Hema "floats" in the traffic pool

Recently, when users searched for the keyword "Hema" on JD.com, two search results with different business models appeared. This also shows the cooperation between the two parties. So how will Hema, which is in the traffic pool, develop in the future?

Eight years after leaving JD.com, Hou Yi gave his old employer a generous gift - Hema chose JD.com as its first stop outside the Alibaba system.

Recently, "Xin Entropy" found that when users search for the keyword "Hema" on JD.com, two search results under different business models will appear.

One is the official flagship store serving the national market, which mainly sells Hema’s own products; the other is the nearest offline physical store, which recommends delivery based on geographical location.

Previously, within the Alibaba system, the integration of these two business models took several years, with Hema first appearing on the O2O platform Ele.me and later on the B2C platform Tmall. This time, the cooperation with JD.com can be said to be a one-step move.

Industry insiders pointed out that Hema chose JD.com instead of Meituan as its first stop, probably because it saw the B2C+O2O model formed by the integration of its instant retail O2O business and the main site's B2C business. Under this model, Hema can better leverage the resource synergy of "Hema Cloud Supermarket + Offline Stores".

As for whether it will enter Meituan in the future, Hema has not yet given a clear response. However, in April this year, Hou Yi said that Hema will adopt a "three-all approach" of full format, full category and full channel to achieve "one trillion sales and serve one billion consumers" in the future.

According to this goal, it may only be a matter of time before they join hands with Meituan. However, before that day comes, the starting lineup of Hema and JD.com will also put pressure on Meituan to a certain extent. Currently, Meituan can only purchase through third-party agents, and has not yet opened official channels.

1. HEMA's three migrations to the traffic pool

As a company born in the spotlight, traffic has always accompanied the development of Hema. Hema's operation of traffic can be roughly divided into three stages.

In the early days, it attracted customers with a new model of catering + dine-in + stores, and once became a star in the national retail industry.

At that time, the fresh offline store experience was its main selling point. In addition to the transformation based on the original basis of supermarkets, such as hairy crabs and dine-in restaurants, Hema also transformed into an exploration shopping center in 2019 and opened the first Hema in the country - Suibao Shopping Center in Shenzhen.

According to the plan, all goods in this format can be paid for through the Hema App, which will further attract traffic. At that time, Hou Yi believed that the greatest value of offline business was to provide low-cost, continuous traffic, which would become traffic for all scenarios online and offline. In the future, Hema would be a super App and a super platform.

During this period, Hema's traffic acquisition was mainly concentrated in offline stores, exchanging a fresher "field" experience for lower-cost online traffic.

Hou Yi said at the time, "If you try to attract new users online, it will be a huge cost. In the future 5G era, whoever can gather the experience traffic to the App will definitely be the king of Apps. Therefore, the ultimate goal of Hema is to convert offline traffic into Hema's traffic."

However, with the new retail pit-filling speech at the end of 2019, Hema entered a period of pain. During this period, the exploration of new formats of more stores slowed down, and Hema's business focus shifted from focusing on changes in the retail "field" to changes in the retail "goods".

At the Hema New Retail Supply Conference in 2022, Hou Yi expressed that the company will move towards comprehensive product power construction, "not only to go up and down, but also to go out, and build a product system that can serve 1 billion consumers in the next 10 years." During this period, Hema believed that the essence of retail competition was product competition.

In the competition around product power, in terms of richness, the launch of Hema Yunchao has introduced more suppliers to provide full-category supply chain support for the national market; in terms of price power, after launching the "Mountain Moving Price", the "discount transformation" was further launched to further penetrate more consumer groups; in terms of uniqueness, the focus is on fresh food, standard products, 3R and other own brands to form a rapidly iterating product power.

During this period, Hema entered the second stage of traffic operation, and the richness, price power and uniqueness of "goods" became the new traffic moat.

Differentiated products have become an important force driving the compounding of Hema's traffic. In 2022, the number of paid members increased by 50% year-on-year, and the consumption frequency of Hema users reached 4.5 times per month.

From attracting and gathering traffic pools to building moats through repeat purchases, the different depths of traffic operations also represent the different stages of enterprise development.

With the launch of the latest full-category, full-format, and full-channel business strategy, Hema has entered the third stage of traffic. In this stage, it no longer emphasizes the ultimate performance of a certain element of "place" or "goods", but focuses on "people" to achieve a comprehensive and balanced development of the three elements of "people, goods, and place".

