Resume the membership system, and Hema returns to "Hema"?

Reporter: Chen Ting Editor: Liu Xuemei

After bidding farewell to the founder, Hema is moving again.

Recently, the reporter of "Daily Economic News" found that the Hema APP is publicizing the resumption of the opening of Hema X Gold/X Diamond membership and the upgrade and adjustment of rights and interests. It plans to resume the card opening and renewal services for X Gold Members/X Diamond Members on April 24, and at the same time will upgrade and adjust the rights and interests of the original "Hema X Gold Members/X Diamond Rights and Interests Rules".

According to the announcement, Nanjing Hema X Club Store (Yanziji Garden City Store) will be put into trial operation on April 20, and the effective time for other areas will be April 24.

Less than half a year ago, Hema suspended or renewed its membership, and launched a "discount" change in October last year. However, since April this year, it has been reported that Hema stores have quietly canceled the "offline exclusive price" and resumed the same price online and offline, to which Hema has not yet responded.

There is a view in the industry that the resumption of the membership system and the cancellation of the "offline exclusive price" may be related to the new marshal.

Vigorous discounting

In the past year, the development of Hema has attracted much attention from the outside world. The suspension of the membership system is related to the resumption or related to the vigorous discounting reform of Hema in the past six months.

In May 2023, Alibaba announced when it announced its Q4 and full-year financial results for fiscal year 2023 that Hema had launched its IPO plan. It is reported that the board of directors of Alibaba Group had approved Hema to start the listing process at that time, which is expected to be completed in the next 6 to 12 months.

The subsequent development was somewhat unexpected by the outside world. In September 2023, it was already reported that Ali would temporarily shelve the Hema IPO, and Hema told the media: "No comment." ”

In November 2023, Alibaba's spin-off and listing plan launched at the end of March of that year took an abrupt turn. Alibaba said in the quarterly earnings report that the initial public offering plan of Hema has been put on hold and that "we are evaluating market conditions and other factors necessary to ensure the success of the project and enhance shareholder value."

And in February 2024, Tsai Chongxin, chairman of the board of directors of Alibaba Group, said on a conference call that Alibaba is not in a hurry to let Cainiao and Hema carry out IPOs. Tsai said at the time that the focus of the strategy now is to drive synergies between the different businesses within the group.

Since October 2023, Hou Yi, then CEO of Freshippo, has carried out a vigorous discount change.

In fact, as early as the end of July and the beginning of August 2023, Hema successively launched the "Yishan Price" in 15 cities including Shanghai and Beijing, proposing to use the spirit of Yugong to move mountains to shorten the gap with the world's leading retail companies.

It is also reported that since the beginning of August of that year, Hema has initiated organizational changes within Hema Fresh, the core of which is the comprehensive transformation of Hema Fresh discount store model.

The reason for the implementation of discounting may be related to the changes in the consumer market environment. According to Chen Liping, a professor at the Capital University of Economics and Business, from the consumer side, the domestic middle class is reducing some high-consumption, high-end brands and unnecessary consumer spending, and instead choosing simple, practical, cost-effective goods and services.

In terms of organizational structure, in August 2023, there were media reports that after Hema fully launched the discount store model, the original three teams of its own brand team, large import team and category procurement were merged. From the perspective of procurement model, Hema will focus on its own platform procurement, and then gradually grow, so as to abandon the KA model (a model dominated by large customers).

In order to promote this change, there are also contradictions between Hema and suppliers. It was in November last year that the founder of a consumer brand expressed to the reporter of "Daily Economic News" the impact of the Hema discount reform. According to her, due to the price reform implemented by Freshippo, the brand is required to achieve a very low price, "but we can't offer such a price, because then we will have a 'broken price' on the whole network and even offline channels."

Even though he knew that the road ahead of the implementation of discounting was full of challenges, Hou Yi was decisive and determined, and repeatedly declared that he would bring down the price of goods.

In the 90s of the last century, the European-style hypermarket format entered China, and with the help of its innovative business form, customer advantages, chain scale, and the use of small scale and brand weakening of upstream manufacturers, it has built a profit model of "admission fee + account period" in the field of domestic circulation.

Hou Yi has always believed that there is still room for the price of commodities in the domestic retail industry to fall, and the KA model is the reason why the current commodity prices are much higher than the original market price. He even publicly stated in November last year that this is a matter of life and death for Hema, and the long-term pain is better than the short-term pain, and said that he is not afraid of being banned.

The suspension of the membership system is one of the changes of Hema under the tide of discounts.

In December last year, Hema manual customer service said that from December 13, 2023, due to business adjustments, it will not support the opening or renewal of Hema X members for the time being. At that time, a person close to Hema told the "Daily Economic News" reporter that Hema is vigorously doing discount transformation, and after all goods are reduced in the future, there is no need to buy additional members to enjoy low prices, the purpose is to make high quality and low prices more inclusive.

