model has been rapidly rolled out in Hangzhou, Beijing, Chengdu, Wuhan, Nanjing, Xi'an and other places. On March 31, Hema opened the first store of Fresh Ole in Guiyang, Changsha and Chongqing, which shows Hema's ambition of "outside the five rings".
In recent years, especially after receiving the worst "Rotten Strawberry Award" at the Alibaba Organization Department Conference in 2019, Hema's profit heart has become more urgent, and it has continuously tried a variety of formats such as Hema Small Station, Hema Mini, and Hema Neighborhood. But it seems that none of them have worked, the Hema station has long been declared a failure; hema mini has not appeared in a high profile after the "double hundred strategy" in 2020; hema neighborhood has recently "retreated" again.
After years of trying and failing, Hema doesn't seem to figure out what to do.
"Hema positions itself as a new retail platform, which is different from traditional retail enterprises, on the one hand, it combines catering and retail to enhance the frequency of in-store users and consumption, and achieve the goal of high frequency band and low frequency; on the other hand, the application of data and new technologies can solve the labor shortage and increasing labor costs of traditional retail enterprises." Zhuang Shuai, an expert in the retail e-commerce industry, pointed out to Burning Finance.
"But with the deepening of practice, traditional retail companies have found that the mixed operation of catering and retail will lead to rapid growth in operating costs; secondly, some new technologies have not reduced costs and improved efficiency, such as suspension chain systems." Hema also found that mixed industry operations and some new technologies can not improve performance, reduce costs and improve efficiency, so according to the changes in the competitive environment and consumer demand for a variety of new formats to try, want to balance the previous investment through new formats. Zhuang Shuai added.
Hema fresh store is large and highly invested, and Hou Yi, CEO of Hema, once revealed that the cost of opening a single store of Hema fresh food ranges from tens of millions of yuan. But it has not yet achieved profitability, e-commerce analyst Li Chengdong calculated that the data of 2021 Q1 Box Horse Fresh Loss is about 3 billion yuan. "Late Post" also reported that at the end of 2019, due to the delay in profitability and GMV growth rate, Hema Fresh was downgraded from an independent sector to a sub-business segment of the business group.
Nowadays, before the box horse can figure out the way forward, the pressure of profitability has come first. At the end of 2021, Ali upgraded the "diversified governance" system, and Hema transformed from Ali's business group into an independent company, which needs to operate independently and bear its own profits and losses. Profit targets are imminent, and Hou Yi also said in an internal email on the first working day in early 2022 that the goal for 2022 is to improve from the current single store profitability to full profitability.
So in the "five rings" for 6 years, but has not yet seen the dawn of profitability of the box horse, it is also logical to turn to a broader "outside the five rings" market. However, whether the box horse born in the "five rings" can adapt to the "outside of the five rings", the voice of concern may be more. After all, there have been too many failed attempts by Hema.
Hema "outside the five rings", one in and one retreat
Hema did not recognize the Ole shop as the handiwork for attacking the "outside of the five rings".
For example, Hema said in an interview with "commercial real estate headlines" that Fresh Olei is a supplementary format outside the three main formats of Hema (fresh stores, X member stores, and Hema neighborhoods), not to point to the sinking market (Hema neighborhood is to the sinking market), but to reduce losses and "anti-waste", corresponding to which Hema Ole is currently giving priority to the layout of more than 10 hema fresh cities.
However, from the perspective of site selection, price and commodity positioning, Hemaole is still in line with the "outer circle of the city and the suburbs" and the price-sensitive sinking market positioning. Taking Beijing as an example, at present, there are three Hema Fresh Olai stores in Beijing, which are located at No. 20, Qinghe Longgang Road, Haidian District, Beijing, the comprehensive commercial building of Gucheng North Road in Shijingshan District, and No. 66 Yunjing East Road in Tongzhou District, of which Longgang Road Store and Shijingshan Store are close to the fifth ring road, and Tongzhou Store is fast to the sixth ring road.
In terms of goods, low prices are also preferred. On April 12, Burning Finance saw in Hema Fresh Aolai (Longgang Road Store, Haidian District, Beijing) that the Oleai store entered the fruit discount area, the left side was the daily necessities and drinks area without discounts, and the right side was the vegetable and meat products discount area. The distribution of consumers is also related to the discount situation, there are few consumers in the area of goods without discounts, and the fresh areas of discounts are very crowded, and there are often shopping carts "traffic jams".
Photo/ Hema Fresh Oleai (Longgang Road Store, Haidian District, Beijing)
Source/Burning Finance Photo
Hema itself also often conflicts with the expression of Hema Ole, for example, Hou Yi once introduced that doing fresh Oleai can reduce the loss of goods, and the other is its cheap price, which helps to pull new in the sinking market.
