On September 12, Hema Fresh opened its first store in Linyi, Shandong. According to relevant media reports, the store's first-day performance set a new national opening record, becoming another iconic example of Hema's "downward expansion strategy." Located on the basement level of Linyi MixC, the store saw continuous crowds even during rainy days from trial operation to official opening. The escalator entrance on the first floor was temporarily restricted, with queues winding down, making it a "new landmark" in Linyi residents' social media feeds. On local social platforms, the topic of "Hema district housing" quickly went viral, and "going to Hema to buy groceries" became a "new experience" for young families.

Hema's "Dimension Reduction"

Hema's downward expansion is not a hasty attempt. Since 2024, Hema has gradually slowed its expansion pace in first-tier markets, shifting focus to second- and third-tier cities. Official data shows that of the 72 new stores opened last year, nearly one-third were in second-, third-, and fourth-tier cities, concentrated in regions such as Shandong, Jiangsu, Anhui, and Henan. In terms of product structure, Hema continues its consistent logic:

  • High-frequency essential categories lead the way—vegetables, fruits, meat, eggs, milk, and aquatic products form stable sales;
  • Mid-to-high-end private brands supplement profits—"Hema Workshop," "Daily Fresh," and "Hema Bubu" focus on differentiation while raising average transaction value;
  • On-site experiences create differentiation—open kitchens, fresh food areas, and bakery sections become consumer "stay points." This combination has shown strong adaptability in the Linyi market. Local consumers' acceptance of "freshness + experience" far exceeded expectations. In the first week of opening, Hema App downloads and online delivery orders both surged. When randomly chatting with a consumer, the author was told: "Hema's bakery products are far better than those in many local supermarkets. Previously, we used to buy from a nearby daigou (proxy purchasing) store, but now that it's opened at our doorstep, it's clearly more convenient." "Previously, we bought groceries for cheap; now we want convenience, taste, and appearance," another consumer said during a casual chat. "After shopping at Hema, you can also eat there; the experience is completely different." From a retail model perspective, Hema's "dimension reduction" is not a price war but rather using systematic capabilities and experience upgrades to reshape consumer perceptions. Most of Hema's private-label products have unique design styles, not mere imitation; by actively exploring and promoting differentiated products, they clearly present core product attributes, forming their own distinct competitive characteristics. Its core competitiveness lies not in who is cheaper, but in who can meet consumer needs faster, more accurately, and with more warmth.

Traditional Supermarkets Forced to "Fight Back"

Hema's arrival has instantly intensified the supermarket landscape in Linyi. This city is not lacking in retail infrastructure. Backed by Huafeng International Food City, one of the country's well-known wholesale markets, Linyi has a complete FMCG distribution system and numerous supermarket brands, including regional strong players like Jiajiayue, Jiuzhou, and Inzone. For a long time, they maintained a stable balance in price and channels, but Hema's entry has disrupted this rhythm. Hema chose the basement level of MixC, and Jiajiayue's store happens to be on the same floor, putting them in direct competition. Facing the "Hema onslaught," Jiajiayue responded quickly. Before Hema's opening, they upgraded and renovated in advance; On Hema's opening day, Jiajiayue arranged promotional activities at the entrance, stacking durians at 17.5 yuan per jin, emphasizing "cheap and affordable"; They expanded the fresh food display area and introduced freshly prepared food and bakery sections to achieve "experience upgrades." But in consumers' eyes, Hema represents a different retail language. There, products are more novel, processes are shorter, and the entire shopping experience is seamless—from scanning codes to order to 30-minute delivery. "Even though it's a supermarket, it feels like a product from a different era," a consumer told the author. This confrontation is essentially a contest between two systems—traditional supermarkets rely on manpower and promotions to drive sales, while Hema leverages digital systems, cold-chain supply chains, and algorithm-driven operations to achieve higher efficiency and better experiences. The former's competitive dimension remains at "price—traffic—sales per square meter," while the latter has shifted to "supply chain—fulfillment—mindshare." When consumer habits are re-educated, the "defense line" of traditional supermarkets becomes unstable. From on-site observations, on Hema's opening day, the promotional crowd outside Jiajiayue briefly gathered, but most customers eventually walked into Hema. This may be a signal that retail competition in second- and third-tier cities is gradually entering a new phase.

Downward Markets Are No Longer "Lower-Tier Markets"

In the past few years, the industry generally believed that "new retail" was difficult to penetrate downward: low average transaction values, insufficient online penetration, and high renovation costs. But reality is being rewritten by Hema. A month after opening, it remains packed First, the consumption structure has changed. With the rise of the new middle class and the increasing proportion of young families, consumer concepts in second- and third-tier cities are upgrading: they are more willing to pay for quality, experience, and convenience. Cities like Linyi, Zibo, and Xuzhou have become typical "consumption upgrade samples." Second, infrastructure has matured. Leveraging Alibaba's digital capabilities and supply chain system, Hema can now achieve stable cold-chain fulfillment and site-selection algorithm replication nationwide. From warehouse scheduling to pricing systems and home delivery, everything can be quickly implemented. Third, industry competition is contracting. Traditional supermarkets have entered a "retreat cycle" in the past two years: Yonghui closed about 100 stores in 2024, Jiajiayue's net profit declined year-on-year, and Wumart slowed expansion. Many traditional supermarkets have begun to shrink and close stores. This has provided Hema with a structural opportunity to go downward. While first-tier cities are trapped by high costs and intense competition, second- and third-tier markets have instead shown market gaps. Therefore, for Hema, this is both downward expansion and capacity expansion. It is no longer just a "new retail experimenter" but a "reconstructor" of the consumer system in second- and third-tier cities. Hema's entry is driving three major changes in the industry:

  • Change in competitive dimensions—from "location competition" to "system and supply chain competition";
  • Change in consumer perception—from "price-sensitive" to "experience-sensitive";
  • Change in industry landscape—traditional supermarkets are forced to undergo digital transformation, optimize private brands, and develop home delivery businesses. In this sense, Hema's downward expansion is not a "dimension reduction attack" but a "system replication." And this replication is making second- and third-tier cities the new main battlefield for retail. From April last year to March this year, Hema achieved its first full-year profitability, ending at least eight years of continuous losses since its establishment in 2015. Today's Hema seems to have found its own rhythm. Combined with the recent opening of franchise policies for Hema NB (Hema NB), the author believes that Hema's current layout is more about using large fresh stores to strengthen its "quality" mindshare among second- and third-tier consumers, paving the way for the smooth expansion of the "low-price" model of Hema NB, opening more cracks in lower-tier markets.

Final Thoughts

The explosion of Hema Fresh's downward stores is not just about breaking opening records; it's a release of industry signals. It shows that in the new landscape of Chinese retail, those once-overlooked second- and third-tier cities are becoming the true incremental space for retail upgrades. For traditional supermarkets, this is a forced battle; for Hema, it's a validation of model confidence; and for the entire retail industry, it's a structural reshuffle "from location to system." Downward markets are no longer "lower-tier" but "main battlefields." A new retail order is being reshaped from here. Of course, on the downward path, Hema will inevitably encounter strong lower-tier markets, such as Luoyang in Henan and Suqian in Jiangsu. Whether Hema can disrupt the local retail landscape there also deserves attention. Readers interested in the impact of new retail and the adjustment of traditional supermarkets can scan the QR code to add the author for further communication.