Analysis of Hema fresh food products!

Since its establishment in 2016, Alibaba's Hema has developed hundreds of offline stores. In these six years, HEMA has grown from a new species that is "strange or weird" to an industry benchmark for new retail. The term "box district house" even became a popular buzzword in the real estate industry.

How did Hema, which is regarded as a model of new retail, grow to where it is today? This article uses the perspective of Hema Fresh to give you an in-depth understanding of the operating logic of this company and the fresh food e-commerce industry.

This article will analyze from the following aspects:

1. Industry Analysis
2. Competitive product analysis
3. User Value Analysis
4. Business value analysis
5. Product Iteration Analysis
6. Product structure analysis
7. Operational Analysis
8. Summarize

1. Industry Analysis

Fresh product e-commerce, referred to as fresh food e-commerce, refers to the direct sale of fresh products on the Internet using e-commerce means. Common fresh products include fruits, vegetables, meat, poultry, eggs, and aquatic products.

In 2021, fresh food e-commerce platforms have flocked to the United States to go public. As the fresh food e-commerce industry is booming, new players continue to enter the market, and giants such as Alibaba, Meituan, Didi, Pinduoduo, and JD.com have all entered the market.

So, why is the fresh food battlefield in full swing? Since the fresh food e-commerce industry is deeply affected by macro factors, we will use the PEST model to explore the reasons.

1. Policy factors

In the past two years, my country has introduced a series of policies and plans that are conducive to the development of the fresh food e-commerce industry. These policies have provided a series of standardized and regularized measures on issues such as agricultural product circulation, cold chain construction, fresh food distribution, and food safety, promoting the healthy development of the industry.

In March 2020, the National Development and Reform Commission issued the "Notice on the Construction of the First Batch of National Backbone Cold Chain Logistics Bases", which will help strengthen the construction of cold chain logistics distribution centers and improve cold chain facilities and equipment such as low-temperature sorting and processing and refrigerated transportation.

In September 2020, the State Council issued the "Opinions on Leading the Accelerated Development of New Consumption with New Business Forms and Models", which affirmed the important role played by new retail that integrates online and offline during the epidemic, and proposed to further cultivate and expand various new consumption business forms and models such as fresh food home delivery, live streaming e-commerce, and supermarket retail.

In March 2021, the "National Food Safety Standard Food Cold Chain Logistics Hygiene Specifications" jointly drafted by the National Food Safety Risk Assessment Center, China Federation of Logistics and Purchasing Cold Chain Committee and other units will be officially implemented. This is the first mandatory national standard in my country's food cold chain logistics field so far. This policy will help promote healthier and more standardized development of the cold chain logistics industry.

2. Economic level

As the COVID-19 pandemic sweeps the globe, China's economy continues to recover steadily. my country's overall economic growth rate in 2020 was 2.3%, making it the only major economy in the world to achieve positive economic growth last year. As of January 2021, my country's economic growth rate had returned to pre-epidemic levels.

From 2016 to date, my country's national income has shown a steady growth trend.

In 2019, due to the impact of the epidemic, national gross income declined.

However, in 2020, with the subsidence of the epidemic and the gradual recovery of national income, the per capita disposable income of residents also increased to 32,189 yuan.

In addition, according to data from the National Bureau of Statistics, my country's basic people's livelihood expenditures also maintained steady growth, among which vegetables, meat, poultry and eggs had the highest growth rates, at 12.1%, 36.5%, 17.2% and 10.5% respectively. It can be seen that the growth of residents’ income and people’s livelihood expenditure has laid a consumption foundation for the development of fresh food e-commerce in my country.

3. Social and cultural aspects

Changes in consumer groups. The natives of mobile Internet, the post-90s generation, are about to enter their 30s, and the post-80s and post-90s generation are gradually becoming the main group of people buying groceries. The younger generation has long been accustomed to online shopping, so with the transfer of "grocery shopping rights", the number of users in the fresh food e-commerce sector will gradually accumulate.

Changes in user consumption habits. During the epidemic, consumers gradually formed the purchasing habit of "online ordering - offline instant delivery to home" due to concerns about food safety and pursuit of quality. After the epidemic gradually subsided, this habit was still retained to a certain extent.

In short, in the post-epidemic era, under the wave of the "lazy economy", a large number of users have developed the habit of purchasing fresh products online, and the frequency of use is increasing. This series of changes have increased consumers’ confidence in online fresh food, and fresh food e-commerce has also ushered in new development opportunities.

4. Technical aspects

(1) Upstream industry

Agricultural product supply: Intelligent planting technology is used to achieve intensive standardization of upstream agricultural product supply, ensuring the quality of fresh products.

(2) Midstream

Logistics and distribution: With the upgrade and advancement of SaaS software, personnel management, order management, and bill management on the distribution side have been deeply optimized. More fresh food e-commerce companies have adopted functions such as intelligent order dispatching and intelligent route recommendations.

Therefore, users' instant delivery needs are largely met.

Cold chain logistics: Increasingly mature cold chain warehousing technology and temperature control systems reduce the loss of fresh produce during transportation and storage, ensuring its freshness.

(3) Downstream industry

Big data analysis: With the development of advanced technologies such as big data analysis and artificial intelligence, the intelligent procurement system and intelligent marketing system in the fresh food supply chain are conducive to helping fresh food e-commerce companies better manage inventory, select store locations and products, carry out precision marketing, and make algorithm recommendations.

In the development of new retail, although the gross profit margin of fresh food is low, it has still become a track for major capitals to compete due to its high frequency of rigid demand, high repurchase rate and large market capacity.

Driven by many factors, the transaction volume of fresh food e-commerce has skyrocketed from RMB 24.33 billion in 2014 to RMB 203.48 billion in 2020. According to the estimation of TouBao Research Institute, by 2023, the transaction volume of the fresh food e-commerce market will exceed 670 billion yuan.

2. Competitive Product Analysis

1. Analysis of the Fresh Food E-commerce Track

At present, there are many players in the fresh food e-commerce market, and a hundred flowers are blooming. According to different business models, it can be divided into five categories, namely traditional fresh food e-commerce, O2O platform model, store-warehouse integrated model of in-store + home delivery, forward warehouse model and community group buying model. Details are as follows:

According to the installation penetration rate and active user data of fresh food e-commerce (see the figure below), the current top players in fresh food e-commerce are Hema, Duodian, JD.com, Dingdong Maicai, MissFresh, and PuPu.

Hema (Alibaba) and 7 FRESH (JD.com), which have the genes of big companies, have a lot of overlap in both their main products and target users. Therefore, this article will take the development paths and business models of HEMA and 7 FRESH as the starting point to deeply analyze the differences between the two companies.

2. Analysis of core players’ competitive products

(1) Hema

a) Development Path

On January 15, 2016, the first O2O fresh food supermarket of “Hema Fresh” opened in Jinqiao, Shanghai.

In March 2016, HEMA received an investment of US$150 million from Alibaba and officially became a member of Alibaba's new retail strategy.

In July 2017, HEMA Fresh announced that its Jinqiao store in Shanghai had achieved single-store profitability. Since then, Hema Fresh has opened more than 120 stores in two years.

In 2018, problems with Hema Fresh's crazy expansion began to emerge. In Hainan, a Hema store owned by RT-Mart suffered a loss of more than 9.7 million yuan in just three months of opening; the Hema Fresh store in Fujian Province lost 58.83 million yuan in 2018.

Starting from the beginning of 2019, Hema stopped its expansion and began to focus on small formats and refined operations. In addition to standard stores, Hema has successively developed four new business formats, including Hema Vegetable Market, Hema Mini, Hema F2, and Hema Station.

At the end of 2019, Hema abandoned the Hema Station model of the forward warehouse, and at the same time, vigorously developed Hema mini.

