---
title: "Aggressive Store Openings and Widespread Price Cuts: Is Hema Losing Its Mind?"
description: "Amid all merchants going all-in on social e-commerce, Hebei merchants are becoming the new price-war champions online, following Yiwu, Guangzhou, and Hangzhou. Meanwhile, Hema has announced a 20% price cut on over 5,000 products across its national stores, signaling a new phase in the battle for consumers amid consumption downgrading."
author: "抛砖"
publisher: "New Distribution"
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published: "2023-10-25"
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# Aggressive Store Openings and Widespread Price Cuts: Is Hema Losing Its Mind?

> Amid all merchants going all-in on social e-commerce, Hebei merchants are becoming the new price-war champions online, following Yiwu, Guangzhou, and Hangzhou. Meanwhile, Hema has announced a 20% price cut on over 5,000 products across its national stores, signaling a new phase in the battle for consumers amid consumption downgrading.

Throwing out 9.9 yuan free shipping, giving you 10 yuan back for a good review, plus supporting refund-only, under all merchants going all-in on social e-commerce, Hebei merchants are becoming the new price-war champions online after Yiwu, Guangzhou, Hangzhou and other places. Recently, Community Super Chain found on major social platforms that many small and medium-sized merchants in Hebei are staging a new round of involution on major short-video and e-commerce platforms. Many small and micro entrepreneurs in Hebei directly admitted: this year, they would rather "exhaust themselves to roll out competitors," focusing on not making money, just making friends.

In fact, under the increasingly obvious consumption differentiation environment, the above phenomenon is not an isolated case. Recently, following the "Mountain Moving Price" campaign, Hema again announced a 20% price cut on over 5,000 products across its national stores. Although Hema's price adjustment is completely different in gameplay and nature from the above-mentioned Hebei small and micro merchants, if you put these two things together, you will find that consumption downgrading and consumption upgrading have indeed arrived.

Previously, Hema stated that its Hema Fresh format achieved overall profitability. Is this price reduction plan a strategic need, sacrificing short-term sales gross margin to gain larger market share? Or is it just a phased new attempt by Hema in the new retail field to explore new possibilities for offline retail stores? Both are worth continuous attention. Admittedly, will Hema's price reduction on offline store products affect Hema's overall profitability? Community Super Chain believes this may not be the key point. The key point is whether Hema's behavior will trigger a "pingti" (affordable alternative) craze in the industry? This is probably the new issue that merchants including Walmart, Sam's Club, Yonghui, RT-Mart, Wumart, Zhongbai, Jiajiayue, and Renrenle must face squarely.

**"20% Price Cut"**
**To Win Over 80% of Consumption-Downgrading Middle Class?** In 2023, for most supermarket enterprises, the primary task is not to maintain the basic market, but to control the decline rate of the basic market. In this context, for most supermarket enterprises, lacking supply chain advantages, especially the severe lack of private brand competitiveness, the only choice is to continue closing unprofitable stores to survive first. But for companies with money and supply chain advantages, this is an excellent time to harvest the market and surpass peers. This includes Sam's Club, Hema, Pangdonglai and others who have already acted. Among them, Sam's Club, as early as around 2019, tried product price adjustments, but the initial adjustments were not across-the-board; various restrictions were set, such as limited to the current month, or only the first 100 customers could participate, and not all products, only 1,000 best-selling items. In 2020, Sam's Club again announced price adjustments for store products. The adjusted categories included high-quality livelihood products and some first-line brand products, with fresh produce accounting for 30%, and popular private brand Member's Mark items like Australian small steak, toothfish fillets, black cod chunks, and butter waffles were all reduced. In addition, some high-end well-known brands also underwent significant adjustments, such as Paris natural mineral water, Toshiba 4K TVs, and Samsonite luggage sets. At the end of 2022, Sam's Club continued to make long-term price reductions on 10 "Member Annual Selection" products with the highest repurchase and penetration rates. These products were all star items from Sam's private brand Member's Mark, including lime juice, daily nuts, mochi, egg yolk pastry, Swiss rolls, yogurt, freeze-dried coffee powder, butter waffles, organic Bordeaux wine, and clean laundry beads. Sam's total investment in this promotion is expected to reach 1 billion yuan. In May 2023, Sam's Club again announced 10 new long-term price reduction products, including Member's Mark series South American white shrimp, wasabi-flavored macadamia nuts, imported whole milk, vitamin C, and grilled eel, Tyson Orleans-style chicken wings, etc. Community Super Chain found that Sam's multiple price cuts not only did not affect the company's overall profitability, but actually brought significant membership growth. According to its financial reports over the past five years, as of the end of 2019, Sam's Club had over 2.2 million members in China. In 2020, Sam's China membership reached 3 million, and by the end of November 2021, membership exceeded 4 million. In fact, besides Sam's Club, since 2017, Hema has been continuously optimizing store product structure and pricing system, but the most noticeable action to the public was the "Mountain Moving Price" campaign in July this year. The reason this price cut sparked widespread attention on social platforms is mainly because the products Hema reduced prices on were benchmarked against Sam's Club's similar products, covering multiple essential high-frequency consumer categories including fruits, meat, poultry, eggs, dairy, aquatic products, bakery, beverages, etc. If Hema's previous price adjustments were just testing the waters, then this time, simultaneously reducing prices by 20% on over 5,000 products (offline store SKUs range from 6,000 to 8,000) across national stores shows sincerity.

