Click to read the original article for details. Reflection has been the theme of Hema Fresh (hereinafter "Hema") for the past six months. From management failures to strategic choices, Hema has talked a lot, but it has never gone beyond the scope of self-reflection. However, these are not the only reasons for Hema's current situation. Today, let's try to look at Hema from a different perspective. Huxiu Selection believes that the root of Hema's problems today actually comes from Alibaba (hereinafter "Alibaba"). Hou Yi may not be unaware of the predicament he has been facing, but for him, it's more like "a mute person eating bitter herbs"—unable to express the bitterness. Moreover, from Hou Yi's level, what Alibaba can give and what it cannot give are not things he has great power to change. When a company's management is brought together by a giant's strategic plan rather than a shared vision, when a company's business ideas are to fill a gap in the giant's business ecosystem rather than come from market demand, and when most employees know little about the original intention of the caller, then when any problem arises in the company, it's hard not to link the problem to the person behind the scenes giving orders. So, in the case of Hema, what is Alibaba's problem? The Contradiction Between Positioning and Practice Alibaba has built the most powerful ecosystem in China's internet sector. The company expands its business following the mission of "making it easy to do business anywhere" and uses the criterion of "whether it can do things that partners cannot do" to decide whether deep participation is needed. Hema is Alibaba's first offline venture where it personally got involved. However, whether this business model necessarily required Alibaba's direct involvement, and to such a deep extent, is debatable. Looking back, Cainiao, which Ma Yun called "the last adventure of his business career," is the product of Alibaba's most massive direct involvement. Although the logistics field is relatively primitive, Alibaba has the confidence not to do dirty and tiring work—it controls the vast majority of e-commerce express logistics. Relying on Cainiao, it stands at the top of data, building platforms and enabling others—something that the "Tongda" companies and SF Express cannot do. So Alibaba had to deeply participate in Cainiao's construction, and Cainiao is essentially an internet company. Back to Hema, it still has some characteristics of an internet company, but it's not entirely like one. After all, Alibaba has never been upstream in offline business data, and this land has never been dominated by any giant company. So to find growth offline and then use data to empower, Alibaba can only rely on itself. If we dig deeper into why Alibaba had to get involved personally, there are two reasons:
1. Alibaba has few helpers in the fresh food sector. Yiguo does B2B, RT-Mart is famous for hypermarkets, and the main industry players have been wooed by Tencent;
2. The online landscape is set, and the imagination of the retail industry is mainly offline. Alibaba is unlikely to hand over the opportunity to continue leading China's digital commerce in the next decade to others. The risk would be too great. Later, Hema added a store layer, first for traffic generation (if you don't shout, where does offline traffic come from?), and second for cost considerations—it's not cost-effective to support so many products, especially live items, with urban front warehouses. This led to a series of actions like offline operations. But in the final analysis, Hema has never considered itself as a struggling offline retail peer. At the same time, whether it has stores or not, Hema wants to channel offline traffic online—using the Hema APP for settlement. However, the key to successfully channeling offline traffic online is the quality of offline operations. This is a complex process involving factors such as site selection, supply chain, inventory, pricing, management, and strategy. Frankly speaking, the part Hema needs to focus on is already beyond the expertise of internet companies. Not being good at it, yet having to do it. This misalignment makes Hema's operations very awkward. Let's use the example of only supporting APP settlement to illustrate the pit Hema dug for itself because it wanted to be an internet company. First, the direct result of only supporting Hema APP settlement is that it blocks a portion of offline traffic. Customers who are not adapted to using the APP or online checkout will be shut out of Hema. These people are usually older men and women, who are often the decision-makers for a family's three meals a day. This is even more evident in lower-tier markets. And the users who register for the Hema APP are mostly Taobao and Tmall users. Due to limited daily consumption budgets, such users are likely to order on Tmall or Taobao and not order on Hema. Consumption upgrade doesn't mean that if you spend 3,000 yuan a month on shopping, you'll change it to 5,000 yuan just because Hema appears. Besides, how many users have Hema but don't use Tmall/Taobao? Probably not many. As a result, in the same shopping categories and types, Hema inevitably competes with its sibling departments. Below are screenshots I took casually before 618 of the Hema APP and Tmall APP shopping pages. Tmall is clearly cheaper. Of