Hema Fresh Product Analysis

Hema Fresh is an important part of Alibaba's expansion into the fresh food e-commerce sector. As the vanguard of Alibaba's "new retail", it has clearly defined its positioning and development model since its inception, focusing on the layout of the fresh food market and creating a new retail format through a combination of online and offline methods.

After nearly four years of exploration, HEMA Fresh has successfully entered the first echelon of the fresh food e-commerce industry, and its unique development model has also become a benchmark for the "new retail" industry.

While 7-fresh, which has a similar business model, is still exploring and Super Species has ended in failure, this article will mainly discuss why Hema has been able to survive and become one of the leaders in the fresh food e-commerce industry?

What is the future development direction of Hema?

This article will analyze from the following aspects:

1. Industry analysis

2. Competitive product analysis

3. User value analysis

4. Commercial value analysis

5. Product iteration analysis

6. Operational Path Analysis

7. Future Outlook

1. Industry Analysis

Fresh food e-commerce refers to the direct sale of fresh products such as fresh fruits, vegetables, fresh meat, etc. on the Internet through e-commerce . Since 2014, the fresh food e-commerce market has received great attention from investors. A variety of new fresh food e-commerce models have emerged, including forward warehouses, store-warehouse integration, O2O platforms, and community group buying. Currently, fresh food e-commerce is still in rapid development. So what is driving the development of the fresh food e-commerce industry? Since the fresh food e-commerce industry is deeply affected by macro factors, we will use the PEST model to explore the reasons behind it.

1.1 Politics

• In December 2017, the Ministry of Agriculture and the Ministry of Commerce issued a notice on the "Action Plan for Promoting the Development of Agricultural E-Commerce", giving full play to the important role of e-commerce in cultivating new economic drivers, building "dual engines" and achieving "dual goals", and solidly promoting the rapid and healthy development of agricultural e-commerce.
• In May 2018, the Ministry of Finance, the Ministry of Commerce, and the Ministry of Finance's Poverty Alleviation Office issued the "Notice on Carrying out Comprehensive Demonstration Work on E-Commerce in Rural Areas in 2018" to further build and improve the rural e-commerce service public system and cultivate the rural e-commerce supply chain.
• At the end of 2019, the Guiding Opinions on Implementing the "Internet +" Agricultural Products Out-of-Village and into-City Project pointed out that it is necessary to organize and implement the "Internet +" agricultural products out-of-village and into-city project, do a good job in the digitization of the entire industrial chain before, during and after production, and establish a supply chain system, operation service system and support and guarantee system that are suitable for online sales of agricultural products, promote the solution to the problem of "difficulty in selling" agricultural products, and achieve high quality and high prices to drive farmers' income growth.

The country has implemented a series of policies to use e-commerce to solve rural development problems, aiming to improve the rural logistics system, solve the problem of difficulty in selling agricultural products, and provide development opportunities for fresh food e-commerce.

1.2 Economy

In the first half of 2021, the median per capita disposable income of residents nationwide was 14,897 yuan, of which the median per capita disposable income of urban residents was 21,517 yuan, an increase of 9.7%; the median per capita disposable income of rural residents was 7,956 yuan, an increase of 19.1%. The growth in per capita income of urban residents has provided more consumption possibilities, providing an economic foundation for the development of the fresh food e-commerce service industry.

According to iResearch data, about 30% of Chinese residents’ expenditures are spent on food, tobacco and alcohol, and this type of consumer expenditure is increasing year by year. This also means that the consumption of fresh food, which is a necessity, is also increasing year by year.

1.3 Society and Culture

• With the increase of new business entities such as agricultural production and operation units and farmers' professional cooperatives, my country's agricultural production is developing in the direction of scale and specialization, and the standardization and intensiveness of agricultural products are also increasing, providing a basis for large-scale procurement of fresh food e-commerce. The results of the third national agricultural census showed that at the end of 2016, there were 3.98 million large-scale agricultural operators nationwide and 2.04 million agricultural business units, an increase of 417.4% over 2006. According to data from the State Administration for Market Regulation, the number of my country's professional farmers' cooperatives has also been steadily increasing in recent years.
• In 2020, the sudden outbreak of the epidemic has deepened people's dependence on mobile Internet, and people's lifestyles and habits have also changed to varying degrees. At the same time, the epidemic has severely restricted the development of the offline economy. Fresh food e-commerce has solved people’s eating problems and allowed more consumers to recognize this consumption model.
• With the development of the economy and the changes of the times, China's consumer groups have gradually changed. At this stage, people born in the 1980s and 1990s have become the backbone of consumption, and their consumption habits have also changed accordingly. They are more willing to improve their personal consumption level, and their standards for quality, experience, and convenience are getting higher and higher . In the future, as the scale of mobile users and the penetration rate of mobile online shopping continue to increase and the concept of online purchase of fresh food becomes more and more popular, consumers' demand for online purchase of fresh food will continue to expand.

1.4 Technology

The continuous development and progress of technology has brought many improvements and changes to the fresh food e-commerce industry.

• Upgrading cold chain logistics technology ensures the quality and safety of fresh products. In the future, as cutting-edge technologies such as the Internet of Things, blockchain, RFIF, and intelligent temperature control are further promoted and applied in cold chain logistics, technologies such as cold chain traceability and full-process monitoring will gradually take shape, which will more effectively ensure the quality and safety of fresh products during cold chain transportation.
• The development of information technologies such as cloud computing and big data helps companies better understand user consumption data and community user portraits, thereby optimizing product selection and accurately estimating customer purchase volumes to reduce losses and improve inventory turnover.
• During terminal delivery, the online intelligent dispatching system is used to achieve optimal route matching and optimal area dispatching, thereby improving delivery efficiency.

