In January 2016, the first store of Hema Fresh opened; In October of the same year, Jack Ma proposed the concept of new retail at the Apsara Conference; In July 2017, Ma Yun visited the Hema Shanghai Jinqiao store, and after the news was released on Tmall Weibo, the Hema brand began to enter the public eye.
As a new product, Hema has created Hema Fresh, Hema x Membership Store, Hema Outlet and other formats from scratch, which is the standard-bearer of Alibaba's reconstruction of the retail industry's "people, goods, and places" and its entry into new retail.
In the midst of the great changes in China's retail industry, in the face of the serial impact of new formats such as traditional supermarkets, temporary discounts, and mass sales snacks, in January 2023, Hou Yi, CEO of Freshippo, said in a letter to all employees that Freshippo's main business format, Hema Xiansheng, has achieved profitability, marking the entry of new retail into 2In the 0 era, the focus of Hema shifted to improving the competitiveness of goods.
In mid-October 2023, Hema comprehensively promoted the discount reform, lowered the number of more than 5,000 products** in offline stores, and set up a "offline exclusive price" area in stores, while SKUs were further streamlined, from more than 5,000 to more than 2,000.
Behind the discount reform, it involves the adjustment of Hema merchants, the creation of vertical chains, the expansion of the proportion of private brands, and the guidance of customer flow back to offline and other issues, from consumers to brands to merchants, which have had a great impact on stakeholders.
Next, let's take a closer look.
Discounting reform, so that hard discounts and soft landing
An important part of the Freshippo discount reform is to increase the proportion of self-operated products.
In fact, it's fairly common for retailers to build their own brands, which in itself is a regular means of achieving "hard discounts".
What is a Hard Discount? To put it simply, hard discount is to continue to sell at a low price under the same quality, and this absolute cost performance is achieved by retailers to build a vertical chain and launch their own brands. From a global perspective, private label brands usually account for more than 30% of the sales of international retailers, such as Sam's and Costco.
Hema is determined to fully launch the discount reform, but also comes from the outstanding performance of Hema Outlets, in the three major formats of Hema Fresh Stores, X Membership Stores, and Hema Outlets, Hema Outlets took the hard discount route at the beginning.
According to relevant sources, "Hema Fresh has an average of 4,000 square meters per store, and does 30-400,000 yuan of business a day; A 300-500 square meter store in Hema Outlet has a turnover of 20-300,000 yuan a day. "The output of Hema Outlet is much higher than that of Hema Fresh, which makes Hema think that discounts can bring opportunities for more business formats.
In terms of time, now is also a good time to increase the size of self-operated brands.
Looking at the global retail market, one of the proven consumer phenomena in the experience of many retail giants is that when consumers are more budget-conscious, they will be more inclined to choose retailer-owned products that are of good quality but do not have to pay for the brand halo.
In the context of the current era, with the successful cases of hard discounts of global supermarket giants, coupled with the success of the hard discount model of Hema Outlets in China, the hard discount strategy of improving self-operated goods has made the prospects for Hema comprehensive discount reform brighter.
Discounted reform affects the whole body
Hard discounts can bring the ultimate cost-effective experience to Hema consumers, but they are not all risk-free.
For brand merchants, if Hema wants to achieve hard discounts through the development of its own brand, it is necessary to carry out a comprehensive reengineering of the first chain, bid farewell to the KA model dominated by brand ** merchants (that is, purchase from ** merchants), and with the promotion of a full range of OEM and ODM by Freshippo, the living space of brand ** merchants on the Hema platform will be continuously compressed.
With the increase of Freshippo's own brand products, the ** merchants behind those SKUs who have been cut off will be very hurt.
However, there are "losses" and "gains".
For the best business behind the remaining SKUs, it is good news.
Let's make an assumption: "The original 50 billion business was realized through 10,000 SKUs, but now it is supported by 2,000 SKUs, so each SKU business left behind can theoretically be increased by 5 times." "By streamlining SKUs and expanding the scale of single products, the remaining ** merchants have become more profitable.
