Text | Wei Ran Xiansheng, author | Zhang Congbai, editor | Zhou Zai’an
For a long time, Hema has never been able to verify its business model, and its position within Alibaba is quite embarrassing. Today, Hema founder Hou Yi has ushered in an "honorable retirement."
html On March 18, Alibaba Group CEO Wu Yongming issued an email stating that Hou Yi (Lao Cai) will step down as CEO of Hema and will be replaced by Hema CFO Yan Xiaolei (Baihe). In the future, Lao Cai will serve as Hema’s chief honorary consultant and provide support for Hema. Development contributes experience and wisdom. Baihe has been with Hema for 6 years and has rich business insights. He hopes to lead Hema to become better and better.Hema’s coaching change can hardly be regarded as an ordinary management personnel transfer. It is neither a simple replacement of established players nor a routine change in leadership positions. As the founder of Hema, Hou Yi helped Alibaba promote the in-depth integration of the Internet and offline stores, and also realized the creation of Alibaba's new retail samples from scratch.
In recent years, Hema has expanded from the core business districts of first- and second-tier cities to 360 stores across the country, from a boutique supermarket in the Internet era to constantly experimenting with "mountain-moving price" and "discount" stores. Alibaba gradually lost patience with Hema when Hema was actively expanding and constantly exploring the direction of its business but could never see any profit prospects.
Although Hema has refuted the rumors that "COFCO will acquire RT-Mart and Hema for RMB 30 billion", there are still voices in the market that believe that Alibaba will most likely sell Hema and RT-Mart, but a suitable price has not yet been negotiated.
After
, Alibaba Group Chairman Tsai Chongxin also responded to rumors of Ali’s withdrawal from physical retail at the financial report meeting in February 2024: “Currently, Alibaba still has some traditional physical retail businesses on its balance sheet, and they are not its core focus business. , it is reasonable for Ali to withdraw. But considering the current market conditions, exit may take time to realize."
At the beginning of the birth of Hema
In 2016, the birth of Hema was accompanied by the "five new strategies (new retail, new retail) proposed by Jack Ma Finance, new manufacturing, new technology, new energy)", Hema Xiansheng, as the "new retail" among them, refers to the integration of online and offline retail and reconstructs the business model of traditional supermarkets.
Hema in the early days was obviously a product of consumption upgrades, bringing mid-to-high-end selections and standardized fresh food to middle-class families in first- and second-tier cities and young people who were willing to spend money.
At that time, young people were dissatisfied with dishonest behaviors such as "substandard goods" and "short of goods" in traditional seafood markets. At the same time, they also felt that they had "no money to spend" on seafood and other high-end ingredients. have no choice. The emergence of Hema has solved the pain points of consumers' demand for high-quality fresh ingredients and has become so popular that even Jack Ma picked up king crab when he visited a Hema store.
This is especially true for consumers in non-coastal cities. During the 2017 Spring Festival, Hema’s Guiyang store in Guizhou ranked first in the country, with sales of nearly 3 million a day. At this time, Hema seems to have only one problem, and that is that the expansion speed is too slow. In the words of Hou Yi in his 2019 "Battle of Filling the Hole" speech: Do it one by one, and you still have to wait for the right store.
Subsequently, Hou Yi led Hema to embark on the road of expansion, and the number of stores soared to hundreds within a year. Hou Yi said: "Hema is still running hard this year. We still need to use the fastest speed to at least double the size of Hema's big stores."
However, in the process of rapid expansion, Hema's internal and external troubles began reveal.
On the one hand, in order to ensure delivery efficiency that consumers are satisfied with, Hema must allocate transportation capacity at peak standards at all times. In addition, with the expansion of stores, operating costs such as product selection, logistics, and personnel have also increased significantly. Although Hema has Under the idea, you can also use high customer unit price to balance.
But on the other hand, affected by the macroeconomic environment, mortgage pressure and shrinking securities have made life difficult for the middle class. After consumer enthusiasm waned, high-end seafood gradually fell out of the consumer base. As Hou Yi said: "We found that large seafood may not be very popular with ordinary people, so we need to make adjustments. Now we no longer mainly sell large seafood, but have begun to turn to crayfish, swimming crabs, Shanghai hairy crabs, etc. that are more popular products."
This change is out of control.
Hema is hesitant
Since 2019, Hema has tried Hema Fresh, Hema x member store, Hema Neighborhood, Hema Station, Hema Market, Hexiaoma, Hema mini, and Hema Fresh Outlet Store There are more than 10 business formats such as Hemali and Hemali, but the response is generally mediocre, and many have been shut down or no longer promoted.
What impressed consumers the most was that in the second half of 2023, Hema launched a low-price brand through the "Mountain Price". A piece of durian mille-layer that should have been worth 100 yuan was priced at 39.9 yuan by Hema. The launch of "Mountain Price" has enabled Hema to gain a lot of user growth, and it has continued to increase its price reduction strategy.
In October of the same year, Hema permanently reduced the prices of more than 5,000 products in about 350 Hema Fresh offline stores. The offline prices of many products were reduced by 20%. At the same time, Hema plans to streamline the number of SKUs in stores, and is expected to delete them from 8,000. Reduced to 5,000.
The above-mentioned measures have caused conflicts between some suppliers and Hema, and also made many member users feel that they have been stabbed in the back. At the Hema New Retail Conference held in November last year, Hema CEO Hou Yi made harsh words. "Removing the ka model is a matter of life and death for me, and there is no way out. Of course, the industry is in great shock, and many people are blocking us, so just block us."