All of the above factors have worked together to promote the development of the fresh food e-commerce industry. So what will be the development trend of this industry in the next few years? Is there enough market space?

As an industry with rigid demand for people's livelihood consumption, the fresh food retail industry has a market size of trillions of yuan. In recent years, China's fresh food retail market has maintained steady growth. In 2020, the scale of China's fresh food retail market exceeded 5 trillion yuan. Fresh food products are one of my country's basic consumer goods. With the increase in per capita disposable income and consumer expenditure, the fresh food retail market will continue to grow in the future. By 2025, the scale of China's fresh food retail market will reach 6.8 trillion yuan.

2. Competitive Product Analysis

With the development of the fresh food e-commerce industry, the number of players entering the fresh food e-commerce market continues to increase. There are traditional fresh food e-commerce companies, such as JD Fresh and Tmall Fresh; and there are also new retail fresh food e-commerce companies that joined later, such as Hema Fresh, Dingdong Maicai, MissFresh, JD Home Delivery, 7fresh, and Shixing Fresh.

According to Analysys data: In the list of self-operated fresh food e-commerce applications, the average monthly active users of HEMA app are much higher than those of other apps, and it is included in the first tier. MissFresh and Dingdong Maicai are second and included in the second tier, and Yonghui Supermarket and PuPu are included in the third tier.

HEMA Fresh has successfully opened up new retail fresh food e-commerce that connects online and offline scenarios, and has successfully entered the first echelon of the fresh food e-commerce industry. Its unique development model has also become a benchmark for the "new retail" industry. Dingdong Maicai has attracted much attention from capital. In just four years since its establishment, the company has completed 10 rounds of financing, and the number of investment institutions and investment amounts are increasing. It was listed on the New York Stock Exchange in June this year. On December 5 this year, the Hema online app launched a "bargain price" in Shanghai, which was said to be a marketing strategy launched by Hema against Dingdong Maicai. Next, we will compare Hema Fresh and Dingdong Maicai to understand the differences between the two.

2.1 Hema Fresh

• In 2016, Alibaba Group founded Hema Fresh;
• In October 2017, the number of stores nationwide reached 30;
• In 2019, Hema Fresh expanded rapidly in my country, with more than 130 stores;
• In 2020, Hema Fresh established more than 200 stores in 21 cities in my country.

Hema's business model is warehouse-store integration

Product Supply :

Hema adopts the methods of direct purchase from overseas and domestically. Overseas, Hema mainly purchases global high-quality seafood, meat products, fruits and vegetables, dairy products and other commodities. Domestic direct purchases are divided into direct purchases from the place of origin and local direct purchases. For example, vegetables, meat and other commodities are picked in the morning and delivered to stores for sale in the afternoon based on cooperation with local enterprises.

Product categories :

With SKU10,000+, Hema Fresh focuses on fresh products. Offline stores account for 80% of food, of which fresh food accounts for 20%, including mid-to-high-end items such as king crab and Australian lobster. This layout is in line with the growing demand for fresh food. Its online products mainly include fresh fruits, seasonal vegetables, meat, poultry, eggs, seafood, dairy products, frozen food, catering and baking, snacks, wine and beverages, grains, oils and general merchandise, etc.

Product quality control :

Hema will go directly to the base to do quality control, procurement, and batch processing inspection center to ensure product quality. In addition to normal temperature and low temperature warehouses, HEMA's DC (central warehouse) has the functions of product quality inspection, packaging, and standardization. In addition, live seafood purchased from abroad will also be transferred or temporarily kept in DC (central warehouse);

Warehousing :

The warehouse-store integration model, Hema's stores are also called store warehouses, which are integrated interactive experience stores for sales and catering, and are also warehousing and logistics centers for online sales. Both personnel and venues can be reused.

Delivery :

• Hema promises to deliver goods to homes within 30 minutes within a 3-kilometer radius of the store. Hema will reasonably dispatch delivery personnel and delivery times based on orders, batches and package sizes to maximize delivery efficiency.
• HEMA’s intelligent fulfillment and order collection system can unify a large number of online orders, and reasonably arrange the delivery route and time according to the freshness, hotness and temperature of the goods and the distance of the order, so as to minimize the overall order cost.

Business Development :

At present, Hema has deployed new formats such as Hema F2, Hema X Membership Store, Hexiaoma, and Hema mini, expanding the customer base from the first- and second-tier mid- and high-end cities where Hema Fresh is located to more third- and fourth-tier cities. Different formats are adopted according to the characteristics of different business districts, different scenarios, and different consumer groups to meet the diverse needs of customers.

2.2 Dingdong Shopping

• In 2017, Dingdong Maicai was officially launched, setting the industry standard of "29-minute home delivery";
• In 2019, we achieved cross-regional operations, opened stores in Hangzhou and Shenzhen, and achieved annual revenue of over 5 billion yuan, with 500 forward warehouses;
• In 2020, it entered Beijing and its annual revenue exceeded 14 billion;
• In 2021, Dingdong Maicai built more than 1,000 forward warehouses, covering more than 30 cities across the country, and was officially listed on the New York Stock Exchange on June 9.

Dingdong’s business model: self-operated forward warehouse model

Product Supply :

The company has penetrated into the upstream of agricultural products. The company has worked closely with manufacturers to develop the Dingdong GAP agricultural product safety and sustainability standards. The order-based agricultural product production has solved the pain points of product production scale for agricultural product suppliers and provided Dingdong Maicai with a stable, low-cost supply of agricultural products. "Direct sourcing from the origin" is more for quality control. Supply chain construction is very expensive, and the cost advantage of procurement is established.