In November 2020, only 14 Hema mini stores were opened. Hema launched the Hema Neighborhood, a lighter model.

As of the end of 2020, Hema Fresh has opened 321 stores, covering 16 provinces and 24 cities across the country.

As a new retail giant integrating multiple business formats, Hema currently has three main formats: Hema Fresh, Hema Market, and Hema Neighborhood.

They have also built a new retail system that integrates supermarkets, restaurants, vegetable markets, and distribution logistics. Looking at the development history of Hema, Hema Fresh's development model is the most mature and has withstood the test of the market. Therefore, this article will select Hema Fresh as the main analysis object.

b) Business model

① Product source

Procurement: Direct procurement from overseas + direct procurement from domestic suppliers + establishing own product

Production: Cooperate with agricultural product bases to establish Hema Village, deeply transform the planting and production end, and improve industry efficiency by direct supply from the production area

Transportation and storage: In the logistics section, Hema has established 3 cold chain warehouses at the production sites, 6 fresh temporary storage warehouses at the sales sites, 44 normal temperature and cold chain warehouses at the sales sites, and 16 processing centers at the sales sites.

② Product categories

There are about 7,500 SKUs in standard stores and 20,000 SKUs online, of which Hema’s own brands account for 20%.

③ Number of stores

As of May 2021, Hema Fresh has approximately 220 stores nationwide.

Coverage radius: 3 kilometers around, delivery to home within 30 minutes.

④ User source

Traffic operation: Hema Fresh x Membership, giving paid members preferential rights and benefits, improving user loyalty, repurchase rate, and average order value

Multi-channel traffic: content social/store traffic/offline media/independent app

⑤ Store expansion model

All Hema stores are self-operated

⑥ Existing business formats

Hema Fresh: Eliminating some stores, slowing down the pace of store openings, and focusing on first- and second-tier cities

Hema mini: A smaller version of Hema Fresh, focusing on consumption upgrades in lower-tier markets

Hema Neighborhood: does not provide retail services, only serves as a self-pickup site. The store locations are mainly locked in the outer ring areas of the city that are not covered by Hema Fresh. The store is equipped with pickup shelves, refrigerators, seafood boxes, and 2-3 employees who are responsible for providing pickup services and attracting new customers.

(2) 7FRESH

a) Development Path

On January 4, 2018, JD.com’s first offline fresh food supermarket, 7FRESH Yizhuang store, officially opened. During the trial operation period, the average daily customer flow of a single store reached more than 10,000 people; on the first day of the trial operation, the number of registered users of the 7FRESH App increased by 3,000% compared to the first day of launch.

On October 22, 2018, JD.com’s 7FRESH Tianjin store opened. The store is equipped with self-service facial recognition payment, magic mirror traceability system, smart replenishment and other technical support.

In April 2019, 7FRESH Supermarket was fully upgraded and transformed from a fresh food supermarket to a Meal Solution Supermarket (MSSM).

On December 24, 2019, "Qifaner" settled in Galaxy SOHO, Chaoyang District, Beijing, officially opened. This is JD 7FRESH's first innovative store in the office business district. The store area is nearly 1,000 square meters and contains about 3,500 types of goods.

In 2020, 7FRESH tried community fresh food stores and opened several 7FRESH stores. The expansion speed of Qishen Life is faster than that of 7FRESH Supermarket.

b) Business model

Product sources: JD.com vertical supply, 7FRESH local supply chain, direct purchase from the origin

Product categories: 7FRESH standard stores have about 3,000 SKUs, of which fresh produce accounts for more than 75%. The hundreds of thousands of SKUs operated by JD.com have become a product pool for stores to select products with the help of big data.

Transportation and storage: 7FRESH is the first in the industry to build its own fruit and vegetable processing center, establishing an integrated model from direct procurement to sorting and processing, and then to cold chain transportation. 7FRESH adopts 'professional buyer team + fruit and vegetable processing center + automated equipment' to ensure the quality and freshness of fresh products in every link from direct procurement, acceptance, sorting and processing, refrigerated storage, to the final cold chain transportation and fresh delivery.

Number of stores: As of May 2021, 7FRESH has approximately 30 stores.

Coverage radius: Delivery within three kilometers around the store within half an hour at the fastest.

Store expansion model:

• 7FRESH self-operated stores account for 10% of self-built stores and are fully managed by 7FRESH
• Self-built franchise, accounting for 90% of self-built stores, adopting a single franchise model

OFC regional brand authorization is to authorize the brand to regional potential retailers and real estate developers, and is responsible for the entire regional store and category planning, supply chain services, data-based store operations, APP online operations, channel marketing, etc.

Existing business formats:

• 7 FRESH: Large-scale gourmet fresh food supermarket
• 7 FUN: A food and entertainment supermarket in a commercial district, with an area of ​​about 600-1,000 square meters, targeting office workers to meet their high demand for catering and fresh food
• 7 LIFE: A community fresh food supermarket with an area of ​​200-300 square meters. It is a small supermarket targeting community residents and focuses on the concept of neighborhood and intimacy.

3. Conclusion

Similarities:

Both Hema and Qishen are striving to create a new concept fresh food supermarket that integrates online and offline operations, adopting a complex commercial model of supermarket + catering. In their future development, both Hema and Qishen hope to expand their stores "lighter" and "faster", but they use different means to achieve this goal.

Differences:

Development model: Different from Hema’s self-operated model, Qishen adopted an open collaborative strategy, cooperating with traditional retailers to create the OFC model. The self-operated model does have disadvantages such as high investment costs and slow payback period.

Therefore, Qixian proposed the OFC model approach. For example, Qishen has carried out in-depth cooperation with Tangshan Wanjia Supermarket, empowering traditional retail companies through the OFC model and establishing Qishen-Wanjia Gourmet Fresh Supermarket to help them expand channels, upgrade stores, optimize products and improve store operation capabilities.

Brand: After two years of development, Qishen still has not formed its own supply barriers and product combination advantages.

Because we can understand that although Qishen has been slightly upgraded based on the original boutique supermarkets, it still has not formed a barrier with boutique supermarkets.

Therefore, by competing on this basis, Qishen will inevitably fall into the retail strategy of "fighting price wars". In contrast, Hema has been focusing on its products in the past few years.

To date, Hema already has its own brands such as Hema Daily Fresh, Hema Workshop, and Emperor Fresh. These brands cover almost all categories from fresh produce to daily necessities, and account for 20% of all products.

Supply chain: As a fresh food business, the local supply chain is an essential part. Qishen entered the fresh food market late and lost its first-mover advantage.

Therefore, Qishen only has more than 20 stores across the country, which makes it difficult to form any advantages in the local supply chain.

Since HEMA entered the market early, it has now formed a procurement model that combines global direct procurement + local direct procurement + own brands to reduce purchase costs. Some fresh products are purchased in a unified manner with Yunchao and Tmall to further improve economies of scale and commodity turnover rates.

Of course, Hema’s ability to restructure its supply chain is based on its current store and user scale. If the number of stores is too small, it would be unrealistic to have its own brand.

3. User Value Analysis

The main participants of Hema Fresh include consumers, platform parties, offline stores and suppliers. Its business logic is shown in the following figure:

Since Hema is a self-operated model, the platform and offline stores share a common interest, so we treat these two parties as a whole when conducting user value analysis. Below we conduct an in-depth analysis from the aspects of user and supplier needs, existing solutions, and the pain points of existing solutions, to explore how HEMA Fresh solves these problems.

1. Supplier

Pain points:

The imbalance in the retail-supplier relationship puts suppliers in a weak position. Due to the continuous improvement of my country's productivity, a situation of oversupply has emerged in the market, and most of my country's commodities have gradually shifted from a seller's market to a buyer's market. Therefore, in the retail-supply relationship, retail wars dominate.

