---
title: "300 Days After Hema's Leadership Change: Rapid Expansion, Accelerated Downmarket Push, and Franchise Opening"
description: "Hema Fresh, primarily targeting middle-class consumers in first- and second-tier cities, is expanding into more cities and downmarket areas. In Xuzhou, bakery and novelty beverages attract more local residents than seafood and fresh produce. In 2024, Hema opened 72 new stores at a pace of one every five days, the fastest in five years, with one-third in lower-tier cities and counties."
author: "林京"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2025-01-18"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/300-days-after-hema-s-leadership-change-rapid-expansion-accelerated-down-b28a543f/"
markdown: "https://xinjignxiao.com/en/articles/300-days-after-hema-s-leadership-change-rapid-expansion-accelerated-down-b28a543f.md"
original_source: "https://mp.weixin.qq.com/s/33tC0Kv20RJXjufhdshfsQ"
translation: "https://xinjignxiao.com/zh/articles/%E7%9B%92%E9%A9%AC%E6%8D%A2%E5%B8%85300%E5%A4%A9-%E7%8B%82%E9%A3%99%E6%8B%93%E5%BA%97-%E5%8A%A0%E9%80%9F%E4%B8%8B%E6%B2%89-%E5%BC%80%E6%94%BE%E5%8A%A0%E7%9B%9F-b28a543f.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/300-days-after-hema-s-leadership-change-rapid-expansion-accelerated-down-b28a543f/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# 300 Days After Hema's Leadership Change: Rapid Expansion, Accelerated Downmarket Push, and Franchise Opening

> Hema Fresh, primarily targeting middle-class consumers in first- and second-tier cities, is expanding into more cities and downmarket areas. In Xuzhou, bakery and novelty beverages attract more local residents than seafood and fresh produce. In 2024, Hema opened 72 new stores at a pace of one every five days, the fastest in five years, with one-third in lower-tier cities and counties.

Hema Fresh, primarily targeting middle-class consumers in first- and second-tier cities, is expanding into more cities and downmarket areas.
At the Hema Fresh store in Xuzhou, bakery and novelty beverages attract more local residents than seafood and fresh produce. Since the store recently opened, foot traffic is high, and on weekends and holidays, the entire road outside the mall is congested.
While traditional supermarkets are closing and contracting, Hema recently disclosed that in 2024, it opened 72 Hema Fresh stores at a pace of one every five days, the fastest in the past five years. To date, Hema Fresh has nearly 430 stores, surpassing Walmart China in store count.
**Downmarket expansion is a key focus of this round of store growth.** Of these 72 stores, one-third are in second- and third-tier cities and counties.
Alongside aggressive expansion, Hema has signaled profitability. On the last day of 2024, Hema CEO Yan Xiaolei sent an internal letter stating that over the past year, Hema achieved double-digit growth on the basis of nine consecutive months of overall profitability, with customer numbers growing by over 50%.
After former CEO Hou Yi left, under the transition of new and old management, what changes have occurred at Hema during its most turbulent year ever?
**Reducing New Business Experiments**
**Doubling Down on Membership, Opening Franchises**
Since Hou Yi stepped down as CEO in March 2024 and former CFO Yan Xiaolei took over, from restoring membership to canceling offline-exclusive prices, Hema seems to be returning to its original model over the past year.
Employees are most attuned to this signal. Hema employee Zhang Mo told the author that after the new management took office, Hema has not engaged in excessive new business experiments, focusing mainly on Hema Fresh and Hema NB.
Specifically in store operations, the attitude toward membership has become clearer. Zhang Mo said that since the first half of 2024, it has been clear internally that membership is one of the main businesses, with attention from headquarters to regional offices. For example, membership card review meetings are held every evening. Offline stores are also finding ways to increase membership exposure; in some cities, the "free vegetable pickup area" for membership cards, previously near one checkout counter, has expanded to multiple checkout counters.
Correspondingly, offline stores have increased membership assessment for employees. A Hema store employee in the Beijing region told the author that their department of three members needs to complete 50 membership acquisition targets per month, otherwise a portion of performance pay is deducted.