Hema finds itself?

Today's Hema farewells to the founder, just in time for the full moon.

On March 18, a relevant person from Hema confirmed to the reporter of "Daily Economic News" that Hou Yi (nickname: Lao Cai), CEO of Freshippo, officially retired at the age of 60 and will serve as the chief honorary advisor of Hema in the future. Yan Xiaolei (nickname: Baihe), who is currently the CFO of Freshippo, will also serve as CEO.

侯毅 图片来源:Ecophoto-1699931412902838290

With Hou Yi's successful retirement, news soon spread that Hema might change its strategic direction.

In addition to the resumption of the membership system, in early April, some media reported that they learned from a number of Hema stores in Shanghai that since April, Hema stores have canceled offline exclusive prices, and are now basically the same price online and offline.

In October last year, the reporter first learned the term "offline exclusive price" from Freshippo. At that time, Hema told reporters that it had fully launched the supply chain optimization project, and the prices of more than 5,000 products in Hema Fresh offline stores were lowered.

The "offline special price" can be regarded as one of the specific measures of Hema to implement discounts. At that time, Hema said that the discount reform first started with the offline stores of Hema Fresh, and will also expand to online in the future, and finally make all Hema products more competitive.

In addition, in February this year, Hema also told the "Daily Economic News" reporter that after the Spring Festival, Hema implemented new measures in three pilot cities: Hema commodity prices were generally lowered, and the price reduction action covered almost all categories such as seafood and aquatic products, meat, poultry and eggs, vegetables and fruits, and baking. At the same time, the free shipping threshold in the three places has been adjusted to 99 yuan.

In stark contrast, as of now, the Hema shipping rules have also been adjusted synchronously.

The reporter of "Daily Economic News" found that on April 12, Hema issued the "Public Opinion Solicitation on the Adjustment of Freight Rates in Some Cities from April 24, 2024", which shows that the free shipping threshold of Hema stores in some cities will be adjusted to 49 yuan.

Previously, the freight rate of Beijing, Changsha and Nanjing was raised to 99 yuan, and this time it was lowered simultaneously, but the freight rate of more than 20 cities such as Shenzhen and Guangzhou was increased from 39 yuan to 49 yuan. In some cities, Hema stores (Hema Fresh Stores, Hema Mini Stores) will receive free shipping for a single online order of 49 yuan, and 6 yuan per order will be charged if it is insufficient.

These recent actions of Hema are considered by some people to be the weather vane after the new coach takes office. Recently, Hema has not publicly expressed the content related to discount changes, but there has been no increase in specific actions.

Some believe that with the resumption of some of the previous measures, Hema is changing back to the former Hema and the middle class, which was regarded as a core customer at the beginning of its establishment, is being re-emphasized.

However, this does not mean that discounting will be completely abandoned by Hema. In fact, there is no essential conflict between discounting and membership, and even paid membership stores can be counted as discount stores.

Zhuang Shuai, founder of Bailian Consulting, said in an interview with the reporter of "Daily Economic News" that mainstream formats such as membership stores, supermarkets, and convenience stores have discounted goods, and there is no conflict between discounting and membership store formats.

The root of the problem may lie in the business model. It is worth mentioning that before Hou Yi implemented discounting, Hema had already opened many discount stores, and he was no stranger to the discount store model.

As early as the 2022 Hema New Retail Conference, Hou Yi said that he planned to open 100 discount stores in Shanghai (Hema Fresh Outlet is a soft discount store that handles tail goods, and Hema Outlet is a hard discount store). In April last year, Hou Yi also said in an interview with reporters that hard discount stores would mainly cover the suburbs. He emphasized that the core of the format is to run through the "215" model, that is, a store is about 600~800 square meters, 150,000 yuan of sales, and 15 points of gross profit margin.

However, even if the discount store model of Hema Outlet has been tested well and is in line with the current consumer environment, Hema has more than 360 stores in 29 cities, the vast majority of which are Hema Fresh stores, and if Hema continues to promote discounting, the profitability of Hema Fresh stores may become a challenge.

Zhuang Shuai also bluntly said to reporters: "Small stores can do discounts, and large stores can only pay for members with discounts." This is the result of decades of validation in the global retail industry. "The so-called small store model is actually the discount store model such as Hema Outlet and ALDI, and the big store model in Zhuang Shuai's mouth is the Sam's Club model.

In the years of the Chinese New Year, Hema has always tried to innovate in the retail industry, and has always been doing additions in the general direction, which has led to the emergence of more than 10 business formats under the Hema brand, and the positioning has also wavered. Today, with the new commander in place, Hema may be given a different fighting style.

National Business Daily