The shoe has landed, and Hema has turned around

New retail giant Hema is accelerating its transformation, from fresh food delivery to affordable fast food, and its continuous innovation and refined operations are eye-catching. After launching low-priced fast food and seafood hot items, Hema has successfully attracted young consumer groups and become a new favorite in lifestyle. With the rapid expansion of stores and diversification of business formats, Hema is gradually creating a new retail ecosystem that integrates online and offline, leading the transformation of the new retail industry.

In this era, we are constantly experiencing "cross-species subversion".

Mobile payment defeated thieves, and takeaway food defeated instant noodles - these are facts we have heard and verified. But the new retail supermarket will defeat fast food restaurants, which does not seem to be a joke.

Recently, my friends who work in Guangzhou are "crying with envy". Just downstairs in the CBD, Hema in Guangzhou has launched a series of "cheap fast food", including 9 yuan Meizhou pickled noodles, 19.8 yuan three-dish fast food, 16.8 yuan pork soup, business set meal, Chaoshan rice noodles, Hakka pickled noodles, Laoguang roast meat, steak and meat jerky. There are all kinds of categories, and the average customer price is basically below 30 yuan per person. Young people call it "poor guy's happy meal" and "when will it be promoted nationwide".

Coincidentally, during this Dragon Boat Festival, a colleague shared her travel experience with great interest and spent a long time sharing how she had a portion of cheap and fresh crayfish at Hema. She commented, "When you go to a popular tourist city, eating at Hema is a good choice," and she also exclaimed, "It's delicious, and there are so many people."

We realized belatedly that Hema, which started out as a fresh food delivery company, seemed to have embarked on a new path. On May 14, Alibaba released its Q4 and full-year financial reports for fiscal year 2024. After a year of proactive transformation, Alibaba has returned to a healthy growth track. Hema's non-core business revenue, which is classified as "others", reached 51.458 billion yuan and 192.331 billion yuan in the Q4 and full-year fiscal year 2024 ending March 31, 2024, respectively, with continued revenue growth.

After frequent maneuvers and explorations, Hema's "comfort zone" is becoming more and more prominent - Hema is becoming a "lifestyle" destination for young people and their families. What new insights will this bring to the new retail track?

1. Start with “eating” to unlock the “traffic code” of Hema

As an "unorthodox" new retail brand, Hema has made many breakthroughs in catering products this year.

At the end of April this year, the super-large shopping mall Huiju Center in the southwest of Xi'an opened. Hema's new store here launched a 19.9 yuan roast chicken, which was crowded for a while. Relevant reports show that on the opening day, before 12 noon, Hema's special roast chicken had sold more than 800 pieces and more than 1,000 durians. There are also many consumers of all ages who come to buy fresh shrimps, just because the price is lower than the vegetable market. In less than half a day, the store's customer flow has exceeded 10,000. Some netizens joked: Every generation has its own eggs. Our parents are queuing for eggs in the community supermarket, and I am queuing for roast chicken at Hema.

Hema has cleverly used "Internet celebrity" products such as roast chicken to siphon traffic to new stores through price anchors more than once: for example, the Boston lobsters that were snapped up in Shanghai stores, and the durian that continued to be popular in Beijing stores. By setting attractive price anchors, Hema successfully attracted the attention and participation of a large number of consumers, which not only brought explosive popularity to the new store, but also left a deep impression on consumers. Through the promotion of these popular products, the sales of other products can also be promoted, achieving an improvement in overall performance.

In fact, when it comes to food, Hema can be regarded as an “old internet celebrity”.

Hema became an instant success in China because of its "big seafood" strategy - breaking through the existing layout, Hema puts all kinds of fresh seafood on the market on display. A 1.4-1.6kg fresh Russian king crab is only 588 yuan, which is half the price of traditional supermarkets and fresh food e-commerce. With cheap seafood, there is also a convenient way to eat it - Hema also provides users with on-site processing and dine-in services through the seafood processing service center and the raw and cooked linkage of the dining area, making "going to Hema to eat seafood" a must-check-in for major Internet celebrities' life vlogs.

Image: Jack Ma holding a hairy crab from Hema

In addition to seafood, the hot pot style launched by Hema in 2019 also successfully swept the country. During the Double Eleven period in 2019, Hema Hot Pot sold 14,000 hot pot soup bases in a single day, and more than 60% of the orders came from online. This data made Hema "surpass Haidilao and become the largest online hot pot restaurant in China."