course, this isn't the first time Hema has been called expensive. You might say, "If I order on Hema, I can get bayberries within an hour, but on Tmall I have to wait days. So even if it's more expensive, I'd rather use Hema." Huxiu Selection can only say that Hema satisfies more occasional, random needs, while Tmall solves daily, planned needs. Clearly, the latter is the bulk of consumption. (Left is Tmall Fresh shopping page, right is Hema Fresh shopping page) Pursuing Synergy Leads to Missed Opportunities When Hema is considered expensive, there are usually two situations: For imported goods and large seafood, there's nothing to say—rarity makes them expensive, which is normal. That is, Hema often explains, "Expensive because of high quality," "Not expensive at the same quality." The other kind of expensive is truly expensive, like pre-washed vegetables. A palm-sized box of chopped green onions, with almost visible quantity, sells for 2.5 yuan. Considering various time costs, users find that buying vegetables from Hema and cooking at home is more expensive than eating out, so they might as well eat out. From a business logic perspective, pre-washed vegetables are a category that should be used to attract traffic at relatively low prices for offline retail, fresh e-commerce, or O2O. Why does Hema set such a high price? In the end, the high price is due to high supply chain costs. Currently, Hema's back-end logistics and distribution are all completed by third parties. Unless Hema can self-digest in the future, it won't be able to control its own pre-washed vegetable costs. But wait, didn't Hema announce the construction of regional supply chain operation centers? Note that this was news from the beginning of this year, three years after Hema's birth. You might ask again, why didn't Hema build its supply chain in these three years? It's certainly not because Alibaba is afraid of burning money—if Alibaba were afraid of burning money, there would be no internet company in China daring to burn money. But in Alibaba's plan, synergy within the ecosystem is better than Hema doing everything itself (perhaps thinking this is the most cost-effective). Yiguo Fresh, which received three consecutive rounds of investment from Alibaba, was once entrusted with the important task of helping Alibaba build a supply chain. But Yiguo was unwilling to stick to the 2B positioning (not everyone necessarily cooperates and agrees with Alibaba), insisting on building a 2C platform. In the end, it not only failed to achieve anything in the past few years but also caused Hema to miss the golden opportunity to build its supply chain. Earlier, Tmall Fresh was also a victim. Tmall Fresh was harmed in the same way as Hema: Alibaba made it the sole 2C role to cooperate with Yiguo's 2B role. The result was predictable. But even if Yiguo hadn't failed, Alibaba's plan might not have worked. Looking at the world, there is no first-class retail company that doesn't build its supply chain. Costco and Walmart are no exceptions. All signs indicate that Hema should first be a retail company; second, if Hema doesn't build its supply chain, it can't fight price wars or do refined management—this is not a question of synergy. The reason is that physical goods, especially fresh food, are not emails that can be received by pressing a send button. If others help build the supply chain, there are too many uncertainties in terms of time, efficiency, and precision. In these three years, Hema may not have been unaware of the help that heavy assets bring to operations, but as mentioned at the beginning, knowing is useless. This is because: First, the cost of a supply chain operation center is too high, far beyond that of an ordinary express sorting center. Hou Yi has no say in an investment of this level; Second, and most importantly, in Alibaba's eyes, Hema must follow its plan. Alibaba's trillion-dollar market value was built this way. Will you listen or not? Organizational Culture Challenges Before this, countless people have asked what Hema is. But for most Hema employees, it is neither Alibaba's forward-looking new retail strategy nor an interpretation that experts say only they understand. If Hema wants to become a great retail company, it needs a simple translation that resonates, read to middle management and frontline employees. If employees can't be given answers to "what, why, and how," then for a company, its management system and corporate culture are out of the question. Since Ma Yun introduced the concept of "new retail," "what is new retail?" has almost become the biggest mystery in the business field in recent years. Alibaba thinking it has explained clearly is useless; Hou Yi's management team must understand. Hou Yi's management team understanding is also useless; middle management must understand thoroughly. Middle management understanding thoroughly is still not enough; the specific ideas must be conveyed to frontline employees. The premise of team combat effectiveness is clear goals. This is why, across Alibaba's big ecosystem, Hema is the most special. First, new retail has almost become metaphysics. Not only do outsiders say all sorts of things, but if you randomly pick a few people from within Hema, their explanations are also varied, let alone frontline employees. In short, they can't understand and won't listen. Second, compared