Retailers use their terminal advantages to gain control over distribution channels and set up a wide range of channel fees. Therefore, suppliers are worried about product sales while also struggling to cope with various channel fees. This imbalance in the supplier-retailer relationship suppresses the survival and development of small and medium-sized suppliers, and ultimately consumers have to pay for this industry chaos.

2. Consumers

According to Analysys International, more than half of Hema Fresh’s users are aged between 24 and 35, while middle, upper-middle and high-end consumers account for 76.8% of all consumers. Therefore, Hema Fresh's main target audience is people born in the 1980s and 1990s who have a certain level of spending power, such as white-collar workers or middle-class families in first- and second-tier cities.

For the above users, we use the four principles of "more", "faster", "better" and "cheaper" in the e-commerce industry to analyze their needs:

“More”: In pursuit of convenience, white-collar workers hope to buy all fresh food and even other daily necessities at one time. Therefore, this requires a wide range of product categories.

“Fast”: Modern young people live a fast-paced life, especially in first-tier cities, where commuting to and from get off work is hard and the commute time is long. Therefore, they will pay special attention to the convenience and time required for purchasing fresh food. Specifically, the convenience of offline shopping includes factors such as the distance between the supermarket and consumers, checkout time, and parking convenience. The convenience of online shopping refers to whether fresh products can be delivered to your home instantly.

“Good”: refers to the quality of fresh products, including freshness, origin, taste, nutritional value, etc. Nowadays, users' requirements for "good" continue to upgrade. The middle class people who pursue quality of life not only have requirements for the freshness and origin of food, but also prefer to buy green and organic fresh produce.

“Provincial”: means low price. As a high-frequency and rigid demand, the sinking market is highly sensitive to the price of fresh food. However, Hema mainly targets white-collar workers in first- and second-tier cities. This group has strong purchasing power and low price sensitivity, and is more concerned about the quality and variety of goods, the convenience of purchasing, and the organic safety of fresh produce.

Other demands: In addition to the e-commerce industry's demands for "more", "faster", "better" and "cheaper", users of fresh food e-commerce also pay special attention to the shopping environment and after-sales service.

For the above requirements, the main solutions currently provided by users are as follows.

(1) Farmers’ Market

A farmers' market refers to a vegetable market where individual vendors operate and sell fresh products, and their products mainly come from nearby agricultural product wholesale markets or suburban farmland.

Advantages: Individual vendors go to nearby agricultural product wholesale markets to purchase goods every morning, while self-selling vendors directly supply goods from their own farmland. Therefore, the fresh products in the farmers' market are often fresher and more affordable.

Pain points:

Young people are generally not willing to go to the vegetable market. The reasons are as follows:

• Farmers' markets are generally open-air or greenhouse markets with poor environments and backward sanitary conditions.
• Most farmers’ markets are morning markets. Young people nowadays may even skip breakfast in order to sleep longer in the morning. So where do they find the time to buy vegetables? Even if they go to the market to buy vegetables after get off work in the evening, the vegetables are no longer fresh.
• The quality of fresh produce varies greatly, as farmers' markets are all individually run and there are no uniform standards or strict quality control. Therefore, the quality of fresh produce cannot be guaranteed.

(2) Community convenience stores

There are usually large and small community convenience stores around residential areas. These stores mainly purchase goods from the city's periphery or suburbs. Some chain community fresh food supermarkets can purchase directly from the bases.

Advantages: The advantage of community convenience stores is that they are close to home, making purchases convenient, and saving young people’s time. The prices are affordable and the focus is on serving the community, so the prices of fresh produce are reasonable.

Pain points: Due to size limitations and merchants’ fear of inventory backlogs, community convenience stores do not offer a wide variety of product categories, and product selection is mainly basic. Therefore, community convenience stores can meet the general needs of users, but users cannot purchase all items at once.

(3) Medium and large supermarkets

Refers to a medium or large supermarket in a shopping mall.

advantage:

Full range of products: The supermarkets have a wide variety of daily necessities such as vegetables, meat, aquatic products, grains, oils, and non-staple foods, which can meet users' one-stop shopping needs.

Guaranteed quality: Large and medium-sized supermarkets have unified purchasing and management standards, so the quality of fresh products is stable.

Pain points:

Large and medium-sized supermarkets are not convenient enough and not fast enough.

Reason 1: Most supermarkets are located on busy roads, a certain distance away from residential areas, and usually require driving or taking public transportation to get there.

Reason 2: Supermarkets have a lot of customer traffic, especially during holidays or after get off work on weekdays, and there are many people queuing to check out, wasting users' shopping time.

(4) Traditional fresh food e-commerce

It means that the platform ships fresh products through a central warehouse or branch warehouses, and distributes them to consumers through third-party logistics or self-built logistics.

Advantages: Rich product supply. In addition, there are often flash sales or coupon activities, so the price also has certain advantages.

Pain points:

Fresh products are easily damaged during transportation, so the platform cannot control the quality of fresh products.

The goods are delivered within 1-2 days after the user places the order. The logistics efficiency is slow and cannot meet the user's demand for immediate delivery after the order is placed.

Traditional fresh food e-commerce is limited in product variety, as most products are frozen foods, and the long transportation time limits the availability of fresh meat and vegetables.

3. Platform

How does the value created by the combined efforts of Hema APP and Hema offline stores solve the above pain points?

(1) Targeting supplier pain points

HEMA focuses on building a buyer system, that is, suppliers provide high-quality and low-priced products, HEMA reduces unnecessary channel costs, and the two parties reach a long-term cooperative relationship. For example, for fresh products, Hema does not charge any entry fees, display fees, promotion fees, or other fees that are not related to the products.

Under this model, suppliers no longer have to incur additional costs for channel fees, nor do they need to worry about the time and effort required for channel development, nor do they need to demand various forms of rebates in order to make a profit.

The buyer system is conducive to improving the upstream supply environment, returning retail relations to the essence of the retail industry, and prompting suppliers to truly improve the quality of their goods.

(2) Targeting consumer pain points

“More”: With a rich variety of SKUs, a standard Hema Fresh store is around 2,500-5,000 square meters, and the scale effect of large stores is obvious. Hema’s standard stores have about 7,000 SKUs, its online SKUs reach 20,000, and the number of SKUs of its own brands is also close to 1,000. The retail areas in the store are mainly divided into meat, seafood, fruits and vegetables, rice, flour, oil and grains, snacks, tobacco and alcohol, beverages, baking, refrigeration and freezing, prepared food, barbecue and Japanese cuisine, which can meet users' one-stop shopping needs.

"Fast": The APP helps users think. Looking at the design of the HEMA APP, you can find that it allows users to not think too much. For example, the homepage recommends hot-selling products to tell users which products are the most popular. “Daily Fresh Table” directly tells users which products are fresher, and “What to Eat” provides users with recipes and the food required in the recipe can be added to the shopping cart with one click. These designs greatly save users' shopping time and thinking time.

Instant delivery: HEMA Fresh's integrated warehouse-store storage and intelligent scheduling technology ensures delivery within 30 minutes within a 3-kilometer radius of the store, of which 10 minutes are used for picking and packing, and 20 minutes are used for delivery, meeting consumers' time requirements for timely consumption. In addition, for some areas with purchasing power but not covered by Hema Fresh's standard stores because they are located in the outer ring of the city or in the far suburbs, Hema has also opened up a new business format, Hema Neighborhood, to increase coverage.

Standardization of fresh goods: Fruits, vegetables and meat are pre-weighed and packaged, the specifications are reduced according to the trend of small families, and they are sold by portion, standardizing non-standard products. Save customers time on weighing and packing.