It is worth noting that Hema's price adjustment this time is limited to offline stores, covering categories including dairy products, biscuits, instant food, beverages, personal care products, frozen meat and poultry, frozen aquatic products, etc. However, whether these categories include Hema's private brand products is unknown. Compared to Sam's Club's toothpaste-squeezing style price adjustments, Community Super Chain believes that the biggest impact of Hema's price adjustment will be another shock to the entire offline traditional supermarket pricing system. Currently, according to the latest financial reports of 13 listed supermarket companies, the gross margins of each supermarket company are basically in the normal industry range of 20-30%. Among them, Bubugao has the highest gross margin at 42%, Hongqi Chain at 29.4%, Sanjiang Shopping at 27.6%, Gaoxin Retail at 24.6%, and Yonghui Superstores has the lowest at 22%. Although the current gross margins look okay, when corresponding to the company's operating efficiency, it is another scene. In the first half of 2023, Bubugao's net loss reached 449 million yuan, a year-on-year decrease of 2162.98%. Similarly, Renrenle's net loss attributable to shareholders of listed companies was 309 million yuan, with losses increasing by 31.03%. Beijing Jingkelong's net loss attributable to the parent company was 48.58 million yuan, compared to a loss of 10.72 million yuan in the same period last year, with losses further expanding. Except for Bubugao, Renrenle, Beijing Jingkelong and a few others, the remaining companies achieved short-term profitability but are still on the edge of profit tightness. So overall, with Hema and Sam's Club competing to lower product prices, it will inevitably trigger follow-ups. Currently, Yonghui, which ranks high, has already followed up, launching a plan to add "genuine discount stores" in its national stores, and this adjustment will cover 500-1,000 SKUs. Calculated based on 10,000 SKUs per store, the discounted products account for only 1/100, far lower than Hema. Besides Yonghui, previously, Jiajiayue and Pangdonglai also tried low-price discount stores and wholesale market store-in-store in some stores, but with little effect. For the 13 listed supermarket companies, while closing stores, they also need to cope with consumption differentiation and significantly adjust product prices, which undoubtedly forces distributors or manufacturers to make new choices. In fact, many supermarket stores have lost commercial value for distributors or manufacturers, as they cannot bring significant sales volume but are tied to the risk of delayed payment. Of course, if traditional supermarket companies do not follow up on product price reductions, it means they will accelerate losing more consumers. As more middle-aged and elderly groups accept online shopping models like community group buying, and the mainstream young consumer group visits supermarkets less frequently, many supermarket stores have completely become one of the must-visit places for the elderly to pass the time. Therefore, under this trend, the only reason stores can attract people is price temptation. This price temptation has actually been fully verified by Hema before. According to public information, after the "Mountain Moving Price" campaign, Hema achieved sales growth of at least 20% in multiple categories, and this was only the effect of slight price adjustments on some products. If most store products are adjusted by 20%, the final sales promotion effect is hard to estimate. Of course, Community Super Chain believes that with Hema's price adjustment, we should pay more attention to how much customer traffic it can activate. If sacrificing 20% of price can penetrate 80% of long-tail consumers in consumption downgrading, then this deal is worth doing. After all, Hema is not listed yet, and the group is willing to continue investing to expand scale. With no significant financial pressure, making concessions on product profits can quickly attract more consumers to stores. Isn't that the best choice that balances short-term interests and long-term development?