In fact, it is not uncommon for supermarkets to use low-priced catering to solve the "pain of traffic". Catering is high-frequency and rigidly needed, which can solve the problem of insufficient customer flow. In this regard, major new retail companies have also made attempts and layouts. Yonghui Supermarket opened an in-store cafeteria in Fuzhou, 7-11 convenience stores opened a "Workers' Exclusive Canteen" (Food Bar) in Guangzhou, and FamilyMart launched a new 5.0 store type, launching freshly made braised beef noodles, hot-pressed sandwiches, grilled sausages, sweet potatoes, and matcha cakes. It can be said that new retail brands all have a determination to enter the catering industry, but in terms of product selection, they have not created a "traffic-generating hit" like Hema. Therefore, the catering category has not received the "traffic explosion" like Hema.

There are thousands of new retails and creative ways of playing. Why can Hema always hit the "itchy spots" of consumers? The reason behind this is undoubtedly the deep understanding of consumers and refined operations.

2. The confidence of Hema, which has expanded rapidly, comes from refined operations

The strategy of "creating traffic" with hot products is inseparable from the "three axes": extremely attractive product selection + quality recognized by consumers + competitive prices. This requires Hema Fresh to deeply explore consumers' shopping habits, taste preferences and lifestyles based on big data analysis and market research, so as to provide personalized services. This precise market positioning enables Hema Fresh to meet the diverse needs of different groups.

The development of Hema is inseparable from the support of its refined operations. The retail giant is gradually accelerating the pace of store expansion. It is expected that by 2024, the total number of Hema Fresh stores will exceed 400, of which 70 new stores are planned to be opened. Alibaba's latest financial report stated that Hema's revenue is still growing, and diversion products such as durian and fresh food are very popular. Behind this, Hema is constantly honing and improving its sales capabilities and operational efficiency.

Hema's refined operation can be seen from the store layout in 2024 - data shows that from January this year to date, Hema Fresh has opened about 10 new stores in many cities across the country, including 4 new stores in April. Hema has stated that it will intensify its layout in the Yangtze River Delta this year. According to relevant reports, Hema Fresh will open 70 new stores, and it is expected that the number of Hema Fresh stores nationwide will exceed 400 this year. At the same time, Hema outlets will also launch a national store opening plan, planning to open 500 stores in 2024, covering areas including Jiangsu, Zhejiang, Beijing and other places.

In Guangzhou, Hema Fresh launched an affordable fast food service, directly addressing the pain point of expensive lunch for migrant workers. A set meal of three meat dishes and one vegetable costs only 19.8 yuan, and adding more ingredients only costs 10 yuan. It is delicious, healthy, and full. Entering the fiercely competitive Guangdong region, using the high-frequency "migrant workers' catering" to leverage supermarket consumption, this service not only solves the actual needs of migrant workers, but also wins wide praise from consumers through rich taste choices and high-quality ingredients. Cooperation with chain catering brands such as Xikou Liu and Hakka Pickled Noodles has further broadened the coverage of affordable fast food services.

Image source: Xiaohongshu

In Zhijiang, the opening of Hema Fresh Xitou Yintai City Store shows Hema's innovative attempt to organically combine specific groups and target user groups. This store is not only the first Hema Fresh store in Zhijiang, but also a pet-friendly store. The pet temporary storage area, camping product area and barbecue area set up in the store meet the special needs of surrounding residential users, and also attract camping enthusiasts and pet owners.

In Beijing's Sanyuanqiao business district, the new store covers an area of ​​nearly 1,000 square meters and has more than 3,000 products, meeting the one-stop shopping needs of family consumers. The prominent display of fruits, vegetables and fresh products has attracted the attention of a large number of family consumers. The sales of Thai golden pillow durian, which was offered at a special opening price, tripled, becoming a hot-selling product in the new store. It meets the one-stop shopping needs of family consumers. At the same time, in response to the needs of office workers, Hema Fresh has also launched sushi sets, cheese beef rolls and other work fast food, as well as nearly 200 afternoon tea delicacies, so that busy office workers can also enjoy deliciousness and convenience.

At the Beijing World Trade Center, the opening of the new Hema Fresh Dongdaqiao store focuses on the upcoming "barbecue season" and strives to become a "new IP" for food. The "all you can eat" event with nearly 10,000 skewers and a differentiated barbecue feast attracted thousands of young people to Hema Citywalk.

Each new store will be precisely positioned according to the surrounding environment and consumer needs. For example, the new store in Sanyuanqiao highlights the display of fruits, vegetables and fresh food, meeting the one-stop shopping needs of family consumers; various special offers and afternoon tea delicacies attract surrounding office workers. The establishment of a pet temporary storage area and a camping and barbecue product area in the new store in Zhijiang meets the special needs of surrounding residential users, and also attracts camping enthusiasts and pet owners, which is highly consistent with the user profile of Hema in Zhijiang. Perhaps this is the reason and confidence for Hema's accelerated expansion.

At the same time, a strong supply chain and logistics system are also supporting Hema's refined operations and sustainable development. The successful practice of Hema Fresh's online and offline integration and omni-channel operation strategy is inseparable from Hema's accumulation of these "hardware".

