Hema wrestled Sam's wrist with one hand and adjusted the price with the other
Since its establishment, Hema has faced many "enemies" such as online Meituan, Dingdong grocery shopping, offline Sam, Costco and so on. Who is Freshippo's most direct "enemy"?
Hema's "moving mountain price" and "cutting price", Meituan's "tug-of-war price"...
Although the official explanation of Hema means that the fool moves mountains, cuts the iron, etc., the "melon" eaten by netizens is set off by Hema and has a price war with Meituan, Sam, and Dingdong to buy vegetables.
For competitors and industry insiders, Freshippo's move has a different meaning. Because, having been a typical representative of consumption upgrades, Hema began to make a fuss about price, which has never been seen since its inception. In the "traditional perception", consumers who are lucky enough to live in box area houses have always been numb to price and sensitive to quality.
In order to adapt to the environment and the market, Hema is undergoing a self-adjustment.
On May 18, Alibaba Group announced its fourth quarter of fiscal 2023 (first quarter of calendar year 2023) and full-year results. The earnings report announced the launch of Hema listing plan.
How to improve the overall profitability, lower the threshold for opening stores, and expand the scale of revenue before going public are the three tasks that Hema has to take seriously.
01 Hema began to play consumption downgrade
Hema and Sam fought a "mountain box battle", this "price war" was vigorous, and Freshippo's "moving mountain price" seemed to hit the opponent directly, and netizens believed that its spearhead was aimed at Sam.
However, Hema responded that "moving the mountain" means moving the mountain, and the poster posted in its store, under the "moving price", indicates "more, fresher, more affordable" and "committed to bringing the world's best and most cost-effective products to Hema users".
The price of durian cake with a price tag of 128 yuan was beaten down by Hema and finally dropped to less than 100 yuan in the tentative price reduction you came and went.
The price reduction of "Moving Mountain Price" varies by region, and Hema updated its products marked "Moving Mountain Price" on August 21. In Jiangsu, a brand of 700g fruit cereal, the original price of 60.9 yuan, the "moving mountain price" dropped 10.1 yuan, while Sam's two packs of 500g of the same product, the price is 87.1 yuan, which is equivalent to the price of Hema is more favorable.
This contest, which was initially started by Sam's "top" durian mille-feuille cake, gradually expanded to the battle of categories, from fruits to meat, poultry, eggs and milk, from dairy baking to drinks and beverages, many online and offline goods were labeled as "moving mountain prices".
This category war has also expanded into a regional war.
The price war initially launched in Beijing and Shanghai spread to 13 cities including Hangzhou, Guangzhou, Shenzhen, Foshan, Nanjing, Chengdu, Chongqing, Nanchang, Changsha, Wuhan, Suzhou, Nantong and Wuxi, becoming a "campaign" covering many places.
This price war also benefits consumers, if Hema lowers prices, Sam often responds, although the two are playing a simple price war with a dime or a dollar reduction, consumers are still enthusiastic to be price recorders to see when is a good time to start.
However, the price war of Hema is only carried out in X member stores, except for some popular products, the price changes of other products marked with "moving mountain price" are not obvious, and consumers' perception of price reduction is very weak. In areas like Zhengzhou where there are no Sam's Shop, consumers do not enjoy the benefit of price reductions.
When Hema and Sam were fighting, RT-Mart, who was watching from the sidelines, was even more maverick, hanging eye-catching posters with three big characters marked "no noisy price" in the store.
Regardless of how much Freshippo's "moving mountain price" helps the sales of the product, the popularity is indeed given. The decline in the price of Hema products is not only reflected in the "moving mountain price" incident, but also from the continuous launch of cost-effective private brand products, it can probably be seen that Hema is no longer high.
02 How to reduce the price without reducing the quality?
How to reduce the price to ensure that the quality is not lost? After all, once the brand is lost, the core competitiveness of Hema disappears.