Electronic tags + self-service checkout = smart front desk: Currently, all standard Hema Fresh stores are covered with electronic tags. In addition to providing product information like traditional paper price tags, electronic tags also have the advantage of being able to view changed product information by scanning the code through the APP and adding it with one click. Users only need to scan the barcode of the product at the checkout counter and then scan the payment code on the mobile phone APP to complete self-service checkout, saving time in queuing for checkout.

“Good”: Strengthen the upstream construction of the supply chain to ensure the quality of fresh food from the source. For fresh products, Hema ensures quality from the source, directly purchases and supplies from the base, and transports them through the entire cold chain to reduce the consumption of fresh products during transportation. In addition, Hema has pioneered a buyer system to standardize products during procurement, such as stipulating the shape, size and weight of products, so as to encourage suppliers to produce more standardized and regular products.

The concept of "Fresh Everyday" was proposed to ensure that the ingredients on the shelves are fresh every day. Milk and vegetables from brands such as “RiRiXian” are supplied directly on the same day to ensure freshness. Secondly, Hema will conduct data analysis based on store sales, control order quantities, and destroy unsold fresh produce to ensure freshness every day.

Establishing private brands meets consumers' demands for taste, origin, organicity and health of fresh products.

The construction of Hema Fresh's own brand is divided into three dimensions. The first level, brands such as Hema Blue Label, Hema Workshop, and Hema Daily Fresh focus on three meals a day for ordinary families and meet the daily life needs of the public; the second level, mainly Emperor Fresh and Hema Gold Label, meets the needs of people who pursue high-quality life, focusing on imported and organic food; the third level, Hema Black Label, meets consumers' demand for globally scarce commodities.

(3) Other requirements

Shopping environment: The shopping environment of Hema Fresh is relatively high-end. Unlike ordinary supermarkets or vegetable markets which are dirty, smelly, and clean, the fresh food sales area of ​​Hema stores is not only clean and bright, but also has very good sanitary conditions. In addition, Hema Fresh stores are equipped with convenient facilities such as air conditioning, refrigerated cabinets, shopping carts, and dirty water and dirt will be cleaned up in a timely manner, which is difficult to accomplish in farmers' markets.

After-sales service: Hema’s after-sales service is relatively guaranteed.

Refund: If the purchased goods of Hema APP users do not meet their expectations, they can apply for a refund. The refund process is very convenient and the refund is made in almost seconds.

Complaints: When users of the Hema APP encounter after-sales problems with their products, such as delivery timeouts, insufficient delivery, or missed delivery, they can contact Hema Xiaomi for consultation or complaints, or use the APP's "Refund/After-sales" and other functions to protect their rights.

4. Commercial Value Analysis

GMV is the core indicator used to measure the commercial value of e-commerce platforms. The commonly used formula is GMV=number of users*conversion rate*average order value.

Next, this article will break down these three GMV indexes in detail and analyze how Hema Fresh users increase the number of users, conversion rate and average order value.

To avoid confusion in analysis, in this section, we define the number of users as the number of registered users of the APP. Conversion rate is defined as the process of completing the first consumption after the APP user registers. Average order value refers to the process in which users who complete their first consumption pay again.

1. Increase the number of users

(1) Apps cooperate with each other to attract traffic

a) Taobao’s “Taoxianda” strongly attracts traffic to Hema

Taobao app has about 800 million users, and its homepage is the golden entrance for traffic. It has been observed that a Taoxianda entrance has been set up in the top recommendation column of the Taobao homepage, and users can directly place orders on Taobao to purchase Hema Fresh's products. During this process, Taobao used its platform advantages to bring traffic to Hema Fresh.

Users can click and enter the Taoxianda page. At this time, if the user's default delivery address is within the coverage area of ​​a Hema Fresh store, Taoxianda will guide the user to shop at Hema Fresh first.

b) Strong cooperation with Ele.me

On September 12, HEMA Fresh and Ele.me announced that they had achieved strategic integration, involving more than 150 stores in 21 cities across the country. Users can also enjoy the delicious life of "Box District Room" through Ele.me. Nearly 10,000 high-quality products such as crabs, lobsters, fresh foods, etc. from all over the world are delivered to their door within 30 minutes.

Online fission and new customer acquisition activities: Hema launched an invitation-gift activity, where old users can get a 30 yuan bonus by inviting old users to register and place an order.

How to play: Place the activity entrance in a prominent position in the personal center of the app, and attach a 30 yuan icon. The main purpose is to use bonuses to attract old users and bring in new ones.

In addition, old users can receive bonuses for the first three orders placed by new users on the platform. Therefore, after becoming familiar with this rule, new users may invite more users to register and place orders, and this process will produce a user fission effect.

Offline stores drive online traffic: Hema is a self-operated store model, so consumers can directly enter the store to experience it. This not only solves the skepticism that online consumers have about product quality and services during the purchasing process, but also leads consumers step by step to online stores through the experience and interaction provided by stores. At this time, Hema stores have also become an important traffic converter.

Offline marketing: Offline marketing refers to the promotion within the distribution radius around the HEMA Fresh physical store, using a touring promotion method to attract new customers in surrounding communities and office buildings. The platform cooperates with offline promotion activities, and new registered users can enjoy products that are several times higher than the paid amount by paying 1 yuan on the spot.

2. Conversion rate

In e-commerce products, the first order conversion is extremely important after the user completes the registration process. The first order conversion determines whether the user can eventually become a loyal user of the product. Hema has multiple designs for first-order conversion.

(1) Home page conversion rate

Home page banner: For new users, HEMA has set up new user benefits. After entering the app homepage, what catches your eye is the large banner at the top of the page - Exclusive benefits for new friends. Red has a strong sense of marketing and atmosphere. The conspicuous color and large font size can attract users to click and learn about the event.

When users click on the activity picture on the homepage, they can see a series of discounts for new members.

a) Special Offers

For new users, Hema not only offers a promotion of purchasing any item for 3.9 yuan, but also gives new users a lower promotional price. This benefit is mainly aimed at users who have unclear goals and are price sensitive, and promotes conversion through price incentives for the first order.

b) Eye-catching label

Put a label of 3.9 yuan for the first item above the normal price of the product to highlight the discount of the product and speed up the conversion of the first order.

c) New Member Exclusive Coupon

For users with stronger target orientation, the conversion is mainly through new user coupons or new user vouchers. Hema will issue various types of coupons and users can choose according to their needs.

Home page - Chaohesuan: The home page usually contains entrances to various activities. Hema has set up four fixed activity entrances on its homepage, one of which is "Super Box Savings". This design is similar to the limited-time flash sales commonly seen on e-commerce platforms.

a) Limited time sale

The [Limited Time Flash Sale] section of Chaohesuan has a countdown to give users a sense of urgency and encourage them to place orders quickly. In addition, in addition to adding a "special price" label to special-priced items, the original price will be crossed out and the discounted price will be marked, allowing users to intuitively feel the benefits of the price reduction.

b) Good product recommendations

The products in Chaohesuan's [Good Product Recommendations] are marked with different discount labels, for example, "buy one get one free", "select two for 19.9 yuan", "order and get coupons", etc. These designs give users a feeling of getting a good deal, which helps stimulate users to place orders.

Product recommendation: When recommending products, take advantage of the user's herd mentality to encourage users to place orders.

Label 1: Tells users that 14,000 people have placed orders.

Label 2: Hema will compile a best-selling list based on the sales volume in the past 7 days, and the best-selling products will be labeled with the ranking list when they are displayed.

(2) Product details page conversion rate

On the product details page, in addition to basic product images, product content introductions and product price information, Hema also adds some other designs to improve the page conversion rate.

Build user trust: Put the words "quality guaranteed" and "support 7-day unconditional return" on the product details page. These designs can enhance users' sense of security. When users trust the products on the platform, the chances of placing an order increase.

