Hema's Digital Capabilities Hello everyone, I am Guo Xulin from Hema. I am very glad to share with you the latest updates about Hema. A very important theme of the current era is digitalization. Fortunately, since our establishment in 2015, we have done a lot of work in digitalization, and we have now developed a globally pioneering retail technology system. This system is now applied in all of Hema's business formats and operations. We believe it represents and leads the digital transformation and upgrading of the retail industry in China and even globally. Simply put, this digital system includes everything from the consumer end to our internal operations management end, and then to the backend, where we collaborate with many brand owners, producers, manufacturers, and partners. This includes WMS, TMS, many IoT systems, automated PDA systems used by store employees, and our mobile APP for communicating with consumers. The entire system is currently applied in all Hema business formats. At the same time, we are also cooperating deeply with leading retailers in the industry such as RT-Mart. Whether in the consumer interaction end or in the store management and operations end, they are using the retail technology system derived from Hema's new retail system. We use many AI artificial intelligence devices and tools that help us better select store locations when opening new stores. In consumer experience-related aspects, such as queuing for checkout, we have also launched the industry's first fully self-service checkout machine based on artificial intelligence and image recognition, which can greatly reduce consumer waiting time and improve efficiency. This system has also helped us achieve very gratifying results in exploring new business formats. In October last year, we opened the first cross-border experience store nationwide. Based on blockchain technology, we achieve dynamic traceability of products, ensuring that customs can track the location of cross-border products in real time through blockchain technology. This enables consumers to place orders on their mobile phones and pick up these cross-border products on-site within 30 minutes, a brand new experience that is also a new breakthrough in the industry. On the IoT side, we have achieved automation and intelligence in store picking and packing. After consumers place orders on the APP, they can receive all the products in their order within 30 minutes. Based on this digital system, we have built an integrated product and logistics supply chain middle platform that supports Hema's rapid parallel development across multiple business formats. Among them, Hema Fresh is our main business format, and Hema Mini is our small business format. There is also our recently launched community e-commerce - Hema Neighborhood, which in the future will help us create more inclusive Hema communities and help us quickly realize the 15-minute convenient living circle proposed by the Ministry of Commerce. Hema Membership Store is currently in Beijing and Shanghai. In the future, we will quickly expand to first- and second-tier cities nationwide where Hema Fresh is located. Hema Xiaoma is a breakfast convenience project we first launched in Shanghai, making it convenient for office workers to order via mobile phone in the morning, pick up their meal quickly in 30 seconds, and enjoy a hearty breakfast. All of this is based on our accumulated operating system and the supply chain middle platform for products and logistics. China has the most complex and numerous channels in the world, including both online and offline. We not only have 30-minute express delivery, but also next-day and three-day delivery, and many new experiences from these new business formats. In order to serve consumers across the country as quickly as possible, we have established a multi-tier logistics network system nationwide over the past few years, striving to achieve nationwide coverage quickly. I have talked a lot before, but actually I want to report to you the basic capabilities that Hema, as a benchmark new retail format, has accumulated over the years. Huge Opportunities in the New Consumption Era In the next five years, we have discovered an even greater opportunity. A new consumption era has emerged, with Generation Z consumers and accompanying new consumption scenarios. These new scenarios bring many opportunities for both new consumer brands and traditional brands. From the standard perspective of people, goods, and scenes, we find that consumers aged 19-35 are the main online buyers, and the number of young internet users has reached 650 million. We also have the world's largest and fastest-growing middle class, whose demands for product and service quality are much higher than before. With the development of social e-commerce, live streaming, and other new media and new channels, we can see that consumers' awareness of channels and brands is becoming more diversified, touchpoints are becoming more diverse, decision-making chains are becoming more socialized, and purchasing behavior is becoming more online. From the perspective of goods, we see that after the pandemic, many enterprises that shifted from export to domestic sales have focused on the domestic market, creating a new matching opportunity between supply and demand. We have also discovered new trends where new products and categories can rise rapidly domestically. As a retailer, we find that all FMCG categories are experiencing rapid quality upgrades. In particular, new domestic brands represented by Jiangxiaobai are rising rapidly, encroaching on the markets previously occupied by traditional multinational KA brands. From the perspective of scenes, we find that consumers are increasingly allocating their budgets for FMCG and fresh products to online channels. At the same time, due to the pandemic, more and more consumers are making near-field community e-commerce shopping a more important channel. Against this backdrop, we believe that all products, especially FMCG, are worth redoing. There are three major themes here. First, quality upgrade, which includes many different new trends, such as turning room-temperature products into refrigerated ones, and turning products with long shelf life into short-shelf-life products. The taste will be fresher, and nutrition and health will be greatly improved. Second, cross-border integration, which has been very popular in recent years, such as combining beverages with fruits, and baking with fruits, giving rise to many new enterprises. Third, scene transformation. After the pandemic, home scenarios are increasingly replacing in-store scenarios, bringing new challenges to many catering companies, but also creating many new growth opportunities. There are also some snacks. We find that if these products are redesigned, they can become a good substitute for staple foods. And if staple foods can be made into delicious snacks, there will also be a new consumption scenario. New Zero-Supply 2.0 On this basis, starting this year, we have officially launched a new strategy for cooperation with brand owners and manufacturers, called the New Zero-Supply 2.0 cooperation plan. Based on the 1.0 we proposed in 2018, we intend to open up all the above resources and infrastructure of Hema to work with our brand owners, manufacturers, and partners to build a platform for new product development, launch, marketing, and sales. The core purpose is to break various barriers, such as consumer disconnection, channel disconnection, and information and data disconnection. We want to share the user assets, channel assets, supply chain capabilities, and our market understanding and insights accumulated in the past with our partners, and work together to build a new ecosystem of New Zero-Supply 2.0, becoming a value community and innovation community oriented towards consumers. In this new ecosystem, I hope both sides can cooperate sincerely. Based on new consumer groups and their new needs, we can customize and develop many new products, targeting new scenarios and meeting their new service needs in these new scenarios. Over the past few years, we have achieved good cooperation results with many enterprises. For example, we have cooperated with many KA brands, allowing us to quickly develop and launch unique products for young people at low cost. We have also cooperated with many internet-famous brands, doing a lot of cross-border innovation, helping them quickly break out of their circles and achieve explosive growth. We have also cooperated with many catering companies to turn their central kitchen products into semi-finished products that can be sold in retail channels, so that consumers can easily make delicious meals at home comparable to restaurant quality. We have also cooperated with many time-honored brands, redesigning their products and adding new retail wings to help them grow rapidly. We have launched a Hema X Accelerator, with the goal of incubating, accelerating, or investing in 100 new brands each year. Through various methods, we help these enterprises quickly develop new products needed by emerging Generation Z consumers, achieving rapid and agile innovation. From product idea generation to product design, production, launch, and sales, we are willing to open up the data and insights we have accumulated internally to cooperate with brand owners and manufacturers throughout the entire process. Recently, I would also like to report that the first phase of our accelerator just started on September 15. About 200 companies applied, and we finally selected 25, distributed across the four major tracks mentioned above. Everyone is welcome to join us. Facing the new era, new consumers, and new needs, we can co-create a future together. Thank you all. PS: Mr. Guo Xulin is the Assistant to the President of Hema and the Head of the New Brand Incubation (Hema X Accelerator) Center. This article is from Mr. Guo Xulin's keynote speech at the 2021 (4th) China FMCG Conference, organized and released after his review and authorization. Click** Read the original text** to see more about the 2021 (4th) China FMCG Conference... Are you watching me?