Product categories:

SKU 12500+ , meat, poultry and eggs account for 20%+, vegetables and soy products account for 20%+, fruits account for 10%+, aquatic products and seafood account for 10%+, and others include rice, flour, grain, oil, dairy products, baked goods, instant food, alcoholic beverages and snacks, accounting for a total of 20%+

Warehousing :

Adopting the central warehouse + forward warehouse model, each store is regarded as a small or medium-sized warehousing and distribution center. The large warehouse in the center of the headquarters only needs to supply these stores, thus covering the last mile of delivery.

Product quality control:

Adopt 7+1 quality control process to ensure product quality from production to customer end, including new product inspection, origin quality inspection, central warehouse inspection, sorting and packaging, forward warehouse inspection, order packaging, cold chain logistics, and customer feedback.

Delivery :

• The forward warehouse is located near the community and can directly reach tens of thousands of households, which enables the company to achieve a delivery speed of "fastest delivery in 29 minutes", ensuring that the products arrive fresh when they arrive to users, and bringing users a convenient, fast, stable and high-quality consumption experience.
• Dingdong Maicai has been focusing on the dense order volume in communities, and can use big data to predict user needs to provide personalized recommendation services, and can use its scale advantages to reduce the last-mile delivery costs.

Business Development :

In 2021, Dingdong's focus will be on the semi-finished product market , with its main focus being home delivery service that can prepare a table of dishes in 30 minutes in a family scenario .

2.3 Summary

From the above analysis, it can be seen that Hema Fresh and Dingdong Maicai were established in 2016 and 2017 respectively, and both have maintained an expansion trend since then. Although Dingdong Maicai was established later than Hema, its expansion scale exceeded that of Hema, and it was the first to cover 30+ cities. This is closely related to the business models of the two companies. Hema Fresh adopts the "warehouse-store integration" model, which requires building stores during the expansion process. Compared with Dingdong Maicai's "forward warehouse" model, it requires more manpower, material and financial resources. It is reasonable that its expansion speed is slower than Dingdong Maicai.

There are differences in their business models.

• From the supply perspective, both adopt the self-operated model. Hema chooses the model of direct purchase from domestic and foreign sources to simplify the procurement process, reduce product loss rate, reduce costs, and keep products fresh. Dingdong Maicai purchases products through in-depth cooperation with upstream suppliers. While ensuring low prices, it also directly controls product quality at the source.
• In terms of product categories, Hema Fresh has fewer categories, but Hema has high-end fresh products such as king crabs and Australian lobsters, focusing on the higher-end market, while Dingdong Maicai focuses more on daily needs.
• From the perspective of product quality control, Hema Fresh's quality control is mainly concentrated in the base, warehousing and cold chain transportation stages. Dingdong Maicai adopts the "7+1" quality control process, which is more strict.
• In terms of delivery, HEMA is relatively more efficient and can guarantee delivery within 30 minutes.
• In terms of business expansion, Hema has launched more business models, aiming to expand coverage to more people, fill in the blank areas that large formats such as Hema Fresh cannot cover, and achieve continuous penetration into areas with low consumption density. Dingdong has chosen to go deeper into life scenarios and develop the semi-finished product market to meet the needs of busy white-collar families for quick cooking.

3. User Value Analysis

In the fresh food e-commerce industry, there are three main participants: fresh food suppliers, consumers and platforms. The business logic of Hema Fresh is as follows:

If the platform wants to achieve rapid growth, it must meet the needs of consumers and fresh food bases. Next, let’s explore the needs of both parties and how HEMA Fresh, as a platform, can better meet their needs.

3.1 Consumers

Hema Fresh mainly serves middle- and high-income white-collar workers born in the 1980s and 1990s in first- and second-tier cities.

According to the iResearch survey results, white-collar workers in first- and second-tier cities are mainly concerned about the quality and freshness of fresh products, product prices, delivery speed, and variety of categories.

White-collar workers with middle and high incomes have higher consumption demands and spending power for fresh products, are relatively insensitive to prices, pursue quality of life, and are willing to pay a higher price for high-quality fresh products. Therefore, product quality and freshness are their top concerns, and product prices are not a consideration.

In addition, white-collar workers in first- and second-tier cities lead fast-paced lives and have little free time. They hope to buy suitable products in the shortest possible time and would like to have all their shopping needs solved in one stop. Therefore, they have high requirements for the delivery speed and richness of fresh food categories of fresh food e-commerce companies.

It can be seen that Hema Fresh's target users have high demands for product quality, product category richness, and quick product acquisition. Currently, they mainly purchase fresh products in the following ways:

3.1.1 Hypermarkets

Supermarkets are the main place where people buy fresh food on a daily basis nowadays. Compared with vegetable markets, supermarkets are tidier, cleaner and more hygienic, so more people now choose to buy fresh food in supermarkets. Large supermarkets have a rich variety of fresh produce , which is concentrated in one area for easy selection.

However, the fresh produce in supermarkets is generally known to consumers as "origin brands", such as "Luochuan apples" and "Taiwan pineapples". The quality of fresh produce produced in different places varies greatly, and upstream suppliers do not perform standardized quality control and screening, resulting in many mixed situations. In addition, some consumers reported that it takes 40 minutes to drive to and from a large supermarket closest to their home, including parking, and 1.5 hours to select items and queue up to pay. If they want imported fruits they like, they have to go to a fruit store. It can be seen from this that for white-collar workers with less time, going to large supermarkets is time-consuming, and large supermarkets also lack high-end fresh food categories and cannot fully meet their demand for fresh products.

