"There's not much cost, but it's not very profitable either." Li Han joined a Hema NB pickup point in Jiading District, Shanghai this year, but after a while, he found that being a 'group leader' is not as easy to make money as he imagined. However, as a franchise brand, Hema's experience may be somewhat different. Various signs indicate that Hema's development focus is no longer on large stores, but has shifted to lighter and smaller community stores. Moreover, in terms of model, Hema is no longer insisting on pure self-operation and has begun to embrace franchising. As we all know, compared to self-operation, supply chain franchising is a business model with higher profit margins. Brands can not only collect franchise fees but also drive more people to sell for them, without bearing rigid costs like rent and labor. Like those franchise brands that quickly reached the 10,000-store mark, Hema, which was embroiled in a sell-off scandal in the first half of the year, has entered a frenzy of store openings in the second half. On one hand, Hema has opened 'pop-up stores' in Pinghu, Nanchong, Dongguan, Xuzhou, and other areas, setting up stalls in shopping malls and on roadsides. On the other hand, Hema is vigorously developing 'Hema NB stores' in Zhejiang and Shanghai, and leveraging pickup stores in communities to launch community group buying campaigns. Hema NB stores are Hema's hard discount store brand. Compared to Hema Fresh stores, which often span thousands of square meters, Hema NB stores are typically only 700-800 square meters, but this is not the 'smallest unit' in the Hema NB ecosystem. Around Hema NB stores, many Hema NB pickup stores and Hema NB pickup points are scattered in various communities, with store areas of only a few dozen square meters. Hema has always been persistent in opening 'small stores,' having previously launched formats like Hema mini and Hema Neighbor. Comparatively, Hema mini is closer to the current Hema NB, while Hema Neighbor is closer to Hema NB pickup stores, but neither format made much of a splash. One of the main reasons is difficulty in profitability. Taking Hema Neighbor as an example, it not only requires renting a 40-50 square meter independent store and hiring 2-3 full-time employees, but also requires standard facilities such as freezers and water tanks, and most stores cannot cover these fixed costs. But after Hema NB stores shifted from self-operation to franchising, these problems may be solved, or at least they no longer trouble Hema. In the Hema NB ecosystem, Hema NB pickup stores and NB pickup points are expanding through franchising. In June this year, Hema NB's first franchise store, Shanghai Chongming Baodian, opened, marking the official opening of franchising. On December 28, the Hema NB store in Zhili Town, Huzhou City, will officially open, becoming the 200th Hema NB store, showing the rapid expansion speed. It seems that Hema, after breaking itself into smaller parts, is one step closer to the '10,000-store' goal. Unlike Li Han, Zhang Yue, who opened a Hema NB pickup store in November, clearly believes in human effort. Zhang Yue, who previously worked in the IT industry, sees franchising Hema as an opportunity to start his own business. He and his wife worked hard and recruited 500 new customers in just 2 days. It is understood that there are three ways to franchise a Hema NB pickup store: First, independent cooperation, which involves renting a store to open a Hema NB pickup store; second, cross-industry cooperation, which means adding a Hema NB project to an existing store; third, group point cooperation, which is mainly for freelancers who lack funds and time and want to do part-time work. Li Han joined through the third method. Although this method does not require opening a store and has no fixed costs like rent, the commission is relatively low. A franchise recruiter responsible for Hema NB pickup store franchising told the author that the commission for opening a store is 8.8%, and the maximum for opening a group is 5%. Of course, in addition, if self-delivery is used, franchisees can also receive the delivery fee paid by customers. Although the first two methods require opening a store, the threshold is not high. The recruitment materials provided by this recruiter show that 60,000 yuan is needed, including deposit, equipment purchase or rental, and platform usage fees, as well as a store of at least 25 square meters. So, Zhang Yue feels that the key to making money is choosing the right location, "Rent cannot be too expensive." According to Hema's official website, currently only four cities—Shanghai, Suzhou, Hangzhou, and Jiaxing—have Hema NB stores, but Suzhou and Jiaxing have only a handful of stores, with Hema NB stores mainly concentrated in Shanghai. The aforementioned recruiter also mentioned that currently only franchisees for Hema NB pickup stores in the Shanghai area are being recruited. Previously, Hema's community group buying route was always hindered. Now, the low-price-focused Hema NB stores are more in line with the genes of community group buying and can better cater to residents' 'three meals a day.' Moreover, after opening Hema NB pickup store franchising, franchisees will actively help Hema NB stores attract new customers, as this directly affects their income. The Hema recruiter also told us that depending on the region, the average daily sales of each store vary, roughly