The two sections of experience and evaluation are also helpful in dispelling users' doubts about the products and further helping users understand the real product information, thereby establishing initial trust. When there are a lot of good reviews or comments, users will also place an order with the idea that "if everyone says it's good, it must be good."

a) Highlight price advantage

Promotional activities: discounts and promotions are used to reflect price advantages. Compared with the original price, the sharp price difference is very attractive. Give users the illusion that they will lose money if they don’t buy.

b) Create a tense atmosphere

Some products will have a label indicating that the stock is tight. When users see the words "stock is tight", they will be stimulated to settle the payment quickly, thereby increasing the conversion rate of the product. Because tight inventory will give users a hint that the product is in great demand and will be sold out if they don’t place an order now.

(3) Conversion of the [What to Eat] page

For users with unclear goals, such as users who don’t know what to eat. The what to eat page of the HEMA Fresh app solves this problem very well. This page will display cooking videos or recipes to help users think about what to eat today.

A "Products in the Article" section will also appear below the video, so users can add related products directly to their shopping cart without having to search for them themselves. This can simplify the user's search path and improve conversion rate.

3. Average order value

The average order value mainly considers two factors: the single consumption amount and the consumption frequency of a single user. Next, the article will analyze the product design in the HEMA APP that increases the average order value.

(1) Shopping cart page

One of the important functions of the online shopping cart page is to allow users to clearly see and understand the various promotional information and rules after selecting products but before checking out. By allowing users to participate in various promotional activities, the platform's conversion rate and average order value can be increased.

Promotion: adding items to a purchase and exchanging items, the main purpose of which is to increase the average order value.

The picture below shows the group buying activity on the shopping cart page of the Hema app, for example, 20% off for purchases of 2 or more items. When the amount or number of items purchased by the user is somewhat different from these promotions, the page will give a prompt and set up a corresponding area for adding items to the purchase. Users can add some items that are not included in the shopping cart through the special area for adding items to the shopping cart. This design can guide users to consume and at the same time help stimulate users to increase their purchases to increase their average order value.

The same principle applies to exchanges. The page shows that if you spend over 69 yuan, you can enjoy a great value exchange. This design is conducive to increasing the user's single consumption amount.

Find similar: When the stock of a product added to the shopping cart is insufficient, the product image will be marked as out of stock.

At the same time, the page provides a similarity search function to help users find other products that are highly similar to the product, thereby reducing customer churn.

(2) Product details page - recommended pairings

On the product details page, we will recommend products that can be used together. This can increase the user's purchase amount and thus increase the average order value of the transaction.

(3) Hema X Membership

As the traffic dividend has bottomed out, it has become increasingly difficult for e-commerce to acquire customers, and Hema has also begun to establish its own membership system. There are entrances to Hema x members on the homepage, shopping cart page and my page of Hema Fresh app. These designs are reminding you in the most eye-catching way that X members are coming.

a) Consumption frequency

Among the rights and interests of Hema x members, "there are member days every week" and "there are 18% off for members exclusive" are conducive to increasing user consumption frequency. In addition, Hema's coupons are set to use dates and are valid within one week after receiving them, further increasing the frequency of users' consumption.

b) Single consumption

Free food and special coupons can only be used after spending enough to make a specified amount. For example, members can receive free dishes if they spend more than 99 yuan, and only if they spend more than 49 yuan, they can be used if they spend more than 10 yuan coupons. These settings take advantage of the user's "fleece" mind and help increase the user's single consumption amount.

It can be seen that Hema hopes to screen out a group of high-net-worth customers by setting a payment threshold. Provide better services around this group of customers, increase the frequency and consumption amount of customers, thereby increasing the overall average customer price and sales.

(4) Hema Town

How to play: Users use the Hema app (search, browse, share, place orders, etc.) to obtain box flowers. When the box flowers accumulate to a certain amount, users can use them to exchange for products and get coupons. This is similar to the points system of traditional supermarkets, where major users retain and repurchase.

a) Increase the repurchase rate

By observing the interface of the box flower, we can see that browsing products in fifteen seconds and completing any consumption, you can get box flower ranging from 500-1500. Obviously, Hema app hopes to use the app to place orders by guiding users to do consumer tasks.

This activity not only increases the frequency of users' usage and increases the user's stay time. Every time the user opens the app to do tasks, it is possible to browse more products, thereby increasing the user's chance of placing an order.

b) Increase the amount of single consumption

Among many tasks, you can get 6,600 boxes of flowers after paying 108 per transaction! This amount is almost 12 times that of the browsing products. Such a high value of box flowers actually stimulates the consumption of a single user. For example, when the user spends 103 yuan, he may think, "It's better to add 5 yuan, so that you can buy things and add 6,600 yuan in box flowers."

c) Consumption upgrade

After the user has saved up a certain amount of box spending, the box can be purchased with Hema and added money. Hema has limited products for purchasing money. Some big brands and high-quality fresh foods account for a very high proportion, such as Meixin mooncakes, Vietnamese tiger shrimps, and fresh Wuchang fish. Although these fresh products are of good quality, their unit price is not low and consumers may not buy them normally.

Therefore, after having coupons, users can be guided to enjoy high-quality fresh food at a low price, which will drive consumption upgrades and increase users' future consumption amounts.

(5) Old user invitation is gifted

After inviting new users to place an order, old users can get coupons. After receiving the coupon, old users may use the Hema APP again under the promotion and purchase behavior. This increases the consumption frequency of individual users and thus increases the average customer price.

5. Product Iteration Analysis

Next, let’s take a deeper understanding of the version iteration history of Hema Fresh APP and analyze the logic behind these iterations. The following is the core iteration record of Hema Fresh APP from launching to V5.23.0:

According to the curve distribution of Hema's cumulative download volume of Kuchuan data, it can be seen that Hema's download curve can be roughly divided into three stages: product cold start (2016.8-2017.4), product growth period (2017.4-2019.10) product and maturity period (2019.10-2021.8)

Looking at the version update of the cold start stage of Hema app, you can find the following features:

1. Stage 1: Cold start

Cold start is the process of accumulating the first batch of seed users. Products will be launched at this stage, seeking seed users to quickly verify whether user needs exist.

(1) Optimized and improved basic functions

• With one click on the Taobao account, users do not need to go through the complicated registration process or enter their login account.
• Enhance product search function, support associative word search, synonym search and other functions.
• Alipay is free to pay for passwords, and purchases in stores with one click, simplifying the user payment process.
• A new evaluation function has been added, so users can evaluate products and riders.
• Added a message box to let users miss any message.

In the cold start stage, the product is still in the polishing stage. The Hema app mainly optimizes the most basic functions of login, search, payment, evaluation, etc., covering the basic needs of users before, during and after-sales. These functions optimize the basic experience of the user app and make the user's ordering process smoother.

(2) Discounts and promotions are frequent and diverse

• Added marketing functions on the homepage: full discount, coupons, etc.
• Added discounted group buying activities, and you can buy group buying at a low price with friends.
• A new friend invitation function has been added, and both parties have product coupons for successful invitation.

Improve users' shopping willingness through subsidies and complete the first order conversion. At this time, marketing functions such as "full discounts, coupons" have also been launched. Secondly, Hema has also added new activities such as inviting friends and group buying of friends, which means using old users to perform fission transformation and attracting new users while promoting repurchase of old users.

(3) Continue to drain online offline

• Upgrade and scan and add offline activities to scan the code to get red envelopes
• Payment function increases in-store scenes
• The store supports the QR code function. How to eat it, just scan it and know it.
• Scan the product QR code in the store and support viewing product details on the app to reduce the trouble of customers not understanding the foreign instruction manual.

It can be seen that Hema has been improving functions related to offline stores. Hema Fresh’s stores can be said to be a powerful tool to attract traffic. Hema acquires customers through offline stores’ traffic, establishes a trust foundation with users, and allows users to recognize Hema’s products, and then upgrades the app function to deposit users online.