to sibling companies like Cainiao, DingTalk, and Xianyu, Hema's founding team is not from Alibaba's direct lineage. The management team is a mix of "former JD employees + traditional retail people + Alibaba executives (P11 level)/political commissars." Not to mention whether the three parties can cooperate well, just getting them to think alike is not easy. At the end of last year, an insider at Hema complained to me that what the company lacks most now is people who understand both online and offline, implying that neither side can convince the other. Third, Alibaba's first offline layout brought in a large number of employees with lower education levels (compared to Alibaba). How to manage these people is a new challenge for Alibaba. In the end, a company is made by people. If execution doesn't keep up, everything is in vain. In this regard, Alibaba really should learn from Haidilao's experience in managing a large offline workforce. According to the current situation known to Huxiu, Hema employees are divided into three types, from low to high: third-party (mostly Shangjia Logistics, and others), Hema-compiled, and Alibaba-compiled. The largest number of Hema employees are contracted by third-party companies (cashiers, pickers, shelf stockers, delivery, etc.). In a sense, they are neither Alibaba people nor Hema people, lacking a sense of identity. Hema told Huxiu that Alibaba has placed political commissars in various departments (Alibaba's political commissar culture), but this is not a foolproof solution for two reasons: First, the two-compilation problem between third-party employees and Hema employees is also likely to occur between Hema employees and Alibaba employees. This is basic common sense.
It's like transfer students often find it hard to integrate into the original class. Moreover, for adults with conflicts of interest, integration is even more challenging. Under the premise that the two compilations create different identities, any work instruction could evolve into office politics.
Second, organizational/cultural construction cannot be separated from business expertise. Perhaps the political commissars from Alibaba think they are capable enough, but traditional retail managers may not be convinced, and vice versa (especially since Hema hasn't succeeded yet).
Think about that insider's words: why does Hema lack talents who understand both online and offline? In short, it's because no one is convinced by anyone else.
Going back, before Hema properly handles the above issues, Hema culture is still a mess, and organizational strength is out of the question. For Hema, which has no culture but only goals, the recurrence of the "label gate" incident is only a matter of time.
When everyone doesn't know whether the people around them are the same kind as themselves, Hema's management will not be flexible.
Today, Hema's failure to delegate product operation rights (display, pricing, promotion, procurement, gross margin) from headquarters to stores precisely shows its lack of gray management. If you don't trust employees' initiative, don't expect employees to repay with creativity.
One more thing: Huang Mingduan, the founder of RT-Mart, another important force of Alibaba offline, has set a good example in centralization and decentralization:
Headquarters is responsible for site selection, procurement, and distribution, while stores control product display and operations. Offline retail has evolved over the past decades through centralization, decentralization, and centralization + decentralization. From the current stage, Hema still has a long way to go.
Where to Go?
Since the beginning of this year, Hou Yi has launched four sub-brands in one go: Hema F2, Hema Cai Shi, Hema mini, and Hema Xiaozhan. These four sub-brands correspond to mature business formats in the market: convenience stores, wet markets, community supermarkets, and front warehouses (pure delivery). They will supplement the business in markets that Hema cannot reach.
These four formats are unlikely to become Hema's development focus in the short term. Hou Yi and his team should understand that the room for learning between different retail formats is very small, as evidenced by RT-Mart's Waterloo in operating Hema Hainan store and Hema Xiaoma. In other words, even if all four sub-formats succeed, the feasibility of feeding back into Hema's main format still does not exist.
From the market environment perspective, Hema's four sub-formats not only need to survive but also compete fiercely with peers. The convenience store, community supermarket, and front warehouse fields are already crowded with strong players.
Stepping back, given Hema's current organizational flexibility and talent pool, splitting into four independent teams to do four completely different businesses, while matching Hema's store opening pace, is almost an impossible task. Since the four sub-brands were announced, the number has remained at 1. Instead, Hema has maintained a pace of opening new stores every month, but the growth rate has slowed.
In the end, Alibaba is still China's most powerful e-commerce company. They have a unique ecosystem and no less money and time than their competitors. But for Hema, caught between competitors and Alibaba's big ecosystem, every step from now on must be taken with caution.
Source: Huxiu APP (ID: huxiu_com)