In terms of supply chain, Hema Fresh focuses on close cooperation with suppliers to jointly build a high-quality commodity supply chain. By introducing advanced warehouse management systems and logistics distribution technologies, Hema Fresh has achieved rapid turnover and efficient distribution of commodities, which not only improves the quality and distribution efficiency of commodities, but also reduces operating costs.

In terms of logistics, Hema Fresh relies on its self-built cold logistics network to achieve efficient delivery of fresh ingredients. By optimizing delivery routes and delivery times, Hema Fresh ensures the freshness and quality of goods. In addition, Hema also improves product quality and delivery efficiency through continuous innovation and optimization of the supply chain.

Private brands also build a "moat" for Hema. In the "2022 China Private Brand Blue Ocean Strategy White Paper", Hema's private brands ranked first among retailers with an active mention rate of 41% and a brand awareness of 93%. For example, during the barbecue season, Hema Fresh not only introduced high-end meat products directly purchased from overseas, but also gave full play to the production advantages of Hema Village and developed a variety of barbecue ingredients with regional characteristics, not only chasing consumer demand, but also achieving the explosion of categories.

3. From fresh food to lifestyle, Hema’s “giant transformation”

Looking back at the development history of HEMA, we find that it seems to be one of the fastest-changing new retail brands. Like a testing field for new retail, it has been constantly "making trouble".

Since its establishment, Hema has explored more than ten business formats - "Hema Fresh" which focuses on catering + supermarket, as well as retail stores "Hema F2", community supermarkets "Hema MINI", shopping malls "Hema Li", forward warehouses "Hema Station", community vegetable markets "Hema Vegetable Market", smart food collection cabinets "Hema Pickngo", membership stores "Hema X Membership Store", community group buying "Hema Neighborhood", discount stores "Hema Outlet", boutique supermarkets "Hema Premier", etc.

In 2023, Hema and Sam's Club will "fight to the bitter end", and the aggressive pace of expansion and customer acquisition has been widely discussed. In July last year, Hema officially launched a low-price battle and launched the "Mountain Moving Price", from durian Thousand Layer to eggs and milk, comprehensively benchmarking Sam's Club and putting pressure on itself through price competition. In October, Hema launched the most powerful price adjustment since its establishment, permanently reducing the prices of more than 5,000 products in about 350 Hema Fresh offline stores, covering almost all categories. However, although the attempt to focus on the community + low price has achieved good results in terms of performance, many netizens complained that the low price made Hema "blurred".

Now, after a series of turmoil including major personnel changes, discount reforms, store closures, and the restart of the membership system, Hema Fresh's business situation seems to have begun to improve. Some of the much-anticipated attempts are gradually cooling down, and Hema's "core competitiveness" is emerging - it is not just a new retail brand, but also a lifestyle brand that carries the recognition of the young middle class and their dream of a better lifestyle.

Prior to this, the stores and operating methods have always tended to be "community + supermarket + logistics". However, from a series of major actions launched in 2024, it can be clearly seen that Hema has more clearly changed its positioning to "catering + supermarket + APP e-commerce + logistics".

In this new round of store expansion, we found that Hema has two obvious orientations: one is to cover large areas of the living areas of important cities to fill the gaps in the past; the other is to further position traffic POIs to create a store network with better traffic conversion. Previously, Hema also stated that it will increase its layout in the Yangtze River Delta this year. In the cities that it has recently entered, such as Qidong and Changshu in Jiangsu, consumers have already recognized and loved Hema.

Hema's 30-minute home delivery service has raised the service threshold of China's retail industry and given rise to the concept of "Hema District House". This has also led to higher fulfillment costs for Hema's membership system and higher requirements for the supply chain system. Judging from Hema's new stores, Hema is emphasizing offline consumption habits by achieving sufficiently interesting "offline resonance" with young consumer groups, and using product selection and store design to attract young people to the store.

We have observed that more and more young consumers say that shopping at Hema supermarkets has quietly become a unique ritual in the lives of "busy workers". On Xiaohongshu, there are workers in Beijing who run to a nearby new store to buy durian at 7 a.m. and go to work at 8 a.m. More and more young consumers are switching lunch and dinner from CBD restaurants to Hema's dining area.

Hema has become a very familiar and trusted shopping option for young people in their daily lives. It represents a stable supply of high-quality goods, a very convenient lifestyle, and an adventure field for exploring some imaginative products.

Hema's exploration over the years can give us many inspirations - but I think the most fundamental inspiration is that no matter whether it is new retail or old retail, the core of the retail industry is still determined by two dimensions: cost-effective products and a sufficiently considerate shopping experience. No matter how things change, they remain essentially the same, which is the core of the retail industry.