(4) Establish a user's trust foundation

Added evaluation function, users can evaluate products and riders

Problem feedback supports uploading pictures, helping Hema understand users better

New service instructions are added, and the questions about Hema Fresh are clear at a glance.

At this stage, users do not understand the product yet, and the product is also in the process of exploring it. Therefore, Hema has optimized some user pre-sales consultation and after-sales evaluation, feedback and other functions, which helps companies understand questions such as "What is the user experience of the product?" and "What need to be improved?", which helps continuously improve and improve the product experience to gain recognition from more users.

2. Stage 2: Growth phase

One of the signs of Hema's growth stage is that its app download volume begins to show strong growth, which shows that the product has gained recognition from seed users.

Therefore, at this time, the main direction of Hema app is to quickly increase product traffic (sales) and brand awareness through marketing methods, and consider how to convert or monetize after obtaining traffic.

(1) Continue to use hot seafood to attract traffic

• Home Events - Special Sale of Emperor
• Hema Yangcheng Lake hairy crabs are on the market nationwide, with the main focus on direct source
• Home Events - Special Offer Quality Crayfish

During the growth stage, Hema took a core category (fresh ingredients - seafood) as the entry point, focusing on the market, and providing more affordable prices under the same quality. Through offline promotion + app marketing, several popular seafood products have been created. It can be seen that Hema hopes to obtain more traffic and orders by creating hot products.

(2) Improve the work of attracting new products before and after sales, promoting vitality and retention, and further improving GMV indicators

Pre-sales-News:

• The invitation mechanism is upgraded and friends are popular.
• New gifts are added, newcomers can get a coupon of 50 yuan, and newcomers are priced for multiple products.

Pre-sales-function optimization:

• New "playing big names" and "chasing foreign goods" on the homepage, "super box calculation" are added, and there are special deals every day.
• Added a multi-spec product switching function to check the specified specifications and promotional activities.
• Some new APPs have been added to scan some products to trace the source.
• Product details page, video is online, watch and buy.
• Added [Pre-sales customer service] shopping guide. You can ask Xiaobo what to eat first.

On sale:

The shopping cart has been added [My Frequent Buy], and you can buy good goods with one click to add them.

After-sales service:

Hema Little Knight is online, and the rider's position can be tracked in the order details.

First of all, Hema app Hema has further increased the intensity and form of discount activities, upgraded and improved the invitation mechanism, and upgraded the gift package for newcomers, which will help increase the number of registered users and the conversion rate of newcomers for first orders.

Secondly, Hema has refined the product details pages and shopping cart pages. Before the sale, the homepage added special products to attract consumers' attention. Scan the APP to traceability certification to enhance users' sense of trust. The details page adds promotional activities and video teaching to stimulate users' desire to place orders. If you don't know what to eat, just ask Xiaoke customer service. On sale, the shopping cart adds the usual purchases with one click to optimize the shopping process. After-sales service, track the rider's position and reduce the anxiety of users' waiting.

3. Stage 3: Maturity

In addition to the breakthrough growth in download volume during the epidemic, the download volume of Hema app has stabilized most of the other times. Because, at this stage, there are many entrants in fresh food e-commerce, the market tends to be saturated, and users tend to be stable.

(1) Make good use of user growth incentive system, Hema Town

In Hema Town:

• Hema Town added homepage
• New gameplay online [Hema Town]

In the maturity stage, since the market has been saturated, the task of promoting vitality is the first to be affected. Hema launched the Hema Town function, which is essentially similar to the points and prize redemption system of traditional supermarkets, and in form it is similar to Alibaba's Ant Forest.

The purpose is to promote retention, interesting marketing, and conversion and monetization. For example, the "check-in" function in Hema Town can increase the frequency of users opening the APP, and the "task" function can increase the user's stay time in the app and increase the chance of placing an order. Since Hema Town was launched, it has been continuously upgraded, which shows how much Hema attaches importance to it.

(2) Content and social operations

• Video release adds AI shooting and product recognition function, intelligent recommendation filter stickers
• 【Really fragrant video】, watch the video to get the reward for buying groceries

Box District Life: Community group buying link is online

High-quality content operations can strengthen user retention. Hema in the growth stage has shifted its focus from preferential promotions to building Hema community. It can be seen that Hema hopes to use the power of community users to attract new users and retain old users at a low cost.

For example, start trying the consumer purchasing scenario of "community group buying". In addition, Hema has also tried to establish its own online community, such as constantly optimizing the functions of video publishers (video teaching, AI shooting and product stickers, smart filter stickers) to help users in the community create better content.

(3) Focus on optimizing in-sales and after-sales logistics

• Added a matching recommendation. When selecting products and adding shopping carts in the category, the app will help you get it
• "My Order" added [You may also like it]
• After placing an order, it supports modifying the delivery time and delivery place
• Added "contactless delivery service
• Logistics and distribution dynamics of orders can be checked in real time directly on the homepage
• Added orders to self-pick up

Hema's maturity is in the epidemic. Due to strict epidemic prevention measures and fear of the new coronavirus, online shopping for groceries can almost be said to have become a necessity. Therefore, customers' focus in this special period is on delivery and after-sales service after buying vegetables.

At this time, the focus of Hema app has changed slightly, mainly upgrading the functions of in-sales and after-sales. For example, it supports modifying the time and address after placing an order; add contactless delivery to reduce direct contact between deliverymen and customers; add self-pickup function to solve the inability to purchase due to tight transportation capacity during the epidemic.

(4) Improve the membership system

• 【X Member Exclusive】Hema X Members Added Logistics Rights
• Hema X member rights revision, new coupons added

Hema continuously improves user rights and interests during the maturity period, thereby improving user stickiness and repurchase rate. The homepage, product details page, and my page of Hema app all have x members entrances.

Throughout the entire maturity period, it can be seen that the focus of Hema's consideration at this stage is "how apps should activate old users and maintain stable growth of new users to the best of their ability" and "how to enhance user value"

6. Product structure analysis

1. Product structure diagram

After analyzing the iteration steps of product functions, we can study the distribution of these functions in the APP and their corresponding requirements. The following picture is the product structure brain diagram of Hema Fresh V5.23.0:

2. Scenario requirements chart

In order to facilitate analysis of the correspondence between functions and user needs, we can sort out the following table according to users, scenarios, requirements, and functions:

3. Overall analysis

Hema Fresh’s target users are consumers. We divide the entire shopping process of consumers from entering the Hema app, browsing, placing orders, paying and receiving goods into three scenarios: before placing an order, when placing an order, after placing an order.

Scenario 1:

Before placing an order: At this time, according to the user's behavior path, they can be divided into two types: users with clear goals and users with unclear goals.

a) Users with clear goals

They have the intention to buy, so they want to find the target item quickly and place an order. For this type of users, the Hema app search box provides functions such as associative word search, synonym search, history, common labels, etc.

On the search page, you can display the product information such as the price, number of grams, brand, whether there are coupons, whether it is delivered today, and you can directly add it to the shopping cart. The entire process does not require opening the product details page, and the shopping process is convenient.

In addition, the shopping cart page provides the [I often buy] service, which shows that users purchase products with high frequency and can add them to the shopping cart with one click. This function is very practical for old users with clear goals.

b) Users with unclear goals

Generally, the main thing is to wander around and browse. At this time, the task of the app is to attract users to place orders and increase conversion rates.

Recommend dishes to users to give users a desire to buy. Hema live broadcast, seasonal calendar, today's food section, homepage product recommendations, and what to eat are recommended for users to market dishes.

Stimulate users' consumption through daily discount activities, such as lowering the carousel picture on the search box on the homepage, and scrolling to play Hema's main special offers and promotions to facilitate users to understand and purchase. In addition, the homepage's [Super Commodity] and [Big Brand] columns also provide limited-time special offers and selected discounts to attract customers to place orders.