In any case, hematio stores have won the favor of consumers in the sinking market. Burning Finance saw in Hema Fresh Ole (Longgang Road store) that there are many people who come to shop in the store of about 400 square meters. Some consumers told Burning Finance, "Living near here, usually I will place an order in the box horse and then deliver it to the door, after the new box Mai lai, because the price is very favorable, so now it is generally to come here after work to buy things." ”
On platforms such as Xiaohongshu and Dianping, the public's description of the Hema Ole store is also low-cost, crowded and crowded.
However, the same as the "outside the five rings" format, on the other side of the Box Horse Olai in full swing and the limelight, another attempt of the Box Horse "outside the Five Rings" - the Hema neighborhood is in a hurry to withdraw the store.
"About April 1, some users opened the Hema APP and could not place a single Boxma neighborhood, so they asked what was going on in our Hema neighborhood group. Then at eleven o'clock in the evening, Hema Neighborhood gave a formal notice that the pick-up point would be suspended, and the last pick-up on the 2nd would be carried out. We couldn't believe it at the time, and even said it was April Fool's Day. Beijing consumers once recalled.
Like Hema Oleai, Hema Neighborhood is also the format launched by Hema for the sinking market, and the location is mainly in the outer circle of the city and the suburbs, but it adopts the mode of placing orders in advance and picking up in the next day' stores. In April 2021, Hema opened the first community e-commerce pick-up store in Shanghai, and since then, the Hema neighborhood project has run low commissioning. In July 2021, Hema announced the official establishment of the NB business unit, at this time Hema Neighborhood has covered 10 cities such as Shanghai, Beijing, Guangzhou, Wuhan, Xi'an and opened more than 400 stores.
Judging from the layout and expression of Hema, Hema also had high expectations for the Hema neighborhood project.
In May 2021, at the beginning of the hema neighborhood format, Hou Yi called it "the most important strategy for the next decade". In an internal letter in the establishment of the NB Business Unit in July, Hou Yi also said, "To create a 'universal version' box area room ... During the more than 2-month test run, Hema NB business has verified the replicability and sustainability of the new model. Then in August, Hema listed Hema Fresh, Hema X Member Store, and Hema Neighborhood as the correct store model troika at present.
But how high it used to be, how sad it is to fall down now. Less than a year after its launch, the Hema Neighborhood Project was hastily withdrawn from the city. On April 1, the news suddenly came out, and the Hema APP hung a notice on the homepage, and some sites will be suspended from April 3. Judging from news reports and community platform news, the withdrawal of the city involves four cities: Beijing, Xi'an, Chengdu and Wuhan. "The Hema neighborhood stores in these cities are all closed."
This is not the first "great retreat" of Hema Neighborhood, and earlier, at the end of 2021, Hema Neighborhood will close all stores in Guangzhou, Shenzhen and Suzhou. At present, only Hangzhou, Shanghai and Nanjing still have the format of Hema Neighborhood in the three cities.
On April 12, Burning Finance saw in the Hema neighborhood (Beijing Chaoyang XibaHedongli store) that the store had locked its doors, and through the closed glass doors, the store had been empty, and the freezer and shelves were standing aside. On the store signboard, taken from the "Neighbor Business" word "NB" and with a thumbs up logo, once marked the pride and hope of the Hema Neighborhood project, now only the gray of abandonment.
Keep trying, keep failing
As for the reasons for the great retreat of the Hema neighborhood, most of the analysis points to the problem of profitability. For example, the report of "36Kr - Future Consumption" said that the reason for the withdrawal of Hema Neighborhood is still a loss problem, according to Xiao Wu, an employee of Hema Neighborhood Self-pickup Site, she knows that all Hema Neighborhood stores are currently in a state of loss.
Hou Yi once said that under ideal conditions, each Hema neighborhood store only needs to cover 3,000 target residents. However, Xiao Wu works in the neighborhood near the store, the number of residents is about 8,000 households, after nearly a year of operation, it has not yet reached breakeven.
For this, I once wondered, "The Hema Neighborhood store near my house probably started in November 2021, and I've been shopping here since it opened." Because the quality control of things is good, the service is good, the after-sales service is also fast, and the price is also cheap. I remember that every time I went to pick up the goods, I saw a lot of people, and my friends around me would buy things here as long as there were hemat neighbors nearby. ”
"As for the price, although it is cheap, it is also relative to the quality of the box horse." Similar products, the actual price of Hema Neighborhood is still slightly more expensive than the supermarket downstairs. The cost of hema neighborhood is basically a façade, or the houses in the community, the rental cost should not be high, and there are two or three employees personnel costs, as well as transportation costs. Think about it without making money. Zeng said.