Through visiting Freshippo, it is not difficult for consumers to find that from food to non-food, the proportion of Freshippo's own brand products has gradually increased. The Hema Intelligence Bureau compiles a monthly list of new products, which often includes Freshippo's own brand products. According to official Hema data: "By the end of 2022, the proportion of sales of private label products, including fresh food, standard products and prepared dishes, had exceeded 30%. ”
In Freshippo's offline stores, private label products are prominently displayed on the shelves. On the snack shelves, there is often a row of Freshippo's own brand beverage items for consumers to choose from. These private label products will also display the words "Hema Original Label" or "Hema Organic" on the label, which shows that Hema attaches great importance to its own brand products.
Freshippo's own brand products are more affordable than similar products. A 2L oolong tea in Freshippo's own brand, with a promotional price of less than 10 yuan in many places, was called by netizens as a substitute for Suntory and Oriental leaves. In the "Hema Day" activity, it launched a full 199 minus 60 campaign, most of the participating products are Freshippo's own brands, and the discount is still very large.
The increase in the category of private label goods not only effectively enhances the brand power of Freshippo, but also puts forward higher requirements for product quality.
Only by ensuring the high quality of our own brands can we win word of mouth for Hema and retain customers.
Hema officials told Lu Jiu Business Review, "The products participating in the price of moving mountains this time are long-term popular or widely loved products in Hema and the market, and Freshippo will strive to ensure a stable supply of goods under the peak consumption situation." ”
When changing its own strategy, Hema obviously has its own countermeasures, doing its own supply chain and reducing circulation costs. There are 185 Hema villages across the country, including 41 organic Hema villages, and last June, the first Hema Village was established in Zhuanghe to help Hema control the quality of goods from the source.
Yu Kaifeng, head of Hema supply chain, once said in a relevant report, "Hema Village has specially built 18 sales warehouses across the country to enter the nearest Hema store. In these 'fresh-keeping transfer stations', there are a variety of chilled and refrigerated equipment. "It can also do secondary sorting and processing, remove seafood that is not in good condition, and then enter the nearest Hema store from 18 sales warehouses. Hema Village has also created a complete supply chain of "sea, land and air".
On July 10, Freshippo's Shanghai Supply Chain Operation Center was officially put into operation. A number of supply chain centers deployed by Freshippo across the country have been put into operation, which is a measure taken by Hema to improve efficiency and ensure freshness at the source.
"As the cornerstone of Freshippo's new retail supply chain upgrade, the center will be data-driven, promote the full automation of Freshippo's warehousing operation and management, and will also build a Hema characteristic central kitchen, which will greatly improve the efficiency of Freshippo's supply chain, reduce operating costs, and help improve the commercialization capacity of various agricultural products." Hao Jingbin, head of the Hema supply chain project, said.
Freshippo reconstructs the three core elements of commercial retail: "people, goods and venues".
Freshippo has set up Hema X Membership Store and X Membership System to provide better services. At the same time, there are also Hema outlet stores and Hema fresh standard stores.
Hema made its own outlets, taking some temporary products to special stores to promote sales and occupy the sinking market. This strategy was well received, and every time Hema Ole added a new member, it gained a lot of popularity, and after eight o'clock Ole became a "poor man's paradise". But there are not many outlets in the country, with 68 Hema outlets in 14 cities across the country.
What exactly is the price reduction of Freshippo?
03 Who is the "enemy"?
Since its establishment, Hema has faced many "enemies" such as online Meituan, Dingdong grocery shopping, offline Sam, Costco and so on. Who is Freshippo's most direct "enemy"?
Online, Meituan, which "strayed in", also joined the melee and launched a "tug-of-war price". Meituan's elephant chef has added a "tug-of-war price" label to many products.
In the face of Dingdong grocery shopping, Hema also launched the "slashing price" in Shanghai, which means to cut prices categorically.
Offline, recently, some Hema stores directly put up posters: X member stores always adhere to providing cost-effective goods, "the same goods in Sam's Club or Costco stores in the same city are cheaper", and the price difference can be refunded within 7 days with a valid voucher.