Scenario 2:

When placing an order: When placing an order, it refers to the process in which the user adds the product to the shopping cart and the final payment is completed. At this time, according to the user's usage process, it can be divided into shopping cart pages and order confirmation pages.

The shopping cart page is to realize the basic operations of users to add, delete, and modify products, as well as to use the function of finding similar products when the products selected by users are removed from the shelves.

Confirm the order page. Users can not only change the basic information such as address and consignee information, time, choice of delivery or self-pickup, but also choose to change the information such as invoice issuance, order notes, and contactless delivery.

Scenario 3: After placing an order: After placing an order, users will have order-related needs. For example, before receiving the goods, they may think about checking the order situation, changing the order information, or canceling the order.

After receiving the goods, you may want to return the goods, refund the goods, or even need to contact customer service to provide feedback. For these needs, Hema provides an order details page to modify the delivery time, consignee and other information. In addition, this interface also allows you to choose to cancel the order or continue to pay. For products that have been paid, you can also apply for a refund to meet the needs of users who buy the wrong product or suddenly don’t want to buy it.

7. Operational Path Analysis

In Internet companies, products and operations often require close cooperative relationships. When a product has launched a certain function, operations often need to help users establish an understanding of the function of this product. For example, by writing introduction copy or doing activities to promote this function, it will quickly improve the GMV and other related indicators of this function in the short term.

On the other hand, if the operation wants to promote some planning activities within the app, it often requires products to help arrange and coordinate development resources. The following article will use the AARRR model to sort out Hema's main operating activities. (Note: The commercial value of the fourth part has analyzed the new recruitment, promotion and retention activities within the app, such as the newcomer's tribute and Hema Town. These activities will not be discussed one by one in this chapter.)

AARRR is a set of data analysis logic frameworks, including five stages: Acquisition, improving user activity, improving retention, acquiring revenue, and auto-propagation. These five links correspond to different stages of the customer's life cycle, helping us better understand the principles of acquiring and maintaining customers.

1. Acquisition

(1) Directly face the ground promotion activities of the community and office buildings

Directly promote office buildings and communities within a radius of three kilometers, so as to attract surrounding residents to download the Hema app and become Hema users. Marketing forms include downloading small gifts, downloading lottery, downloading coupons, etc. In addition, it is supplemented by single pages, banners, posters and other methods for promotion.

(2) Group fission

In Hema shopping activities, users can invite family, colleagues, and friends to purchase together, so as to buy orders, freight fees, etc. This form is similar to community group buying, where two to three people can form a group. It is still based on the gameplay of "old leads to new things", which is essentially a new activity: old users invite new users to participate in group buying and enjoy the discount for purchasing products at low prices.

(3) Brand linkage to create new IP

In January 2019, the Internet celebrity "Liuxin Cream Yellow Eight Treasure Rice" jointly launched by Hema and Shanghai time-honored brand Guangming.

In March 2020, the joint-branded Youth Group of Hema and Heytea was launched and sold out after one hour of launch. This is a milestone product, which allows Hema to see the joint reconstruction between strong brands and the unlimited imagination space for both parties and even the entire industry.

On May 28, 2020, two zongzi "Naixue Baijie Treasure Zong" and "Naixue Cocoa Treasure Zong" jointly launched by Hema and popular brand Naixue officially launched pre-sale on the Hema platform.

These projects initiated by Hema are not only strongly engaged in marketing with partners in brand and mutually supporting and sharing in traffic. More importantly, both parties should jointly design and produce unique and unique original products only available on Hema based on user needs and consumption trends, so as to magnify the user circle and enhance brand value.

2. Improve user activity (Activation)

(1) Offline activities

Parent-child experience education activities:

Hema Fresh has launched exclusive activities for members, which are both parent-child experience education activities, which is an important way for Hema community to maintain and retain users.

Invite children into the kitchen during the event and help children make food and shop around Hema. This is conducive to cultivating the next generation of users who attach importance to Hema. It is also conducive to retaining middle-class people with children at home, because this type of people is the core purchasing group of high-end shopping malls and supermarkets

Offline pop-up store:

Hema joins different brands to create offline pop-up stores activities, such as Hema x Dangdang, Hema x Wuling pop-up stores. The most popular one is the offline pop-up store "Not-Free Zhishi Supermarket" created by Dingxiang Doctor and Hema Fresh. "Zhishi Supermarket Nothing" focuses on the "food" scenario, and through the three-dimensional presentation of offline interaction, it enhances interaction with fans and guides a new generation of healthy lifestyle.

Offline Expo:

Hema held an offline food expo to achieve online and offline linkage. For example, as the preheating event of the "14th China Time-honored Brand Expo", Hema's "Haipai National Tide" special session was launched on the APP. Users who cannot participate in offline fairs can buy the most authentic and original Shanghai time-honored delicacies on the APP.

(2) Online activities

a) WeChat "box fan group" operates to activate the community atmosphere

Regular community content push: Buy every Wednesday membership day, and launch a large number of exclusive membership services on membership day, striving to build your own moat, and also to better serve Hema members. Every day, coupons are purchased at 11.00 in the morning. The editor of the community issues a coupon grabbing password. Community users enter the coupon grabbing password on the Hema app to receive a shopping coupon for a certain product. It is first come first served, until it is snatched. This can strengthen interaction with users within the group and maintain the active atmosphere of the community.

Daily community greetings: Daily morning and evening greetings, such as today's date, weather, interesting jokes, to liven up the community atmosphere.

b) New media operations to bring users closer

Hema's Weibo has been online and remains very active. WeChat also maintains a daily pace. These new media platforms will release new activities, recommend new products, answer user questions, report various Hema's recent situation and news, and combine it with a heartwarming copywriting style, which also makes Hema seem to be able to stand with consumers across the country. By pushing messages to users, increase user participation and increase brand awareness.

3. Improve retention rate

WeChat "Box Fan Group" operates, answers questions and solves problems on a daily basis, and increases customer trust. The community editor actually acts as after-sales customer service. Whether it is the customer's experience when shopping, the service or the quality and price of the product, the community editor will respond quickly and effectively.

These measures are conducive to increasing customers' sense of trust in Hema and improving user retention.

4. Revenue

This part has been explained in detail in the fourth part of the article, the analysis of business value, so it will not be repeated.

5. Self-propagation (Refer)

In January 2020, when the epidemic in Wuhan was severe, Hema Wuhan established a special team to provide rescue supplies to many medical units such as the Red Cross Hospital and Wuhan Sixth Hospital in Wuhan.

In July 2121, facing the disaster in Henan a few days ago, Alibaba MMC business group stated that all more than 1,000 materials in the Henan warehouse of its Hema Market will be given priority for disaster relief.

In August 2121, in response to the Nanjing area affected by the epidemic, Jiangsu Warehouse, a subsidiary of Alibaba Community E-commerce (MMC) business group, has urgently raised the first batch of 100,000 anti-epidemic health products.

In August 2021, "Hema" helped the northwest Minqin County sand onions to sell to the whole country, helping to solve the dilemma of unsalable agricultural products.

Hema has always helped public welfare and improved social responsibility. In addition to the above-mentioned charity activities, Hema also proposed sharing employee activities. Hema proposed the idea of ​​"seconding" of stand-off employees to temporarily closed catering companies. This is an innovative move to actively save the epidemic, which has also caused considerable discussion in society.

These public welfare behaviors of Hema can help companies increase their visibility, promote brand value, and improve public relations, so as to facilitate spontaneous communication among the public.

8. Conclusion

Hema's model and experience have also been learned from many companies. Since its opening in 2016, Hema has taken detours and achieved achievements. Next, this article will conduct a SWOT analysis of Hema based on the above articles.