Not only that, if powerful businessmen want to stay, they can also choose to change the way of cooperation to seek a win-win situation.
Hou Yi, CEO of Freshippo, said that the business model of going to KA does not mean abandoning KA, and Hema will continue to embrace KA merchants who are willing to adapt to the change together.
Hema will take advantage of the advantages of scale, technology and food safety of large brands to develop more cost-effective self-operated brand products through OEM and ODM, conform to consumer trends, and allow consumers to buy goods of the same quality at low prices. Last year, dozens of first-class merchants have reached tens of billions of cooperation with Freshippo.
For Hema consumers, the gains and losses are self-conscious.
Although the reduction of SKUs has made consumers less choice, the remaining SKUs are all products with a high purchase frequency, and there are basically all the things that should be there, but the subcategories are reduced, which can still meet the different needs of consumers well.
What's more, the hard discount of Hema makes the product lower, for example: through planned customized procurement, Hema beat more than half of the ** of Audrey canola oil imported from Canada, and a net celebrity edible oil that sells more than 130 yuan on other platforms only costs 66 yuan in Hema.
Consumers have fewer choices, but they can buy the same quality products for less, and they know what they have to lose.
"Different prices online and offline" caused controversy.
The focus of Hema discount reform this time is on offline stores.
On social networking, it has caused some Hema consumers to be puzzled and dissatisfied with the "offline exclusive price" and "different online and offline prices", and many consumers who have been using the app to place orders have found that many of them are cheaper than online when they go offline, and even members are difficult to enjoy discounts, and it is inevitable that the psychology is unbalanced.
In this regard, Hou Yi once explained straightforwardly, saying: "Hema pioneered online and offline different prices, because there is a high distribution cost online and low offline cost, so it is reasonable for the offline to be lower than the online, so the offline price of all standard products of Hema has dropped by more than 20%, welcome to the store to buy." ”
The meaning is very clear, for the sake of lower costs, sorry, if you can't accept online purchases due to delivery caused by higher than offline **, you can only go to the offline store to buy.
It remains to be seen whether the discount reform will involve online in the future.
Discount reform, right? Is it wrong? Who's to say
In addition to the controversy of "different prices online and offline", increasing the proportion of self-operated brand products is not a good thing, compared with consumers who are willing to accept low prices, some consumers angrily describe that "Hema has become a copycat supermarket".
So, is the Freshippo discount reform right or wrong?
First of all, from the perspective of the market environment, Hema comprehensive discount or partial discount, is also the trend of the times, it is not an exaggeration, it is not an exaggeration, the reason is that Hema large-scale self-operated brand, feel that it can replace the brand, which is very dangerous, taking water as an example, Hema put Nongfu Spring 5L and Cestbon 45L of water has been taken off the shelves, and 5L is filled with bottled water of Freshippo's own brand, which will undoubtedly have a greater impact on the consumption habits of Hema's existing customer base.
At the same time, the vertical chain can not be built overnight, and there must be a scale effect behind the low price and high quality of its own brand.
If the sales cannot form a scale, or the construction of the ** chain is not smooth, the discount reform of Hema Xiansheng will be easily affected.
The reason why the market is complex is that consumers are not machines built by assembly lines, they can be locked with unified standards, consumers are emotional people, and consumers' behavior of buying products is a comprehensive behavior of rationality and sensibility, not a simple ** low can be, if this is possible, Pinduoduo can rule the world, and enterprises do not need to be brands, as long as the production cost plus gross profit can be.
If you want to be more secure in the discount reform of Freshippo, you can greatly discount some brand-name products as drainage products, and at the same time, there must be a certain premium of profitable products, including products that reflect the high-quality image of Freshippo, adapt to self-management, and you can't choose to eat one-size-fits-all, which will be nondescript and pay a huge price.
The discount reform of Hema Fresh has just begun, and as a new retail brand, the success of Hema Fresh has a great impact on the market, so we will wait and see.
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