**"30-Minute Delivery"**
**To Conquer Service-Sensitive Online Consumers with Consumption Upgrading?** Another highlight of Hema's price adjustment is that it only targets over 300 offline stores, not online. This means the product structure difference between Hema's online and offline will be further amplified, which has almost no impact on most high-income groups. They are originally online shopping enthusiasts, and whether product prices are adjusted by 20% or not, their perception will not be that strong. On the contrary, compared to price, product quality is their focus. In addition, after Hema's price adjustment, how much will the product structure difference between online and offline be adjusted? This is also a highlight. Although it is not yet certain whether Hema will adjust, it is certain that after offline store price adjustments, the division of online and offline service groups will be clearer. Offline stores will use category and price advantages to radiate more consumption-downgrading middle class, becoming their preferred channel for family and daily consumption. At the same time, online, in addition to accelerating product structure updates, will continue to improve the "30-minute delivery" and "1-hour delivery" instant delivery shopping experience, through a more convenient shopping experience, to further cover high-income groups from first-tier to second- and third-tier cities. Speaking of "30-minute delivery" instant delivery service, Community Super Chain found in past consumption experiences that among all supermarkets, Hema is one of the few with the best service experience. Currently, after two upgrades, Hema has taken the lead in the industry to launch two instant delivery services: "fastest 30-minute delivery within 3 kilometers" and "fastest 1-hour delivery within 5 kilometers," covering 27 cities nationwide. In addition to expanding service experience, Hema has also made its shopping entrance ubiquitous. Currently, besides its own independent APP and official stores on various Alibaba apps, it has also entered WeChat mini-programs, JD Daojia, Douyin and other third-party platforms. This means that for netizens who have not downloaded the Hema APP, there are no consumption barriers; through any common APP, they can easily buy and get delivery. In addition, completely different from Walmart, Sam's Club, Yonghui and other supermarkets that rely entirely on third-party logistics companies, Hema has its own dedicated logistics system, so there is no need to worry about issues like goods being swapped midway, damaged goods, or troublesome after-sales service. Community Super Chain searched for "Sam's Club" and "delivery" keywords on Sina Black Cat Complaint Platform and found nearly 100 user complaints in the past six months. Many netizens reported that after ordering on the Sam's Club APP, either delivery was not on time or customer service was unreachable. Some netizens also reported buying food with quality issues and contacting customer service, but were repeatedly treated arrogantly. In contrast, Hema has an advantage in instant delivery experience. After all, Hema's Hou Yi has a professional logistics planning background. He once led the planning of JD.com's Shanghai Asia No.1 logistics center. For Hema's logistics planning, he boldly proposed the "decentralized logistics system" concept. Currently, Hema's "store-warehouse integration" has become a major industry feature. Now, with the popularity of instant consumption, more and more consumers are accustomed to buying and getting delivery immediately, while most traditional supermarket companies severely lack service capabilities in instant delivery. Although many traditional supermarkets have chosen to cooperate with Meituan and JD Daojia, overall they still fail to show their differences. Now, for most consumers, when shopping online, they value two things: first, whether the official store has the products they want or unexpectedly good products; second, after placing an order, whether the merchant can deliver to the designated location within a convenient time slot. In comparison, most supermarkets can neither achieve the first point nor fully guarantee the second. For Hema, the company is currently accelerating the improvement of its "full business format." In addition to the original three main formats: "Hema Fresh," "Hema X Membership Store," and "Hema Outlet," there are new moves this year. One is a boutique Hema store targeting high-end elite groups - Hema Black Label Store, with the first national store already opened in Shanghai Changning Longemont Shopping Mall; the other is a warehouse-style shopping mall similar to Metro, called FOD (Food Operation Delivery), with cash and carry (C&C), targeting small and medium enterprise customers. In this way, with the accelerated layout of multiple formats, Hema has seen accelerated store openings this year. In September this year, Hema completed the opening of 30 stores. As of now, Hema has over 350 stores nationwide. It should be noted that these stores are not only offline service entrances for consumers, but also front warehouses for serving consumers' instant consumption home scenarios. In summary, after 8 years of iteration and change, Hema has formed a differentiation between store visits and home delivery. So in the future, how much brand effect will these two models generate? How many consumers will they influence? This will be a major highlight.