around 8,000 yuan. But the actual situation may not be so optimistic. Some franchisees have posted online that their daily sales are basically between 3,000 and 5,000 yuan. If calculated based on this data, the commission income for pickup stores is between 260 and 440 yuan. This also makes it easy to see why Hema Neighbor's income was difficult to cover costs. For franchisees, although the initial investment is not high, after deducting monthly rent and personnel costs, the profit space for 'independent cooperation' is not too large. Relatively speaking, the second method, 'cross-industry cooperation,' is more 'friendly' to franchisees. A Hema NB pickup franchisee in Minhang District, Shanghai, is also a franchisee for Meituan and Duoduo Maicai pickup stores, and also operates a courier collection business. Compared to independent Hema NB pickup stores, the 'cross-industry cooperation' model not only has more income sources with fixed costs but also has a broader traffic base. Returning to the online main business and bidding farewell to offline retail is Alibaba's main theme this year. Just two days ago, Alibaba sold Intime Retail for 7.4 billion yuan, losing 9.3 billion yuan to further slim down its retail landscape, showing Alibaba's determination. As an important member of Alibaba's retail landscape, Hema urgently needs to win a battle. Among Sam's Club's many learners, Hema was once considered the most 'promising,' but it has never come close to victory. In fact, over the years, Hema has been walking on multiple legs, trying more than a dozen different formats, with layouts in fresh food supermarkets, community group buying, membership-based supermarkets, discount supermarkets, and premium supermarkets. But now, the store information published on Hema's official website only includes four formats: Hema Fresh stores, Hema X Membership stores, Hema Neighbor stores, and Hema Outlet stores, where the Hema Outlet category lists the current Hema NB stores. From a geographical distribution perspective, besides Hema Fresh stores having stores in multiple cities nationwide, Hema X Membership stores are only in Beijing, Shanghai, Nanjing, and Suzhou, while Hema Neighbor stores and Hema Outlet stores are concentrated only in Jiangsu, Zhejiang, and Shanghai. Based on this background, Hema's commercial choices are easy to understand. It is using franchising to go down-market, expanding its territory while not having to pay rent. In fact, Hema has tried going down-market before. The former Hema mini was considered to have successfully run a business model in lower-tier markets. The head of Hema mini once revealed that not only suburbs of first- and second-tier cities, but also communities in third- and fourth-tier cities and county towns in fifth- and sixth-tier cities are all destinations for Hema mini. Hema mini not only adjusted its store size to 300-1000 square meters but also adjusted its SKUs to cater to the consumption habits and low-price needs of middle-aged and elderly groups. After a year of piloting, Hema mini opened 6 stores in Shanghai. Although former Hema CEO Hou Yi proposed a plan to open 100 Hema mini stores a year, the actual expansion speed was far below expectations. In later reflections, Hou Yi mentioned that because franchising was not opened, execution was difficult, investment was large, and expansion was slow. Obviously, Hema NB stores have learned from Hema mini's lessons. On one hand, Hema NB stores are limited to the Jiangsu, Zhejiang, and Shanghai regions. Hema has high recognition in these areas, and market education costs are relatively lower. Moreover, some lower-tier county-level cities in these regions have strong consumption power, which also reduces the difficulty of profitability for Hema NB stores. On the other hand, the Hema NB format has opened franchising. After opening franchising, Hema not only no longer needs to bear costs like rent and labor but can also collect certain franchise fees. More importantly, franchisees will also take on the task of expanding new customers, which is also crucial for Hema's expansion into lower-tier markets. The author observed that many Hema NB franchisees go deep into communities, conduct carpet-style promotions, and achieve private domain conversion through community groups, and they also push various product information or promotional information in the groups at irregular times every day. It is understood that some Hema NB stores have already achieved good sales performance. For example, the Hema NB store in Haining City, Zhejiang, exceeded 1.6 million yuan in sales in the first three days after opening. A consensus in the new retail industry has been reached. Now, the time left for Hema to experiment is running out. Alibaba's determination to return to the internet is so obvious that it is unlikely to continue to inject capital into Hema within the big ecosystem as before. The options for this pioneer of China's new retail industry are limited: either be responsible for its own profits and losses and achieve its own business closed loop, or 'marry someone else.' Even in the latter case, the bride always needs to dress up before leaving. Yonghui, which was just sold, is a good example. In September this year, Miniso acquired 29.4% of Yonghui Superstores' shares for 6.27 billion yuan, becoming its largest shareholder. When explaining the reason for acquiring Yonghui, the founder