"But maybe it's just me who thinks the business is good." In addition, it is also possible that the shop I came into contact with is good, and the others are average. Zeng had finally guessed.
Photo: Hema Neighborhood, which has been closed (Xibahe Dongli store in Chaoyang, Beijing)
Source/Burning Finance Photo
Another possibility is that Hema is optimizing the business format. Burning Finance noted that in recent years, Hema has been trying new formats outside the Hema fresh store.
In 2018, Hema began to explore small shop formats that are closer to consumers and more close to the people. In 2019, the Hema store system was adjusted to "one big and four small", "one big" is Hema fresh big store, located in the core business circle, positioning the middle class; "four small" is the four formats of Hema Vegetable Market, Hema Mini, Hema F2, and Hema Small Station, positioning communities and suburban residents.
However, at present, in addition to the hemat mini, the other three formats have rarely appeared in the market. So in 2020, Hema mini has become the focus of Hema new format attempts, on March 19 of that year, Hou Yi put forward the "double hundred strategy" on Weibo, the next year to open 100 Hema fresh stores and 100 mini stores, and said that "Hema Mini store will become the ultimate model of fresh e-commerce."
However, the grand vision of "double hundred" has not been fulfilled by the market, and by the end of 2020, hema mini has only opened 14. Later, in 2021, the Hema Neighborhood Project succeeded Hema Mini to explore new formats. It's just that now the "great retreat" of the Hema neighborhood seems to have become another mistake after the Hema mini, and the heavy responsibility of exploration has also shifted to hema Ole.
For the continuous attempt at new formats of Hema, some analysts believe that this is the "puzzle" game of Hema, "what is missing to make up for what", the new retail format has been launched to make up for small problems, and after intensive expansion occupies the share, relying on the results to judge whether there is a need to retain. For example, Hema's current "troika", Hema Club focuses on the high-end market, Hema Fresh focuses on the middle and high-end, and Hema Neighborhood is responsible for the coverage breadth and market sinking of Hema Fresh.
But in hindsight, over the years, Hema's attempts have not succeeded much.
At present, in the official caliber of Hema, the main format of Hema is "3+1", "3" is Hema Fresh, Hema X Member Store, Hema Neighborhood, and "1" is Fresh Ole, as a supplement to these three major formats. But strictly speaking, the basic disk of Hema is actually only "1", that is, Hema is fresh, Hema neighborhood has been hastily left, Hema X member stores have only landed in Shanghai, Beijing, Suzhou, Nanjing four cities a total of seven stores so far, of which Shanghai occupies four stores, the coverage is not wide.
Zhuang Shuai pointed out, "Hema offline business capabilities and industry experience are in the process of accumulation, as the basis of innovative formats and new technology applications of Hema in the absence of large-scale profitability, under the premise of trial and error costs and risks controllable, the attempt of new formats will help Hema to find its own core competitiveness and main format." ”
At present, Hema Aolai has won a certain favor in the sinking market, and is also integrating sinking market stores such as Hema Mini. For example, the article mentioned earlier in the article hema fresh Olai (Beijing Haidian District Longgang Road store), formerly known as the Hema mini store. But will Hema Ole be the future of Hema?
Can "outside the five rings" support the profitability of hema?
In the fresh market, losses seem to be an inevitability. Dingdong Grocery (DDL.US) Q4 2021 and full-year financial report data show that in the fourth quarter of 2021, according to US GAAP, Dingdong Grocery Net Loss was 1.096 billion yuan and the full-year loss was 6.429 billion yuan. The U.S.-listed company Daily Excellent Fresh (MF.US) has not yet released the financial data for Q4 and the whole year of 2021, and the operating conditions are unknown.
Backed by Ali's box horse, the previous situation was not so embarrassing. Although it also faced the problem of profitability, hema still had ali's support and optimistic attitude at that time. In a 2019 interview with Lianshang.com, Hou Yi was asked, "What does Alibaba think about the loss?" "We never use the word loss, we think it's an investment." There must be investment in innovation, and how can it be done without investment. ”
And for the investment and loss, "the greater the investment, the greater the investment" and "the finance of Hema will gradually move towards health in one or two years." ”
But now a year or two later, the financial health has not arrived, and Ali's "food shortage" has arrived first.
At the end of 2019, Hema Fresh dropped from an independent sector to a business group sub-business segment. Since then, hema's status in Ali has continued to decline. In June 2021, Ali announced the organizational upgrade, and on the surface, Hema was upgraded to an independent business group, in fact, in order to fully implement the business responsibility system, Hema needs to bear its own profits and losses in the future. In December 2012, Alibaba further upgraded the "diversified governance" system, and Hema transformed from a business group into an independent company, and the burden of independent operation and self-responsibility was heavier.