**Supermarket "Pingti"**
**An Unavoidable Involution** If we were to summarize the supermarket industry in 2023, Community Super Chain believes that "pingti" (affordable alternatives) would definitely be among the top ten keywords. This year, affected by the overall economic environment, more and more netizens have become more rational in consumption decisions, which has also given opportunities for many high-quality and reasonably priced domestic brands to become popular again on major e-commerce and social platforms. "Huo Li 28" is a typical example. As one treasure domestic product after another is discovered, many netizens directly sighed, "After seeing the prices of these domestic products, I suddenly found that my salary of over 3,000 yuan can't be spent, absolutely can't be spent." Although this is just a funny way for netizens to show off their poverty, it also reflects a change in the consumption concept of contemporary young people. This change is the "pingti" that is particularly popular among young people. From 39.9 yuan Starbucks to 9.9 yuan Luckin Coffee, it's a pingti; from 600+ yuan YSL beauty products to 70+ yuan Dai Chunlin, it's also a pingti; from Downy to Huo Li 28, it's still a pingti. If the "Mountain Moving Price" was the cause for many consumers to switch from Sam's Club to Hema, then will Hema's price adjustment of over 5,000 products this time also cause users of other supermarkets to flock to Hema stores? This is likely a high-probability event. Why do we say this? Besides the previous "Mountain Moving Price" event having been verified, the Hema Black Label Store, which just opened before the National Day holiday, is also a good supporting evidence. According to an insider at Hema who revealed to Community Super Chain, the Black Label Store created its sales peak on the second day of opening. In the first week of opening, the average daily sales exceeded 1.5 times that of a regular Hema Fresh store, with very strong sales. The reason for the Black Label Store's explosive popularity is mainly because although it is positioned as a high-end store among boutique supermarkets and has introduced many international brands, the overall product prices are about 30% lower than other boutique supermarkets. For consumers, who can resist the temptation of "noble but not expensive"? Multiple facts have told us that current consumers are no longer blindly pursuing price, but rather paying more attention to cost-effectiveness. In this context, including Hema and Sam's Club's price cuts, other traditional supermarkets have no resistance at all. In terms of product characteristics, except for a few supermarket companies like Pangdonglai, the products in most other supermarket stores are almost the same, with only slight differences in price and SKU display numbers. Therefore, consumers have the same shopping experience at any supermarket store, which is also the main reason why everyone has been crazily opening community stores in recent years. But in contrast, Hema and Sam's Club each have their own private brands, which means going to Hema or Sam's Club can buy novel products not available in other supermarkets. Speaking of private brands, Hema has gradually cultivated multiple private brands including Hema Workshop, Hema MAX, Hema Organic, covering categories such as fresh produce, snacks, cooked food, bakery, flowers, beverages, and daily necessities. There are over 1,200 private brand products, and 10 brands have sales exceeding 100 million yuan. In terms of product prices, Community Super Chain recently visited multiple supermarket stores including Yonghui, Lianhua, Bubugao, Zhongbai, and China Resources Vanguard, and found that except for promotional products in the stack area, the prices of other products are not much different from online, and some products are even more expensive than online. In terms of shopping experience, compared to 20 years ago, the biggest change in most offline supermarkets is the addition of self-checkout areas. The biggest advantage of this design is not that you don't have to queue for checkout, but that you can finally avoid manual checkout errors. In addition, Community Super Chain also found that Yonghui Superstores is actively trying to set up children's play areas in supermarkets, such as basketball hoops and other interactive devices, but because the area is small and it is easy for one child to occupy the area for a long time, other children cannot play at all. Another big problem with this setup is that some naughty children, when shooting or competing, may accidentally throw the ball at other customers or knock over goods. So Yonghui's attempt can only be said to have good intentions, but that's all. For supermarkets like Yonghui, Lianhua, Bubugao, Jiajiayue, Zhongbai, China Resources Vanguard, and Renrenle, under the impact of e-commerce, the original store experience advantage has disappeared. With the widespread concept of "buying online is cheaper," traditional supermarket stores are losing not only young people but also middle-aged and elderly people. Facing this embarrassing fact, it is meaningless for traditional supermarket companies to decide whether to follow Hema and Sam's Club in adjusting product prices. Because supply chain construction is not achieved overnight, because of channel diversification, distributors no longer rely on offline stores, and because the era of private brands in the supermarket industry has arrived.


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