The restart of membership is widely seen as Hema refocusing on core middle-class users. Membership fees are one of the core profit methods for membership warehouse stores like Sam's Club, and they also help Hema secure stable revenue. Hema previously disclosed that by the end of 2022, its paid members approached 3 million, accounting for 5% of registered members, but membership fees alone contributed 588 million yuan in revenue annually.
At the same time, Hema is expanding through two formats: Hema Fresh and Hema NB. The former, with a store area of about 3,000 square meters, is Hema's main format. The latter is a community supermarket, a discount retail brand positioned for downmarket, with an average store area of 600-700 square meters, mainly selling self-operated products with the Hema NB label.
**One of the challenges for Hema stores, often over a thousand square meters, has been high investment and low store density, making it difficult to cover more users.**
In 2024, Hema attempted to open franchises through the "**Hema NB Pickup Point**" format. There are three ways to franchise: first, lease a store of about 30 square meters to open an NB pickup store; second, cross-industry cooperation, adding Hema NB projects to existing stores to increase business; third, group point cooperation, similar to "group leaders" in community group buying, targeting freelancers who lack capital and time and want part-time work.
On the other hand, Hema has also implemented a series of cost reduction and efficiency measures. A Hema employee told the author that since the end of 2023, Hema has added third-party staffing outside its regular headcount. Third-party staffing is concentrated in store and logistics employees, with 95% of store employees (including "store-warehouse" staff) transferred to third-party staffing.
In addition, staffing has been streamlined. As one of the important departments in Hema stores, the "tasting and sales" department has been merged from three departments into one, with staff reduced by two-thirds.
Over the past year, focusing on core business and reducing costs has been a common trend among internet companies. Just as Alibaba's strategic adjustment focuses on core business, Hema's business is also becoming more focused.
Several former Hema employees told the author that, in their view, **compared to the aggressive discount-oriented reforms launched in April 2024, Hema has made a series of adjustments, gradually returning to its original model.**
**Is Hema's Rapid Expansion Entirely Downmarket?**
In the past year, downmarket has become more important in Hema's expansion. Hema has experimented with multiple formats for downmarket attempts, and now Hema Fresh and Hema NB are shouldering this mission.
Hema disclosed that Hema Fresh entered 21 cities and regions this year, including counties such as Changshu, Tongxiang, Yiwu, Zhuji, Deqing, and Zhangjiagang.
A Hema employee told the author that Hema's downmarket expansion is not blind large-scale expansion but focuses on areas with stronger consumption capacity, such as the Pearl River Delta and Yangtze River Delta, because Hema Fresh's average order value is not low, and local consumption levels need to be fully considered.
In the view of the above employee, Hema Fresh's expansion has also benefited from the retreat of traditional supermarkets. Over the past year, when traditional supermarkets like Yonghui closed, mall properties often attracted Hema with low or even free rent. For Hema, whose stores are basically in core business districts, this can greatly reduce high rent pressure.
In addition to Hema Fresh gradually going downmarket to cover more people, Hema also has NB and Outlets formats for downmarket. Hema NB focuses on community hard discount stores, covering various daily necessities, while Hema Fresh Outlets focuses on fresh discount, usually taking over tail-end fresh products from Hema Fresh and X Membership stores.
Over the past year, Hema NB expanded through the "**1+N**" model. "1" refers to Hema NB offline stores located in densely populated, relatively downmarket areas, while "N" refers to pickup stores around Hema NB offline stores that offer "order online, pick up next day," with each NB pickup point covering about 4-5 residential communities for convenient nearby pickup.
Unlike the adjustments to membership and other reforms, Hema NB was also a project that Hema founder Hou Yi previously valued. According to Hou Yi's previous plan, Hema NB Outlets stores needed to achieve the "215" profit model: 150,000 yuan monthly sales and 15% gross margin. Once the profit model is proven, it would rapidly expand nationwide, aiming for 10,000 stores in the future.
Franchising is undoubtedly one of the effective ways to achieve the 10,000-store goal. According to a Hema NB pickup point recruitment staff, Hema NB pickup stores are currently only open for franchising in Shanghai, with 400-500 franchise stores, mainly independent NB pickup stores. The initial investment is about 100,000 yuan, and franchisees receive 8.8% of net sales as income.