Photo/ Upcoming Hema Fresh Ole (Sun Palace Store)
Source/Burning Finance Photo
Under the pressure of profitability, Hema is also obviously anxious. In July 2021, when Hema Neighborhood was born, Hou Yi said in response to the profitability of Hema Neighborhood that the business would not pursue profitability until next year. But now it is far from the time to pursue profits, but hurriedly close stores and withdraw from the city, behind which may be an urgent profit problem.
In addition to shrinking the Hema neighborhood, Hema is also making adjustments to the Hema Fresh Store. In March this year, Hema also closed five Hema fresh stores in Nanjing, Qingdao, Chengdu and Guangzhou. For the reasons for the closure of the store, Hema said that it was "business/business strategy adjustment", for example, the Chengdu Tianfu Great Wall store was planned to reopen due to the overall hardware conditions, equipment and facilities, and the Nanjing Xinjiekou store was relocated due to the expiration of the contract. In addition, Hema also said that it will make some adjustments to the tail department store, and the closure is one of them.
In terms of strategy, Hou Yi also said in an internal email on the first working day of the beginning of 2022 that in 2022, it is necessary to temporarily "tighten the belt of pants" and upgrade from "online development as the mainstay, offline development as a supplement" to a two-wheel strategy of "online and offline common development". Hema also revealed in an interview with the self-media "Alphabet List" that it hopes to increase the proportion offline from 30% to 50%.
For how to achieve profitability, Zhuang Shuai pointed out: "Hema needs to clarify the main format as soon as possible, and continue to 'reduce costs and increase efficiency' and clarify the core competitiveness on the basis of the main format, and then it can achieve large-scale profitability." ”
Hema Fresh Shop is undoubtedly the main force of Hema. However, the hema fresh big store is also too "heavy" and has not yet run through the profit. When founding Hema, Hou Yi chose the warehouse-store integration model of the front-end warehouse model, which also increased the investment. What's more, in the mid-to-high-end supermarket market where Hema Xiansheng is located, although the gross profit is generally higher than that of traditional supermarkets/hypermarkets, it also means higher investment, such as the rent of core areas, and high loss. According to the China Times, only the cost of rent and labor costs, it takes about 30 million yuan to open a Hema fresh store.
In addition to the excessive investment in offline stores, Hema is also very heavy online. "Online" used to be the boast of Hema and one of the characteristics that distinguish hemat from other traditional retail. In September 2018, at the Alibaba Investor Conference, Hou Yi disclosed operating and profit data for the first time, mentioning that Hema online sales accounted for more than 60%, far exceeding traditional supermarkets. But building "online" also means high investment, such as supply chains, logistics, data systems and so on. The layout of online Dingdong to buy vegetables, daily excellent fresh has not yet achieved profitability, is the difficult note of this game.
In addition to the excessive model and the profitability, Hema Fresh Big Store is also facing the problem of limited expansion scenarios.
Affected by the positioning of Hema Fresh Big Store, it can only adapt to the core locations of high-energy cities, core locations, and middle- and high-income communities with high consumption levels. According to the store data released by the official website of Hema City, among the four municipalities directly under the central government of Beijing, Tianjin, Shanghai and Chongqing, only Tianjin does not have Hema stores; among the five cities listed separately in Dalian, Qingdao, Ningbo, Shenzhen and Xiamen, only Xiamen does not have Hema stores; among the 27 provincial capitals, Hema has settled in 15; from the perspective of urban GDP, only Tianjin and Fuzhou have not been settled in the top 20 cities of GDP (2021 data).
That is to say, Hema is close to saturation in the "five rings", and the next continue to expand the "five rings" market can only be selected in the provincial capital cities or cities with high GDP that have not been settled, or selected locations in the cities that have been settled, and the space for play is limited. It is also logical to turn to the broader "outside the five rings" market.
It is just that Hema has repeatedly lost battles in the "five rings", and although the new format of Hema Aolei has attracted a number of consumers, what kind of benefits it can bring still need to wait for the market to give an answer.
Resources:
"Depth: Hema "moved", not because it did not make money", source: commercial real estate headlines;
"Hema Neighborhood Sudden Mass Contraction", Source: 36Kr - Future Consumption;
What will The Box Horse Become? ,Source: New Eyes;
"The Dilemma of the Duality of The Box Horse", Source: Alphabet List.
*The caption image is from Visual China.
*This article was a pseudonym
*Disclaimer: In no event shall the information herein or the opinions expressed herein constitute investment advice to any person.