3.1.2 Farmers’ Market

The farmers' market is organized into stalls, and each business operator is a boss. They have independent purchasing and supply channels, a rich variety of products , and the dishes are generally handled by the business operators themselves, so there is little loss.

However, quality monitoring and management in farmers' markets are difficult, traceability of safety responsibilities is poor, and the quality of fresh products cannot be guaranteed. The construction and management of farmers' markets are also in a state of disorder, with poor infrastructure and prominent fire and food safety risks. There is not a farmer's market near every community, and there are many stalls in the farmer's market, and there are duplicate products in different stalls, so it takes a lot of energy and time to visit the farmer's market.

3.1.3 Community Fresh Food Stores

The community fresh food store is located in the community, so you can buy it on the way home from get off work, which is convenient and fast. However, most of the community fresh food stores are individually run businesses with a limited variety of merchandise and not many choices. In addition, since it is an individual business, the purchasing channels are different, and the overall quality of fresh fruits in the fresh food store is average.

3.1.4 Traditional Fresh Food E-commerce

Traditional fresh food e-commerce platforms choose to sell fresh food online, such as Tmall Fresh and JD Fresh. Consumers can purchase products online without leaving their homes, but the inability to experience fresh food makes consumers have doubts about product quality. Traditional fresh food e-commerce has a rich variety of fresh food categories, but most of the fresh food sold is frozen products, and can only be delivered within 1-2 days after the user places an order. There are problems with the long delivery time and high loss of fresh food .

To sum up, the above four methods have their own advantages and disadvantages, but none of them can simultaneously meet consumers' demands for rich and fresh product categories and fast and convenient purchases.

3.2 Fresh Food Base

in the country, there are still many farmers in the upstream agricultural field who are struggling to find stable channels. The good products "hidden" in the fields lack channels to "go out", and their quality and standards still need to be improved through modern agricultural technology. At present, there are several ways for agricultural products to "go global":

3.2.1 Sales through multiple intermediaries to farmers’ markets, supermarkets, etc.

At present, agricultural products “going global” are mainly distributed and circulated nationwide through multi-level wholesale markets in production and sales areas. This sales model has too many intermediate sales levels and involves multiple stakeholders, which is bound to bring many problems. First, there are too many intermediate circulation links, which hinder the rapid transmission of consumer demand information, leading to blind production by farmers and a backlog of agricultural products, thus causing economic losses to farmers ; second, there are too many circulation links, which leads to increased costs and expenses, which in turn increases the price of agricultural products, resulting in lower sales , thus affecting farmers' enthusiasm for production.

3.2.2 Urban and rural trade markets

Sales in urban and rural collective markets mean that producers of agricultural products sell their agricultural products directly to consumers through farmers’ markets. This sales model allows producers and consumers to trade directly, eliminating the middleman, thereby obtaining higher economic profits than with the participation of middlemen. However, this sales model requires farmers to invest more time and energy, and there is a risk of imbalance between supply and demand.

3.2.3 Agricultural product processing enterprises

Agricultural product processing enterprises sign planting agreements with growers and purchase agricultural products. Agricultural product producers sell agricultural products to agricultural product processing enterprises, and processing enterprises turn agricultural products into other commodities for sale. This sales model can increase the profits of agricultural products and indirectly increase farmers' income, but the proportion of purchases made directly by purchasing and processing companies from agricultural producers is relatively small .

3.2.4 Agricultural products e-commerce

Agricultural products are shipped directly from the cultivation bases to consumers, saving the channel costs of wholesalers and retailers. However, since the storage of many agricultural products is unstable, the freshness of the products cannot be fully guaranteed, which affects the sales of agricultural products and may cause farmers' agricultural products to be unsalable.

3.3 Platform

From the above analysis, we can find that the unresolved pain points faced by consumers are:

• Product quality cannot be guaranteed. Fresh products are non-standard products, and it is difficult to maintain consistency in taste and appearance, and there are issues with shelf life and freshness.
• The product variety is not enough and there are few channels for purchasing high-end fresh food.
• Offline purchases are time-consuming and laborious, while online purchases do not allow you to experience the product and the quality cannot be guaranteed.

The unresolved pain points faced by fresh produce bases are:

• There are too many stakeholders in the multi-level supply and marketing system, and the supply and demand information of products is not circulated smoothly.
• Farmers put too much effort into sales and need to bear the risk of unsalable products
• Farmers selling through e-commerce face storage instability issues

In response to the above pain points, how does Hema Fresh, as a platform, better meet the needs of consumers and production bases to attract them to this platform?

For consumers:

3.3.1 Direct sourcing from the origin

Adhere to direct sourcing from the source and build a fresh food traceability system. Hema has achieved joint procurement and supply chain collaboration with Alibaba platforms such as Tmall Supermarket, Miaoxiansheng, and Yigu Fresh, insisting on direct sourcing from the source, reducing intermediate links, improving the operating efficiency of the entire chain, reducing losses and costs, and ensuring the freshness of goods.

3.3.2 Source quality control

Hema will go directly to the base to perform quality control, procurement, and batch processing inspection center. Goods such as vegetables and meat are picked in the morning and delivered to stores in the afternoon based on cooperation with local businesses to ensure product quality and freshness.

