Hema Xiansheng was founded in 2015 by Alibaba Group as an O2O fresh food platform and a key proof of the “New Retail” concept coined by Jack Ma. Since its inception, Hema Xiansheng has expanded aggressively to 321 stores in 24 cities in 16 provinces. Monitoring data shows that Hema Xiansheng opened 6 stores in the first 21 days in October with a store growth rate of 1.9% and 16 new stores in the past three months, with a store growth rate of 5.25% [1]. Alibaba has further plans to expand that to 2.000 stores across China [2].
O2O and New Retail Concepts
O2O, or Online-To-Offline, is a business strategy that draws potential customers from online channels to make purchases in physical stores. This was then further refined by Jack Ma to “New Retail” which is used to describe how online, offline, and logistics businesses would merge to create an integrated retail sector through the digitization of the entire retail value chain [3]. Let’s take a closer look at Hema Xiansheng.
Hema Xiansheng Overview
In 2019, New Retail sales exceeded e-commerce commissions and have become the second largest revenue for Alibaba at 18.21 billion RMB up by 125% from 2018, the largest revenue being online advertising and commissions [4]. So what’s driving this success?
There are several factors that have contributed to their success. According to the “Hema Fresh Brand Analysis Report” we can conclude several facts, such as:
· Stores are primarily in first-and-second tier cities.
· Stores are concentrated in residential communities, shopping centers and commercial office districts with high population density
· Stores are positioned at more expensive locations with surrounding consumers having higher spending power.
· Main consumers are tech-savvy post-80 and post-90’s office workers who have the need to cook at home.
Store Site Selection process and future.
As mentioned above, Hema stores seem to be positioned in locations with a high-population density in a 3 kilometer radius often where office buildings are nearby. It utilizes online data from Taobao and Alipay to analyze the consumer spending power, consumption habits and Alipay usage rates to determine the penetration rate of both e-commerce and mobile payments in the region prior to continuing with their store set-up.
There are further signs that Hema Xiansheng seems to be focusing on supermarket miniaturization experimentation as evident by the 18 stores opened in August, 2020. Of those 18 stores, only three were Hema Fresh standard stores, with the remaining were small businesses formats such as Hema Mini, Hema Market, Hema F2 and Hema Station.
In other words, Alibaba seems to be experimenting with small-and-medium sized supermarkets moving forwards.
