Say hello to Hema!

D40_40_z_team_shuai_yuan2017

August 17, 2017

by Shuai Yuan



Shuai Yuan opens our eyes to Hema Fresh Market, the new foodstore concept from Alibaba


'Alibaba Zoo' now has a new member, Hema (pronounced in Chinese as 'hippo') , which aims to revolutionize grocery shopping. In case you're not in the know, Alibaba (the e-commerce giant) has rolled out a couple of animal-related brands including Tmall (cat), Alitrip (pig) and Antgroup (ant).

From early 2016 till now, a new brand called 'Hema fresh market', has opened 10 supermarkets in Shanghai and two in Beijing, selling only food and drink but not personal care or home care products. As a new brand of supermarket, that's some pretty high-speed growth and I've heard it's gaining popularity with Shanghai shoppers. Alibaba's relationship with Hema was revealed early last year and now we're aware of their ambitions in the O2O (Online to Offline) area.

Image: China Daily

I went to a Hema supermarket last weekend. Based on what I experienced there and the news I heard, I now have some idea of what makes it different to other O2O retail outlets (most of which didn't survive)

1. The birth of ‘Hema’ is based on the huge database of Alibaba.
We all know the strong position of Alibaba in e-commerce industry. It has a huge database of Chinese consuming behaviour. The way Alibaba chooses locations of Hema is likely the first step to success. By using their database, they locate stores where consumers are mostly young (not retired), busy, working, high income, and most importantly, Alipay users. Hema only accepts Alipay to place the order. In this way, the database can keep tracking the population structure and consuming behaviour of this area. The products supplied can be adjusted according to the database. So the database is pivotal to managing resource, and improving business intelligence.

2. Unlike other supermarkets, Hema not only sells food, but also provides a food preparation service in-store. Some foods can be cooked by their chef right after you buy it, then you can eat directly in the store. Additionally, you are also able to directly buy some freshly cooked dish in vacuum pack. You can just heat it in the microwave at home. Or if you don’t like vacuum pack food or take away food and also don’t want to waste too much time on cooking, you can also found some semi-processed ingredients , which are cleaned and chopped and packed with weighed seasoning. So you will be able to spend only 20-30 minutes to cook for a dinner for two. Multi-options for saving your time for eating without losing the experience and quality matches the expectation of the white-collars in Tier One cities.

3. Where Hema amazed me most is their delivery system. If you talk to the staff in Hema, they would call it an 'offline experience store' rather than a supermarket. Quite a lot consumers might not go to this offline store often, but instead place an order on the app. For consumers who live within a certain distance (some stores require within 3km, some require 5km), Hema will deliver the products in around 30min after they are paid on the app. This service is free and no value limit. When you go to the offline store you will see lots of tracks constructed on the ceiling for quickly transferring the products ordered from the app to the sorting station. That’s how online and offline works well together – it provides a good experience offline and convenience online.

Although we heard quite a few failure examples, this O2O business model is a growing trend for retail industry as we see the competition never ends! It certainly means opportunity as well as challenge for both e-commerce as well as traditional retails industry.

Shuai Yuan is a Senior Research Executive at MMR Shanghai.