3.3.3 Fresh Everyday

In order to solve the problem of fresh food experience, HEMA Fresh has launched a series of daily fresh products, which are picked and sold on the same day, with the main focus on "freshness". Hema Fresh stores have a special team that checks the quality of fresh products one by one every day and sets a shelf life for fresh products. Fresh products will be discounted or reported as damaged when the shelf life expires, even if there is no problem with the quality or appearance.

3.3.4 Selected product categories with rich variety

Most stores are around 5,000 square meters in size and have more than 1,000 SKUs. Hema Fresh selects products from all over the world, and its product categories present a "hundred flowers blooming" phenomenon. The main category sold is fresh food, including high-end fresh food from home and abroad. The second category is fast-moving consumer goods, and the third category is daily necessities, allowing consumers to enjoy one-stop shopping.

3.3.5 Integration of in-store experience and online purchase

The strong experience of offline users endorses online services and attracts traffic. At the same time, offline stores have front store and back warehouse, assuming the function of forward warehouse to ensure delivery timeliness . Hema Fresh’s online and offline products are unified. After consumers experience the products offline and think they are good, they can choose to place an order directly on the app, saving time going to and browsing the store.

3.3.6 In-store self-checkout

There are multiple self-service checkout machines in the store, where consumers can check out by themselves after shopping, reducing waiting time in line.

3.3.7 Fast delivery

HEMA Fresh’s delivery range is 3 kilometers, and the fastest delivery time is 30 minutes. Starting from the needs of consumers, it strives to create a living circle suitable for target consumers.

For fresh produce bases:

3.3.8 Digital Agriculture

In accordance with Alibaba's digital agriculture planting standards and requirements, farmers grow products based on orders, and sell them directly to Hema Fresh's online and offline channels, using digital tools to connect production and sales, reduce unsold agricultural products, and increase farmers' income.

3.3.9 Development of Hema Village

Hema has developed many Hema Villages and cooperated with large agricultural companies to underwrite all of their agricultural products, allowing farmers to concentrate on upgrading agricultural digital production technologies. Sales, channels and logistics issues are left to Hema to increase farmers' income.

3.3.9 Buyer System

Under the buyer system model, the buyer team is often responsible for the entire process from production to sales of goods and bears the risk of product unsale. Buyers often need to integrate various supply chains such as R&D, production, warehousing, transportation, marketing, sales, and services based on a deep understanding of end-consumer demand. Therefore, the goals of buyers and retail stores are often highly unified, that is, to be sales-oriented and to meet consumer needs to the greatest extent possible. Hema connects with fresh produce bases through buyers, reducing the number of stakeholders. The information flow is directly transmitted from the terminal to the supply end. Fresh produce producers only need to focus on production and no longer have to worry about product sales.

4. Commercial Value Analysis

As an e-commerce platform, an important indicator for measuring the profitability of Hema Fresh is GMV (gross merchandise volume). The general calculation formula for GMV is GMV=number of users*conversion rate*average order value. The improvement of any one of the indicators, namely the number of users, conversion rate and average order value, will have a positive impact on the growth of overall revenue, so next we will focus on analyzing the means by which HEMA Fresh has improved these three key indicators.

3.1 Increase the number of users

3.1.1 Invitation to Gift Events

Currently, only old users have the "Invite and Get Gifts" activity. Old users can invite new users to place orders or invite old users to place orders.

Invite new users: A new user is successfully invited when he/she registers on the HEMA Fresh app through a link or a Hekouling and places and signs for an order online or in a store within 7 days.

Invite old users: Share the box code with friends. Friends only need to copy the box code and open the Hema app to receive the coupon and place an order.

3.1.2 In-store traffic generation

QR codes for downloading the Hema app are posted everywhere in the Hema Fresh stores. When consumers are selecting products in the store, they can download the Hema app by scanning the QR code. In addition, when purchasing Hema Fresh products in the store, you must download the Hema app to check out by yourself. This can guide consumers who have experienced the products offline to purchase products online.

3.1.3 Strategic Interconnection with Ele.me

All 150 Hema stores across the country have been launched on the Ele.me platform. Users can also directly connect to the Hema app to place orders through Ele.me and enjoy the delicious life of "Hequfang". Nearly 10,000 high-quality products from around the world will be delivered to their door within 30 minutes.

3.2 Increased conversion rate

3.2.1 Guide users to register and log in

After guiding users to download the app through various means, only by allowing users to register as consumers can subsequent purchasing behavior be generated. When users have not registered and logged in to the Hema Fresh app, they can browse products and view product details, but they cannot add products to the cart or place orders and pay for them. Therefore, only user registration is meaningful for the Hema Fresh app. So how does Hema Fresh guide users to register?

When users enter the homepage, there are exclusive prices for new customers at the top of the homepage . The following banner shows exclusive coupons for new customers. At the bottom, it says that they can log in immediately and there are gifts for new customers. This shows that Hema Fresh mainly attracts consumers to register and log in to the Hema app through preferential activities.

3.2.2 Guide users to purchase products

E-commerce users can be divided into users with clear goals and users with unclear goals. Users with a clear goal will search for products directly and then place an order to purchase them. Users with unclear goals need to browse products repeatedly and make actions such as adding them to shopping carts or favorites. However, whether the user has a clear goal or an unclear goal, when purchasing a product, they generally go through three pages: the product list page, the product details page, and the shopping cart . Next, let’s take a look at how HEMA Fresh guides consumers to purchase products on these three pages.

(1) Product list page

Targeted consumers

Consumers with clear goals will directly search for the products they want to buy and enter the product list page through the product search page. In the product search page below, you can see that Hema helps consumers quickly think of the products they want to buy through search history and search discovery.

