Author | Gao Linglang
Edit | Zhang Congbai
Source | Spread gymnastics
A month after the retirement of founder Hou Yi, a series of previous business strategies of Hema were "braked".
In the Hema APP, you can view the latest announcement about X members: "It is planned to resume the card opening and renewal services of X Gold Member/X Diamond Member on April 24, and at the same time, the rights and interests of the original member will be upgraded and adjusted." ”
(Source: Hema App)
We have found that many of the products that were previously included in the "offline exclusive price" have been restored to their original prices. Although this strategy is a core part of the low-priced Hema brand, offline price reductions are not very convincing for Hema online consumers, but also bring consumers a feeling of "imbalance".
In addition, the controversial free shipping threshold has also been adjusted again, and the free shipping threshold for a single transaction on Hema online will be restored to 49 yuan, and the insufficient will be charged at 6 yuan per order, after the free shipping standard in Beijing, Changsha and Nanjing has been raised to 99 yuan.
Hema is Alibaba's exploration of new retail business, and it is also a boutique fresh supermarket loved by the middle class.
However, since 2019, Hema has continued to try various business models, in addition to Hema Xiansheng, more than 10 business formats such as Hema Neighborhood, Hema Outlet, and Hema MINI have been launched in turn, for fear of missing any outlet.
In short, because of the constant change of strategy and the reversal of the ship's head, Hema not only offended new and old customers, but also lost its original brand tonality and became an "unstable" discount store with "unstable" quality.
After a series of events such as price reduction, streamlining SKUs, rumored acquisitions, and the founder's resignation, Hema finally took concrete actions to try to show a new development trend.
01
In fact, the fundamental reason why Hou Yi, the former CEO of Freshippo, carried out the discount strategy was the change in the macro consumption environment. The new retail business of Internet companies is completely rising with the general trend of consumption upgrading.
After tossing for a few years, everyone found that consumption upgrading is just a "trap" of the surface scenery and a false proposition. On the other hand, Pinduoduo, which has been deeply involved in sinking users since its birth, once surpassed Alibaba and JD.com in terms of market value. For the full year of 2023, Pinduoduo's revenue reached 247.6 billion yuan, a year-on-year increase of 90%, while Pinduoduo's customer unit price is much lower than that of JD.com and Taotian.
In the early days, Hema targeted the urban middle class, but the rapid pace of its expansion led to a shortage of middle class. In 2019, the number of Hema stores soared to hundreds, and Hou Yi said: "Hema is still a year of sacrificing his life this year, and we still need to use the fastest speed to make at least one of the big stores of Hema larger." ”
However, while Hema is expanding, operating costs are also rising, in addition to high expenses such as manpower and facilities, there are often a lot of fresh seafood and tropical fruits that cannot be bought by customers in time.
After the change of user consumption habits, Hema had to carry out drastic discount reforms, in addition to direct price reduction, but also through the ultimate selection of products, compression of supply links to achieve cost reduction. But in this process, Alibaba's layout of new retail is also "hitting the street" one after another.
(Source: Rhine)
To put it simply, Alibaba wants to realize the closed loop of users' online and offline scenarios through offline consumption places such as Freshippo.
However, almost no Internet companies have been able to do both online and offline at the same time. Ali is probably the closest to success by constantly giving Hema "blood transfusions". In 2019, Hou Yi said that new retail is completely standing on top of the giants.
On the one hand, Alibaba's main business has also suffered an impact in recent years, and its core position has been dangerous, and Taotian needs to deal with the expansion of Pinduoduo and Douyin e-commerce;
The most important thing is the failure of the new retail business, including Freshippo. Obviously, Ali did not run through this business model. After Ali announced the "1+6+N" architecture change last year, Hema was classified as "N", through Alibaba's new CEO Wu Yongming
It is not difficult to see that retail businesses such as Hema have become Alibaba's heavy asset baggage.
In mid-March, there were rumors in the market that "Hema Fresh will be purchased by COFCO for 20 billion yuan", but Hema denied this. Prior to this, Ali had announced the launch of a listing plan for Hema and Cainiao, but it was ultimately shelved, and it was rumored that the valuation given by investors was lower than Hema expected.
On April 21, there were market rumors that Hema founder Hou Yi and former Alibaba CEO Daniel Zhang intended to join forces to acquire Hema and made a bid of $2 billion. However, this news was also quickly denied by Hema sources.
02
Hema wants to live the most, I'm afraid it's Sam. According to market sources, as of 2023, Sam's Club has 48 stores in China, and its annual sales are as high as 80 billion yuan, of which online sales account for nearly half.
In September 2020, there were 72 Hema stores in Shanghai, while Sam's Supermarket, which also caters to the middle class, still has only 3 stores in Shanghai.
As far as we know, the delivery range of Hema Fresh is 3 kilometers, Hema NB (formerly Ole) is 800 meters, and Sam's delivery covers almost the whole city. In Shanghai, Hema may be able to achieve a level of store density, while in non-first-tier cities, Hema coverage is far less effective than Sam's.
In addition to the launch of a membership system, Hema has also reduced the number of SKUs in standard stores and strengthened its own brand building, which is similar to Sam's "wide SPU, narrow SKU" principle.
However, in this process, it is difficult for Hema to avoid the reduction of product review standards, the complexity of SKU management, and its dependence on suppliers. Hema's procurement team struggled to replicate Sam's merchandising power under the pressure of a rapidly changing market and high SKU numbers.
But judging from the results, whether it is learning the Sam model, or "moving the mountain price" to fight the price war, Hema has not gone well, after the new CEO Yan Xiaolei took office, Hema still maintains the "old tradition", no matter what the result is, "change the order" will not work.
On the one hand, Hema is trying to further focus on mid-to-high-end consumers and improve user stickiness and purchase frequency by re-launching the membership business, canceling offline discount prices, and unifying the allocation exemption threshold.
However, the effectiveness of this strategy needs to be further observed. Especially in the highly competitive market environment, how to ensure that the X membership business can truly attract and retain mid-to-high-end consumers will be a major challenge for Freshippo.
On the other hand, when adjusting the price strategy and delivery threshold, Hema needs to take into account the decline in online orders and the lack of obvious growth in the number of offline customers.
Previously, Hema online transactions accounted for more than 65% at one time, and the decline in this proportion will directly affect its overall performance. Therefore, how to expand the offline market and increase store traffic while ensuring the stable development of online business is also a problem that Hema needs to solve.
Hema Fresh's recent series of adjustments do reflect its efforts to find a new positioning and development direction.
It's just that in the context of the overall contraction of Alibaba's new retail strategy, it is still difficult for us to say that Hema is good again.