1. Advantages

As a leading player in the fresh food e-commerce field, Hema has demonstrated strong advantages in the supply chain.

my country's agricultural industry has problems such as decentralized planting, lack of standards, long circulation chain, and unclear sales channels. After 6 years of development, Hema has established a good fresh food supply chain system.

In the product supply process, the main focus is on the product, and the product adopts a combination of direct procurement from the origin, global direct procurement and base direct procurement. With the growth of Hema's sales scale and the accumulation of supply chain resources, Hema's bargaining power and cost control have been greatly improved.

Hema's business model is difficult to imitate by competitors.

This is mainly due to two aspects:

The fresh food industry itself also has high entry barriers. Due to the easy loss of fresh food products, fresh food e-commerce needs to have strong supply chain capabilities and logistics capabilities. However, for most companies, it is difficult to complete the construction of both supply chain and logistics system in a short time. Hema entered the fresh food track early and had the advantage of first-mover attacking, so the high barriers in the fresh food industry have established an industry 'moat' for Hema to a certain extent.

Hema’s self-built fresh food supply chain is closely related to the business scenario and is difficult to imitate. In Hema's entire supply chain process, from warehouse design to cold chain processing center, the entire system is built based on Hema's business scenarios. After establishing this supply chain system, all costs can be controlled in Hema's hands. Perhaps technical barriers may be replicated, but this complete set of industrial collaboration mechanisms cannot be replicated.

a) Super operational and brand power

From the third section (user value analysis) and the seventh section (operation path analysis) of the article, we can see that Hema has strong brand building capabilities and has been building Hema cross-border IP. For example, Hema and Heytea make green rice dumplings, making this traditional Jiangnan seasonal snack taste like Ahuatian. In conjunction with the traditional Shanghai brand "Aunt Yan" to launch "Aunt Yan Eight Treasure Rice", bringing this Shanghai brand to more than 100 cities across the country.

The above examples show Hema's excellent brand innovation and operational capabilities. Hema first introduces the best catering and food merchants to jointly prepare or develop flavors.

Then, the excellent catering capabilities are transformed into batch and circulating commodity power.

Ultimately, combined with Hema's operating power (store + APP), high-quality fresh food will be circulated to the terminal customer base. In this process, Hema has accumulated Hema's brand power, allowing other suppliers and catering partners to share the lasting sales power of its brand power.

b) Expand the coverage of people in multiple business formats

Hema adopts different business models for different scenarios, expands coverage in breadth, improves service efficiency from depth, and strives to seize market share in the fiercely competitive fresh food e-commerce.

In 2021, after Hema X membership store, Hema Station and Hema MINI, Hema recently launched another new business model - Hema Neighborhood. Hema Neighborhood has undertaken the task of "meeting the needs of the sinking market."

2. Disadvantages

a) The pressure on cost of huge infrastructure and expansion

The potential problem with the Hema model is that it is heavy on assets, heavy on models, and difficult to expand. In the above article, we mentioned that Hema’s store operates and its supply chain is built. The problem with these models is that they are too expensive.

In the Hema model, the core business district location selection + high decoration investment + a large store model of several thousand square meters has caused Hema's high fixed cost investment, which has led to certain disadvantages in the cost side of the Hema model compared with the forward warehouse and community group buying model.

In addition to store costs, Hema's logistics costs are also not low. The picking costs, distribution costs and personnel management costs in the fresh food distribution process do not decrease with the increase in scale. On the contrary, the cost may not decrease but increase due to excessive overload in order scale. The delivery cost of Hema's door-to-door delivery in the same city is very high, and the larger the scale, the more the order fulfillment cost will increase.

b) High prices lead to limited user coverage

Hema has been positioned as a mid-to-high-end customer base since its inception, so the price is slightly more expensive than that of ordinary supermarkets. Hema has already formed a brand advantage in terms of "many", "fast" and "good", but it is not convincing in terms of "savvy". For example, Hema fresh vegetables are pre-packaged.

The prices of pre-packaged dishes or clean vegetables are often higher than those sold in the vegetable market, so for users in third- and fourth-tier cities with more spare time, they are often more willing to go to cheaper vegetable markets. Therefore, due to the limitations of positioning and price, Hema has been working in first- and second-tier cities.

c) Limitations of drainage methods

Hema's usual drainage method is to create popular seafood products. However, high-end products have always been low-frequency consumption. Although short-term sales can be increased through instant centralized promotion, there is no way to increase the consumption frequency of high-end products. Therefore, this drainage method is not long-lasting.

d) The loss of fresh food cannot be reduced

The original intention of establishing Hema Fresh Store is to reduce the loss of fresh food in the store by introducing catering formats. However, although fresh food retail and catering are different business formats, there is uncertainty of "creating losses" in the process of fulfilling the contract. Since both of them are business models that will cause losses, the superposition of the two will not only make it difficult to reduce losses, but will instead restrain each other.

3. Challenge

a) The fresh food track is crowded and there are many players

Capitals such as JD.com, Suning, Didi, and Meituan are accelerating their entry. Suning Vegetable Market Community Group Purchase Platform is launched in Beijing; JD not only launched the acquisition of Meijia Maicai, a sub-brand of the fresh food e-commerce platform Meicai.com, but also launched fresh food supermarkets such as Qixian and Qifaner.

In addition, fresh food stocks such as Dingdong Maicai and MissFresh, which have forward warehouse-to-home model, have been listed one after another, and the traditional supermarket giant Yonghui Supermarket has entered the online retail market. These companies have had a certain impact on Hema's business, and the fresh food market is a must-fight for capital.

b) There are challenges in multi-adult development

When Hema was first established, it was positioned as a high-end customer base. Later, for the sake of a larger user base, Hema gradually adjusted its strategy and gradually implemented a market sinking strategy. Hema has successively tried four derivative brands: Hema F2, Hema Vegetable Market, Hema mini and Hema Xiaozhan to meet the needs of different groups of people in different models. Hema will focus on launching Hema Neighborhood in 2021, which shows that Hema has been exploring small business models that suit it. However, the operation difficulty of small business formats is somewhat greater than that of large stores. Whether these models can really retain users still needs to be questioned.

c) Sequelae of market expansion

Hema has been running rapidly since its birth, and the store opening speed this year has increased by 30% year-on-year in order to expand its scale to cultivate the market. Market size is particularly important for the retail industry, because if the number of stores is not large enough, the supply chain integration capability will inevitably be subject to various constraints, and the cost will naturally not be as good as other leading supermarkets, such as Yonghui Supermarket, and customer group expansion will also encounter bottlenecks.

However, rapid expansion will also bring about a series of problems, such as declining store service quality, lax quality control management, and declining store operation efficiency. How to grasp the degree of market expansion is also a major challenge for Hema.

4. Opportunities

a) E-commerce policies are introduced to help the industry develop in a standardized manner

In recent years, my country has continuously introduced support policies for e-commerce.

For example, in 2018, the Ministry of Commerce issued the "Guiding Opinions of the Ministry of Commerce on Accelerating the Construction of Urban and Rural Convenience Consumption Service Centers", proposing to improve existing community consumption service centers such as supermarkets, convenience stores, and vegetable markets, and encourage urban and rural convenience consumption service centers to cooperate with large e-commerce companies, integrate online information resources and offline life service resources, and promote the integrated development of online and offline. This provides policy support for the expansion of the sinking market for fresh food e-commerce.

b) Advances in logistics technology

Cold chain logistics plays an irreplaceable role in the supply of perishable products such as fresh food. In recent years, cold chain logistics, as an emerging industry, is booming.

While the demand for the cold chain market is increasing, the Chinese government has also continuously introduced measures to promote the development of the cold chain logistics industry. The advancement of cold chain logistics technology has brought new help to fresh food e-commerce.

Author: Joannna

Source: Joannna