When you enter the product list page from the search page, you will first see the leftmost picture in the figure below. The top 1 selling product is recommended to consumers first, and the price is worry-free for consumers, which helps consumers make purchasing decisions more quickly. Displaying the delivery time at the top of the page also helps certain consumers make purchasing decisions faster. If consumers keep searching and fail to find suitable products, a selected list of products will be presented to them. “Buyer recommendations” enhance consumers’ sense of trust. If the consumer still hasn’t selected a product, the next prompt “Try these” will appear to recommend similar products to the consumer, thus preventing the user from exiting the page and causing user loss.

Consumers with unclear goals:

What consumers want most when purchasing fresh products are freshness, good quality and safety. As can be seen from the picture, in addition to product lists, Hema Fresh also has food tutorial videos to guide consumers who don’t know what to buy.

On the product list page, the most prominent feature is the product picture. The picture fully displays the details of the product ( products that cannot display details are marked separately, such as seasonal fresh produce, how many people have purchased the product, etc. ). On the one hand, it allows consumers to confirm that it is the product they want, and on the other hand, it reassures consumers about the product quality and speeds up their consumption decision-making. The second highlight is the product name, which informs consumers of the product category and assists them in making decisions. The third highlight is the shopping cart, which shortens the shopping process and increases consumer conversion rate. The fourth thing to highlight is the price, to see whether it meets the consumer’s psychological price range.

(2) Product details page

After users select the product they are interested in on the product list page, they enter the product details page. The product details page is the user's consumption experience page and will have a direct impact on the user's purchasing behavior. So how do you design the product details page to guide consumers to add products to the shopping cart?

(a) Describe the taste of the product and create a sense of scene

Describing the taste of the product makes consumers feel like they have tasted the product, helping them feel whether the product is their favorite, and thus encouraging them to buy the product.

(b) Determine the product arrival time and support self-pickup

Clearly informing consumers of product delivery time will make them feel more secure and they don’t have to worry about having to wait due to uncertain delivery times. Store pickup service is provided for consumers who want to get the products quickly.

(c) After-sales service commitments to establish consumer protection

What consumers are most concerned about is the quality of fresh products. For consumers who encounter quality problems, we promise to provide corresponding return services to dispel consumers' doubts about product quality and allow users to buy products with confidence.

(d) User reviews build trust

First, see the number of user reviews to create a popular atmosphere. In addition, a good product review page can also encourage consumers to make purchasing decisions faster.

(e) Recipe recommendations

Through recipe recommendations, consumers who are interested in the product but are hesitant or who don’t know what to cook can be stimulated to buy.

(3) Shopping cart

Display coupon information to make it cheaper for users to pay with coupons, demonstrate profit-sharing, and increase users' willingness to pay.

3.3 Increase in Average Order Value

The average order value is affected by two factors: the single purchase amount and the purchase frequency.

Increase purchase frequency:

3.3.1 X Member

Users who purchase X membership can receive free food every day, free shipping with zero threshold, and enjoy 100-yuan coupons every month, which increases the frequency of user purchases and improves user activity.

Increase the single purchase amount:

3.3.2 Value-added Exchange

Purchasing a certain amount or type of goods can allow consumers to purchase other goods at a more favorable price , which can stimulate consumers' desire to purchase other goods and increase the amount they purchase at one time.

3.3.3 Free shipping and group order

Encourage consumers to buy more products for free shipping and increase the purchase amount of each word.

3.3.4 Product recommendations/I often buy

Recommend related products through big data mining technology , recommend products of interest to consumers, and increase the purchase amount of words.

3.4 Summary

From the above analysis, we can find that HEMA Fresh has done a lot of work to optimize its revenue model, constantly attracting new users, and improving conversion rate and average order value by demonstrating product quality, providing discounts, after-sales service guarantees, and big data recommendations. So far, these measures have been quite effective. Alibaba's first quarter 2021 financial report shows that as of June 30, 2020, the online penetration rate of Hema Fresh's GMV continued to exceed 60%. There are 214 self-operated Hema Fresh stores in China, mainly located in first- and second-tier cities.

5. Product Iteration Analysis

In order to deeply analyze the product iteration logic of Hema Fresh, the author has compiled all the core version iterations of Hema Fresh as follows:

According to the curve distribution of the cumulative downloads of Hema Fresh on Kuchuan, it can be seen that the user growth curvature has continued to increase since November 2017, and then formed a trapezoidal growth trend in October 2019. Therefore, the iteration stage of Hema Fresh can be divided into three stages: the startup stage, the growth stage and the mature stage.

5.1 Phase 1: Start-up

Before April 2017, that is, versions V0.9-V1.3.3, was the startup phase of Hema Fresh. The main goal of this stage is to verify user needs and polish the user experience.

During this stage, HEMA Fresh mainly focused on completing the main functions of an e-commerce app, such as changing the homepage, order list page, search function, problem feedback, etc., and adding marketing functions, all of which were to increase user conversion rates and allow initial core users to settle on the platform . As more and more products are available on the app platform, users generally have clear goals when purchasing products in the early stages. In order to allow users to find products more quickly and accurately, the product search function has been enhanced.

5.2 Stage 2: Growth Stage

The product was in its growth stage from V2.0.0 to V4.40.0. During this period, the number of app downloads continued to rise. The main goal of the app was to expand the number of users, explore more user scenarios, and improve conversion rates .