This time, Hema launched the "Moving Mountain Price", which pointed to Sam. Also a warehouse member supermarket, Sam can be called a fierce rival of Freshippo.
Third-party platform Yuehu iBrand data has pointed out that the overlap rate between Sam and Hema reached 43.1%, that is, more than 40% of Sam's users installed the Hema APP. Competing for users may be the most direct purpose of Freshippo's "moving mountain prices".
Previously, according to media reports, Walmart China CEO Zhu Xiaojing said in an internal speech in February this year that Sam's only competitor may be Freshippo, because Freshippo's "advantages in the food supply chain are very prominent."
Hou Yi, CEO of Freshippo, also said in July that this is a competition between Freshippo's entire format and membership store models Sam's and Costco, "We are targeting the same customer group - middle-class and above consumer groups." These people are either buying at Hema or Sam, and that's the challenge we face today. ”
Recently, Hema users in Shanghai and Beijing have received SMS messages from Hema surveys. For the feedback of "Moving Mountain Price", the question "How willing are you to renew Sam's membership after understanding/trying the 'Moving Mountain Price' product" is directly established.
However, competitors such as Ele.me, Dingtone and Costco were also mentioned in the questionnaire content, and the objects mentioned were different for different regions.
But in fact, Freshippo's "moving mountain price" has its meaning, Hema official told Lu Jiu Business Review, "This 'moving mountain price' is not a crazy subsidy model price war, but a re-sorting and exploration of the supply chain value of typical commodities, using competition to force self-innovation." "Breaking through yourself may be the best choice for Hema at present.
04 The profit battle before going public
Hema has been losing money for 7 consecutive years, and Hema Xiansheng, the main business format of Freshippo, has just achieved two quarters of profit. However, the profitability of Hema alone is difficult to support the Hema outlet store and the Hema X member store.
Hema Xiansheng and Hema X member stores rely heavily on business districts, and can only "live well" in the core business districts of first-tier cities, but as long as they go to lower-tier cities or choose a slightly worse location, their business will be greatly affected. For Freshippo, it is difficult for a few high-quality stores to drive most loss-making stores.
If the product structure is not adjusted, the requirements for the location of a single store will be particularly high. The points that can meet the profitability of a single store before Hema are limited, and it cannot meet the needs of opening stores in a large area, so it can only reduce the price to improve the survival rate of the model.
On May 18, Alibaba Group announced its fourth quarter of fiscal 2023 (first quarter of calendar year 2023) and full-year results. The earnings report announced the launch of Hema listing plan. For Hema to go public, it needs to solve the problem of profitability.
Returning to cost-effectiveness is not just a choice for Freshippo. Jingdong and Taobao are also returning to cost performance, the rapid rise of Pinduoduo and Douyin, and the crazy layout of discount supermarkets all illustrate this phenomenon.
However, this does not mean that Hema will rely on a simple "price war" for a long time. The price reduction of Hema may make consumers who once pursued quality question it, and those attracted by low prices are difficult to convert into loyal users of Hema Horse.
"With the abundant supply, there is no longer a platform for one-stop shopping, and if consumers want to choose you, they can only achieve the ultimate cost performance through the innovation of explosive products and the reform of the supply chain." Hema officials said to Lu Jiu Business Review.
Indeed, for the homogeneous products of Hema and Sam, there are often a large number of price comparison posts on social platforms, and if you simply talk about heroes by price, the customers in exchange can only be temporary.
In Hou Yi's view, in the context of sluggish consumption, discounting in the retail industry is the way to win the competition. Discounting is not cheapening, not simply low prices, but "differentiated commodity competition, vertical supply chain, mechanism operating costs", "discount stores are not business formats, but business models".
How to balance quality and cost performance is a problem for Freshippo, and what Hema wants to achieve is a "quality-price ratio". Before going public, this is a business model that Hema must solve.