A Hema NB pickup store franchisee told the author that as a low-cost franchise business, achieving high returns is not easy; it requires extreme control of rent and labor costs. Like community group buying, the biggest test for these franchisees is community operations. The community needs regular new members, and the existing user base must be large enough to ensure stable order volume.
The above franchisee said that when they don't earn much, they joke about "working for Hema," acquiring new customers for free every month. In their view, Hema NB's market competitiveness depends on Hema's supply chain system, which needs to continuously develop high-cost-performance products for NB stores.
**Trying Every Way to Make Money**
While Hema announced profitability, Alibaba has sold Intime for 7.4 billion yuan and all shares in Gaoxin Retail, the parent company of RT-Mart, for 13.138 billion Hong Kong dollars. So far, of Alibaba's three most important new retail assets, only Hema remains.
**The future of Hema is also attracting market attention.**
Over the past year, looking at the retail industry, traditional supermarkets have collectively suffered. Carrefour, the "supermarket leader," now has only 4 stores. Walmart and Yonghui are also closing stores. According to incomplete statistics, in the first half of 2024, of 14 listed supermarket companies, 7 were profitable and 6 were loss-making, each accounting for nearly half, with over 130 supermarket closures nationwide.
Meanwhile, Sam's Club, Aldi, and Pangdonglai have moved into the spotlight, corresponding to membership warehouse stores, discount stores, and the new "top influencer" in the supermarket sector, with store numbers and profits reaching new highs in 2024.
Hema and Sam's Club regard each other as one of the main competitors. Over the past year, whether in downmarket expansion or strengthening online-offline integration, both have entered the same river.
Sam's Club, which only began exploring online business in 2020, now has online sales accounting for nearly half. Walmart's fiscal 2025 Q3 results show that Sam's Club China's online sales growth is driven by its instant delivery service, i.e., the front-warehouse model. Currently, Sam's Club has 500 front warehouses, making it the "number one player" in the instant retail front-warehouse track.
In August last year, Hema also restarted its front-warehouse model, but this track is already crowded with internet players including Dingdong Maicai, Xiaoxiang Supermarket, and Pupu Supermarket, making competition more intense.
Hema founder Hou Yi once implemented a series of drastic discount-oriented reforms to balance online and offline development, including canceling membership, raising delivery fee thresholds to 99 yuan in some cities, and setting offline-exclusive prices, aiming to push users back offline.
One important reason is the high cost of online fulfillment. According to a previous report by "LatePost," a Hema employee calculated that Hema Fresh stores have a gross margin of about 30%, and a 49-yuan online order has a gross profit of only 14.7 yuan, while delivery costs nearly 10 yuan. After deducting in-store picking costs, each delivery loses money. Online orders account for 70% of Hema's orders.
However, a Hema employee revealed that Hema now focuses more on profitability. For example, in downmarket expansion, the online-offline ratio cannot be accurately predicted before opening, so delivery and store-warehouse staffing are dynamically adjusted based on actual operating conditions.
Hema is trying every way to make money. Now, on short-video platforms, multiple Hema live streams can be seen, some hosted by offline store employees who set up phones in the bakery area. Live-stream products have expanded from bakery items to more Hema self-operated products, including 9.9-yuan beef rolls and two bottles of coconut juice for 18.9 yuan. Hosts use phrases like "online-exclusive price" to attract orders, which are then picked up offline. In many Hema Fresh stores, boxed meal services are offered during lunch and dinner hours, with all dishes priced uniformly at 3.28 yuan per 50 grams.
The above Hema employee said these are businesses Hema has explored before, not new formats. For example, the boxed meal service, after significant growth in some stores near office buildings, has been reintroduced in more stores.
Hema's new retail exploration continues, and there are more tough battles ahead. After all, after nine consecutive months of profitability, current CEO Yan Xiaolei has set a new goal for the company: annual GMV of 100 billion yuan in three years.
**[New Order · Symbiosis]**
**The 10th China FMCG Innovation Conference**
**Date: March 17-19, 2025**
**Location: Chengdu, China**


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671