In terms of expanding the number of users, we adopt the online fission method of inviting friends to obtain coupons, and launch electronic gift cards to encourage users to actively attract new users, reduce operating costs, and achieve user growth. In addition, in response to the different needs of users in different scenarios, HEMA Fresh has expanded many new scenarios to meet the needs of consumers, thereby attracting new users and improving conversion rates.

Before purchasing:

• For users whose purchasing needs are unclear, many improvements have been made to the product homepage, including the addition of a waterfall menu and a new "My Frequently Purchased" module to assist users in making purchasing decisions. For users with clear purchasing needs, new hot selling lists, attribute selling points, etc. are added to the search to speed up user decision-making.
• For products that consumers are interested in and want to learn more about, we use video explanations when they enter the product details page, and use dialect voice explanations to enhance the product experience, make users feel familiar, and quickly understand the product so that they can make purchasing decisions.
• The "One Table of Food" channel has been launched for users who need to entertain friends and relatives.
• In order to attract users with children and elders to buy more products, we added growth plans, respect for elders, and recommended lifestyle products columns to the product details page.

After purchase:

• After purchasing a product, users need a place to express their satisfaction or dissatisfaction with it, which also serves as a reference for other users to purchase the product. Therefore, Hema Fresh has added a review function.
• After placing an order, you may find that you have filled in the wrong address or delivery time. Add the function of modifying the delivery time and address.
• After placing an order, users may want to know in real time where their purchased items have been delivered, so the logistics and delivery status of the order has been added to the homepage.

In general, during this stage, HEMA Fresh mainly focuses on attracting new users, improving user conversion rates , and constantly exploring user scenarios, so as to display as many functions as possible on the homepage, enhance the user experience before and after purchase, and attract new users to stay on the platform.

5.3 The third stage: mature stage

From July 2020 to the present, Hema Fresh has been in the mature stage. During this stage, maintaining the activity of old users and reducing the loss of old users are the focus of Hema Fresh's product iteration.

In terms of expanding the number of users, we adopt the online fission method of inviting friends to obtain coupons, and launch electronic gift cards to encourage users to actively attract new users, reduce operating costs, and achieve user growth. In addition, in response to the different needs of users in different scenarios, HEMA Fresh has expanded many new scenarios to meet the needs of consumers, thereby attracting new users and improving conversion rates.

Before purchasing:

• For users whose purchasing needs are unclear, many improvements have been made to the product homepage, including the addition of a waterfall menu and a new "My Frequently Purchased" module to assist users in making purchasing decisions. For users with clear purchasing needs, new hot selling lists, attribute selling points, etc. are added to the search to speed up user decision-making.
• For products that consumers are interested in and want to learn more about, we use video explanations when they enter the product details page, and use dialect voice explanations to enhance the product experience, make users feel familiar, and quickly understand the product so that they can make purchasing decisions.
• The "One Table of Food" channel has been launched for users who need to entertain friends and relatives.
• In order to attract users with children and elders to buy more products, we added growth plans, respect for elders, and recommended lifestyle products columns to the product details page.

After purchase:

• After purchasing a product, users need a place to express their satisfaction or dissatisfaction with it, which also serves as a reference for other users to purchase the product. Therefore, Hema Fresh has added a review function.
• After placing an order, you may find that you have filled in the wrong address or delivery time. Add the function of modifying the delivery time and address.
• After placing an order, users may want to know in real time where their purchased items have been delivered, so the logistics and delivery status of the order has been added to the homepage.

In general, during this stage, HEMA Fresh mainly focuses on attracting new users, improving user conversion rates , and constantly exploring user scenarios, so as to display as many functions as possible on the homepage, enhance the user experience before and after purchase, and attract new users to stay on the platform.

5.3 The third stage: mature stage

From July 2020 to the present, Hema Fresh has been in the mature stage. During this stage, maintaining the activity of old users and reducing the loss of old users are the focus of Hema Fresh's product iteration.

For the convenience of analysis, the author re-sorted the product structure of Hema Fresh according to users, scenarios, needs and functions and obtained the following table:

6.1 Overall Analysis

Hema Fresh’s main target users are fresh food consumers, and the focus is on meeting the needs of this group of consumers. There are three scenarios when consumers use Hema Fresh: 1. Before purchase; 2. During purchase; 3. After purchase.

Scenario 1: Before purchase

Consumers first need to find a product before buying it. Consumers with clear goals can directly search for the products they want to buy through the search box on the homepage. For consumers who have unclear goals but know what type of products they want to buy, HEMA Fresh divides products into fruits, vegetables, flowers, seafood, and prepared foods, etc. Different types of products can be found in different categories, allowing them to search on demand. .

For consumers who buy fresh food, finding out what vegetables to buy and how to cook is a big problem. To meet this demand, Hema Fresh has specially set up a "What to Eat" bottom navigation, which shows that Hema Fresh attaches great importance to this demand. If consumers are very interested in a certain product but don't know how to cook it, they can learn about the food's characteristics and cooking methods through the ingredient encyclopedia in What to Eat; What to Eat contains cooking videos posted by consumers, and consumers who don't know what to cook can watch the videos to see what others are cooking and eating, and then choose the video they like and buy and cook it accordingly.

Modern white-collar workers are busy with work, and their families or boyfriends and girlfriends don’t have time to go out together to buy fresh food. Hema Fresh enables online shopping through the Buy Together module in My Module.

Generally speaking, young people nowadays are busy with work, and some families with children have elders to help with cooking. The elderly are not used to buying fresh food online. In order to make it easier for the elderly to cook a meal, HEMA Fresh launched an Elderly Assistant module, which includes three modules: products for the elderly, what I often buy, and my footprints. Young people can buy suitable products and then deliver them to their elders through HEMA.