Although for offline consumers, Hema's price reduction is real Yes, but the online shopping experience is greatly reduced.
First, at the end of 2023, Hema closed the x membership registration entrance and said that due to business adjustments, it currently does not support the activation of renewal membership services. Then after New Year's Day, some ingredients that consumers often buy began to be removed from the shelves or were out of stock for a long time, and orders placed through the app often showed insufficient shipping capacity. Finally, since February 18, 81 Hema stores in the three pilot cities of Beijing, Nanjing, and Changsha have implemented the same price online and offline. Although product prices have generally decreased, the free shipping threshold has been raised to 99 yuan. Even the author’s home was removed from the coverage because the delivery distance reached 3.2 kilometers.
Obviously, the offline price reduction is not very convincing to Hema’s online consumers, but it also brings an “unbalanced” feeling to consumers. The increase in delivery fees in Beijing, Nanjing, and Changsha has also made local consumers feel that they are being treated "differently", and there is even a sense of "driving" online consumers to offline stores.
According to data disclosed by Hema, the paid membership business launched in 2019 can contribute 588 million yuan in revenue every year, with more than 3 million members. Hema's choice to give up nearly 600 million in membership revenue is, from a certain perspective, one of Alibaba's steps away from offline retail.
Consumption upgrading is not simply a price increase, but a higher price to compensate for the cost increase caused by improved quality; discounting is not simply a low price, nor does it mean a price war to sell the best products. , The real skill is to lower the prices of high-end products. We all understand the truth, but Hema’s strategy in this regard seems too idealistic.
Hema’s future is slim
Initially, Alibaba tried to use its huge online advantages to create a new retail ecosystem. In addition to building Hema, it also acquired physical retail companies such as RT-Mart and Intime Department Store at high prices. The most fundamental significance of these measures is to help Alibaba connect online and offline scenarios. Moreover, offline business lines have always been the shortcomings of e-commerce giants like Alibaba. Previously, almost no Internet companies could do both online and offline.
Of course, now it seems that Alibaba has also failed. Expansion, discounts, layoffs, Hema's current dilemma is increasingly similar to that of BYD, which has closed down. It's just that Hema is still relying on Ali's blood transfusion to find a way to save itself. As early as 2019, Hou Yi said that new retail is completely based on giants. Today, the overall situation of Alibaba is unfavorable. On the one hand, its main business has also suffered impacts in recent years, and its core position has been in danger. Taotian needs to deal with the expansion of Pinduoduo and Douyin e-commerce; Alibaba Cloud business also has to face the challenges of Telecom Cloud, Huawei Cloud, etc. compete.
As a result, Hema, RT-Mart, Ele.me, etc. have obviously become a "big burden" because they need to constantly rely on cash and traffic for "blood transfusion". After Alibaba announced the "1+6+n" structural change last year, these businesses that are far away from the core of Alibaba Group have become the focus of public opinion, and discussions about their listing and sale have never stopped.
Under the promotion of Jack Ma’s strategy of “returning to Taobao, returning to users, and returning to the Internet”, traditional retail business has become a heavy asset burden for Alibaba. In December last year, Alibaba reduced its holdings in Xpeng Motors and Kuaigou Taxi and transferred its shares in Suning.com, Focus Media, Easyhome and other companies to Hangzhou Haoyue.
Alibaba management made it clear internally at the beginning of this year, "We do not need new directions or new business models. Alibaba once bet on too many new directions on Taobao, which in turn led to a lack of investment in the basic needs of e-commerce. and attention is far from enough.”
Alibaba CEO Wu Yongming said: “Taotian Group does not position itself as a retail company.” In November this year, Wu Yongming listed Xianyu, 1688, DingTalk, and Quark at the financial report meeting. It is the first batch of strategic innovative businesses of Alibaba. Obviously, Alibaba will focus on its main business in the future, which is e-commerce, cloud computing, and the most important, AI.
Although Hema has accumulated a good reputation among users in the early days and is regarded by Sam as its only domestic competitor, the success of its business model has not been reflected in the financial report. At the beginning of 2023, Hou Yi announced that Hema’s main business format, Hema Fresh, had become profitable. In April of the same year, he announced again that Hema had achieved full profitability in the fourth quarter of 2022 and the first quarter of 2023. But since then, Hema has not announced relevant profits.
Hou Yi once proposed a business logic, that is, you must download the Hema app to pay for purchases at Hema. The fundamental purpose of this is to cultivate users’ online ordering habits and distinguish new retail from traditional supermarkets. Looking at it now, neither Hema nor the entire new retail industry has succeeded in this business model.
Hema’s biggest flaw is its cost. Previously, news circulated on the Internet that Hema has launched a listing plan, aiming to solve some of the financial problems. However, at the end of last year, Alibaba's internal attitude changed, and they decided to wait for more favorable market conditions before promoting the Hema IPO. But as time goes by, the resources and funds that Alibaba can provide to Hema gradually become limited. Therefore, selling Hema may be a better choice.
Now that CEO Hou Yi has retired and been replaced by CFO Yan Xiaolei, Hema, which is unprofitable, high-cost, and gradually moving away from the Internet, may have lost the opportunity to prove itself. Next, it is Hema’s turn to have endless cost reductions and efficiency gains and being eliminated. Sold for a good price.