Therefore, Hema has taken the first step to go beyond "Hema" and become a full-domain operation. Hou Yi said that Hema will successively open Hema official flagship stores on platforms such as Tmall, Taobao, AutoNavi, and Cainiao to complete the coverage of Alibaba platforms. In the future, Hema will also expand more platform channels.

2. Is Meituan far behind?

From relying on traffic from the "place" to pursuing traffic from the "goods", and then to currently being dissatisfied with the Alibaba platform and looking for business growth across all channels, behind Hema's constant adjustments and experiments is the pursuit of greater traffic.

Perhaps the pace is not fast enough. So far, Hema has not been listed on Meituan, the largest traffic platform for local life. Not only Hema, but also major chain KA supermarkets such as Walmart and RT-Mart have not settled in Meituan, which has become one of the shortcomings of Meituan, the current leader in the instant retail market.

Due to its disadvantage in KA supermarket resources, Meituan mainly relies on the development of Meituan Flash Purchase to meet the lack of supply richness. According to O2O Mind data, compared with JD.com's binding with large chain supermarkets and presenting a regional distribution supply, Meituan Flash Purchase's supply side emphasizes connecting small and medium-sized merchants' grocery points, presenting a point-distributed supply.

The advantage of this is that compared with JD.com, Meituan has a more diversified merchant supply side and is far ahead in the number of merchants, which can meet the long-tail needs of consumers and obtain more orders. However, the disadvantage is that the average customer unit price is much lower than that of JD.com.

According to an analysis report by Soochow Securities, the average customer spending on Meituan flash sales is currently around RMB 70-80, higher than the RMB 50 average spending on takeout. This is mainly because the average customer spending on supermarkets, fresh food, flowers and cakes is significantly higher than that on food delivery.

However, there is still a gap compared with JD.com’s average order value of 210 yuan, mainly because JD.com’s supermarket and 3C categories account for a higher proportion and average order value, while flash sales currently account for about 1/3 of low-average-price pharmaceutical products, which lowers the overall average order value.

Therefore, in the second phase of Meituan's flash sales, adding more chain supermarkets and 3C brands to the market and increasing the proportion of non-pharmaceutical products will become the focus of supply-side operations. If Hema, which has more than 300 stores across the country, can enter Meituan under the omni-channel operation strategy, it will obviously effectively promote the increase in the average customer spending of Meituan's instant retail.

For Hema, access to the traffic pool of instant retail platforms such as Meituan will also better help it complete its ten-year plan to serve 1 billion consumers. Taking the fast-moving consumer goods market as an example, according to data from Soochow Securities, O2O has rapidly eroded offline large channels in recent years. The share of hypermarkets and supermarkets in the urban fast-moving consumer goods retail market has dropped to 15.6% and 30.9% in 2021, accounting for 56% of the overall O2O fast-moving consumer goods market.

However, this win-win cooperation may not be so easy to achieve. Compared with the competition between Hema and JD.com, which is mainly concentrated at the group level, the competition between Meituan and Hema is fierce.

When HEMA and Sam's Club launched the "Mountain Moving Price" in October, Meituan Maicai took the opportunity to launch the "Tug of War Price" and joined the fresh food price war.

Not only that, Hema and Meituan have been challenging each other for a long time.

In April 2018, when news of Meituan Waimai’s valuation of US$20 billion just came out, Hou Yi publicly “blasted” Meituan on WeChat, saying: “Meituan banned Hema two years ago, and that revenge has not been taken yet. This year, Hema will launch a new food delivery model. Let’s see if we can cut your valuation in half. Don’t be happy too soon…”

During the community group buying war, Hou Yi also called out Meituan’s Wang Huiwen, saying that Meituan made a fundamental mistake in doing community group buying, “confusing the difference between non-standard products and standardized operations. Non-standard products require unlimited supply, but standard products have limited SKUs.”

It is not uncommon for such historical legacy issues that have hurt the relationship to make cooperation difficult. After the collapse of the tangible "Berlin Wall" between BAT, new-generation large platforms such as TikTok and Meituan are becoming new players that redefine the competitive camp.

For example, in terms of payment, ByteDance's Douyin removed WeChat Pay in October, and Meituan once folded the Alipay option on the payment page. Compared with the clear boundaries of BAT in the past, today's hidden arrows are often more invisible.

However, in 2018, Wang Huiwen responded to Hou Yi, saying: "The purpose of running a business is to better serve users, not to cause trouble. We welcome participants who can give users a better experience and more choices." If occasional frictions cannot cover up the original intention of serving users, then a win-win cooperation between the two parties will not be far away.

Author: Gu Er

Source public account: Xin entropy (ID: xinshangxz)