Scenario 2: Purchasing

When purchasing, consumers first need to confirm that the product has been added to the shopping cart, and then fill in necessary information such as address and delivery time. These can be completed through the shopping cart settlement module, improving consumer shopping efficiency. In my module, there is a special delivery address for managing multiple addresses, which is convenient for consumers with multiple addresses to manage addresses.

If you are very interested in a product during the purchasing process but have not made up your mind to buy it, you can collect the product.

If you have any questions during the purchase process, you can consult Hema Xiaomi at any time.

Scenario 3: After purchase

After a consumer purchases a product, he will want to see where the product has been delivered. After receiving the product, he needs a place to express his opinion of the product. Therefore, the "pending receipt" and "pending evaluation" sections are set up in the Hema Fresh My Order module.

If consumers forget to issue an invoice when purchasing products, they can also apply for a reissue of the invoice in the invoice center module.

If consumers want to return a product after purchasing it, they can directly contact Hema Xiaomi to inquire about the return process, or they can directly apply for a return in My-Return/After-Sales.

From the above analysis, we can find that the functional design of Hema Fresh can well meet the needs of consumers in three scenarios: before purchase, during purchase, and after purchase. At the same time, the high-frequency functions required by different users are highlighted and reasonably distributed in the product structure.

7. Operational Path Analysis

The saying "Products are responsible for giving birth, and operations are responsible for raising them" also indirectly reflects the close relationship between products and operations. How does HEMA Fresh operate this product and achieve rapid growth in a short period of time? According to the AARRR model, the author has sorted out the main operational activities of HEMA Fresh since its establishment as follows.

1. Attract new customers (A)

Method 1: Cross-border cooperation

2022-01-19, Hema × Bilibili jointly launched Caigou chocolate;

2022-01-19, Hema New Year's Eve Dinner × Pepsi Taiqi Series;

2022-01-07, Hema x Dongfadao jointly launched the Lu Nai Hua Eight Treasure Rice;

On December 24, 2021, Hema joined hands with Youku, Lemon Pictures and the hit drama "Xiao Min's Family" to create a "Watch dramas on Youku, buy good things from the dramas on Hema Mind";

2021-12-02, Hema x Xiaolongkan jointly launched the seasonal limited edition "Hot Pot Tart";

On October 21, 2021, Hema and the Ghost Story Mobile Game jointly held the first "Hema Fresh Cup" Sea Fishing King Competition;

2021-06-15, Hema x Wang Baobao launched a limited edition oatmeal cup for summer food;

2020-07-25, Wenheyou, Feifei Shrimp Restaurant, and Hema jointly launched Hema Crayfish;

2020-07-18, Hema X Youku "This is Street Dance 3" launched an exclusive joint hand-cranked small box, watching street dance and eating the same street dance;

2020-03-20, HEYTEA X HEMA launched a joint green rice dumpling.

2. Stimulate activity (A)

After users download and register the app, they need to be activated to open the app, thereby increasing the daily and monthly activity of the app . HEMA Fresh has the following methods to increase user activity:

• Sign in at Hema Town every day to get a box of flowers, plants and get free fruits
• Push message

3. Improve retention (R)

After promoting user activity, it is also necessary to improve user retention rate in order to continuously create value for the platform. In order to improve user retention rate, Hema Fresh has several main ways to retain users:

• Launched Hema X membership, free food every day and exclusive member coupons
• The "What to Eat" community allows users to share cooking videos, and the platform is committed to cultivating community video experts
• Creator Center User Level System

4. Share and spread (R)

In order to guide users to spread the word spontaneously, Hema Fresh has mainly done the following things:

• Encourage consumers to recommend the APP to people around them through invitation gifts
• The 3-hour charity event encourages users to participate in charity, provides an entry point for charity activities, and provides skills training for women in difficult situations, so as to establish a good public image.

5. Increase income (R)

We have introduced in detail the methods to increase revenue in the business value analysis section, so we will not repeat them here.

Above, the author systematically analyzed the reasons behind the rise of HEMA Fresh from seven aspects, including industry, competitors, user value, commercial value, product iteration, product structure, and operations. It can be seen that no product can succeed casually. It must be the combined effect of internal and external factors such as "time, place, and people".

8. Future Outlook

Through the above analysis, we understand clearly why HEMA Fresh has been able to survive and become one of the leaders in the fresh food e-commerce industry. So where will it go in the future? Next, the author will use the SWOT model to conduct a system analysis, hoping to draw effective conclusions from it.

From the above analysis, we can see that Hema wants to continue to develop and maintain its position in the industry:

1. HEMA can seize the opportunity of the government to promote agricultural development, use intelligent data to support agricultural supply chain management, help farmers improve efficiency in various links such as planting, circulation, and sales, and reduce the supply-side cost of fresh food.

2. Although HEMA Fresh controls product quality from the source, food safety issues still occur. Therefore, in addition to controlling the source, it is also necessary to strengthen the control of food safety in the entire supply chain and the management of retail goods in stores.

3. Fresh food is always a product that takes cost-effectiveness into consideration. In the face of economic downturn and fierce industry competition, can Hema try to expand more business models to target more people?

• Open franchise stores in third- and fourth-tier cities and provide merchandise and delivery services to franchise stores to cover the third- and fourth-tier populations.
• The management of vegetable markets is chaotic and prices fluctuate arbitrarily. HEMA can empower vegetable markets, help vegetable farmers manage their stalls, and adjust vegetables and prices more timely and reasonably to maximize farmers' profits.