of Miniso mentioned that after traveling the world, he found that a better retail model exists in China, namely the Pangdonglai model, which is the only way out for Chinese supermarkets. Before the Pangdonglai adjustment, Yonghui Superstores was almost 'on the verge of collapse.' Since 2019, Yonghui Superstores has closed more than 400 stores and accumulated losses of over 8 billion yuan for three consecutive years. Of course, not only Yonghui Superstores, but also a host of traditional offline supermarkets have fallen into a wave of store closures, facing varying degrees of operational pressure. In its third-quarter financial report, Yonghui Superstores mentioned that by the end of the third quarter, it had completed 10 store adjustments, including 7 self-adjustments, and the adjusted stores saw significant revenue growth. In fact, if you look only at the financial data, Yonghui Superstores' performance in the adjustment quarter was not impressive, with both revenue and net profit declining year-on-year. However, Ye Guofu revealed that excluding the opening effect, the sales of the earliest adjusted Yonghui stores could still reach about 3 times the past level, and he was very satisfied with that. In the valuation of retail companies, the price-to-sales ratio is a common reference indicator. The 'Pangdonglai model' dress made Ye Guofu confident in Yonghui Superstores' sales growth prospects, and he expects that after the 'Pang reform,' Yonghui Superstores can pass the market test and achieve profit growth. In comparison, Hema has also faced the same difficulties as Yonghui, with consecutive years of losses and store closures. Although Hema executives have been emphasizing that they will not 'sell out,' the fact that Hema's valuation has been declining year after year is undeniable. In 2022, there were reports that Hema planned to raise funds at a valuation of $10 billion. By 2023, Hema was reported to be preparing for an IPO in Hong Kong, when its valuation had dropped to $6 billion. Later, the reason for shelving the IPO mentioned that the $4 billion valuation was below expectations. The continuous decline in Hema's valuation has also led outsiders to speculate that the capital market has lost interest in Hema. But now, Hema shows signs of 'warming up.' On one hand, after seven consecutive years of losses, Hema achieved single-quarter profitability in both 2022 and 2023, and from March to June this year, Hema achieved profitability in the off-season for the first time, indicating that Hema is expected to shake off the shadow of consecutive losses. On the other hand, Hema's GMV in fiscal year 2024 reached 59 billion yuan, 4 billion yuan higher than the previous fiscal year. After Hema changed its leadership, the new CEO Yan Xiaolei also proposed reaching 100 billion GMV in three years. In terms of store expansion, the plan is for Fresh stores to expand into lower-tier markets, opening 70 new stores this year, and before the end of fiscal year 2025, NB discount stores will open 300 stores. Obviously, after shifting to 'small stores' and opening franchising, Hema's pace has become much lighter. In last year's 'Mountain Moving Battle' with Sam's Club, Hema initiated a transformation around the discount store model, even canceling the paid membership system, which not only caused consumer dissatisfaction but also made the relationship between Hema and suppliers extremely tense. For example, Wang Xiaolu and others stopped cooperating with Hema, with the reason being that 'chicken feet products could not be sold at the company's standard price.' Hema NB stores have made the discount model a separate format and created Hema NB private-label products. Now, Hema NB's private-label products such as grilled sausages, shaomai, and milk have become bestsellers, and these products can reach consumers without Hema having to build its own sales and last-mile delivery networks. As we all know, the costs of these two businesses were once the unbearable weight in Hema's model. Even Sam's Club has not built its own delivery system. It is worth noting that as Hema's discount store brand, Hema NB stores have a price advantage. For example, for the same 750g strawberry cake, Hema Fresh is priced at 79 yuan, while Hema NB is priced at 59.9 yuan. If there is a discount, the final discount price at Hema NB may be only half of that at Hema Fresh. Of course, looking at the ingredient lists of the two products, there are some differences, but the actual experience for consumers is not that different. After all, they are all from the same supply chain. It can be imagined that when Hema NB stores launch low-price attacks, the first to be impacted is its own base—Hema Fresh. Of course, in the past, Hema NB stores with a self-operated model opened very slowly, only reaching a very small number of cities and a very small range of lucky people. But now the floodgates of franchising have opened. Once a large number of franchise stores are rolled out, the situation of left hand fighting right hand is actually hard to avoid. As a company that has been immersed in the new retail industry for nearly 10 years and has some of the smartest talents in China, Hema cannot be unaware of this. However, it has probably already figured it out. Before the contradiction occurs, survival is the only thing it needs to do. 【New Order · Symbiosis】 The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China