Hema has experienced its most turbulent year ever. In March 2024, Hema founder Hou Yi retired, and Yan Xiaolei, who previously served as Hema's CFO, was appointed as the new CEO. Besides the major management changes, Hema was also mired in public relations difficulties: consecutive store closures, empty shelves, IPO suspension, and frequent rumors of being sold by Alibaba. Last year was Hema's darkest moment, but also a critical turning point. At the end of 2024, Yan Xiaolei sent an internal letter disclosing Hema's latest situation: on the basis of nine consecutive months of profitability, it achieved double-digit growth. At a time when it is quite difficult to break through in the retail industry, Hema has delivered a fairly good interim report card.
China's retail industry has entered a painful period of transformation—traditional chain supermarkets have begun to "ebb," with Carrefour's store count plummeting from over 200 at the end of the year to 41; Yonghui Superstores, Bubugao, and others are also not optimistic, having suffered losses for three consecutive years since 2021; Lianhua Supermarket, RT-Mart, and others have also closed stores. On the other hand, Sam's Club, ALDI, and Pangdonglai have become the narrative centers of another dimension. According to media reports, in 2024, Sam's Club's omni-channel sales exceeded 100 billion yuan, reaching 100.5 billion yuan; ALDI, which has 62 stores in China, announced it will enter more cities in 2025; Pangdonglai's overall sales in 2024 were nearly 16 billion yuan, with profits exceeding 800 million yuan. In an industry environment of extreme contrasts, Hema turned losses into profits and, over the past year, penetrated 21 cities and regions at a pace of opening a new store every five days on average—this may be a new direction for retail exploration. After Yan Xiaolei took office, Hema proactively sought change, making bold explorations in three aspects: returning to user value, focusing on development direction, and advancing organizational construction. In terms of business awareness, it changed its usual "high-profile" approach, focusing on loss reduction and pragmatism, with stricter financial assessments. To some extent, Hema's trade-offs also reflect the larger cycle. Should business or finance come first? How to understand market demand and supply gaps? Has new retail truly died? How to cross cycles has always been the answer enterprises seek. Hema, as a representative of new retail, has also experienced setbacks and paid a price. Its interim report card may contain reference methods.
Hema Wins One Back Nine months—that's the time since new CEO Yan Xiaolei took over. This internal letter can be considered a summary of the achievements of her various reforms since taking office. In 2024, Yan Xiaolei proposed that Hema should "return to user value, focus on development direction, and advance organizational construction." We broke down these three major actions one by one and found that over the past year, Hema has had deeper thinking about the "essence of retail," with almost all changes revolving around the strategic origin of customer needs, product strength, and organizational efficiency.
Regarding returning to user value, Yan Xiaolei expressed it in the internal letter in two dimensions: First, Hema upgraded nearly half of its stores nationwide to improve hardware facilities. After visiting the renovated Hema stores, China Entrepreneur found that the overall brand style of the store side had not changed, but compared to before, the stores were more spacious and clean, with brighter lighting and more transparent views—this is the most intuitive step for retail stores to optimize the experience. Efficiency optimization is also a key step in improving customer experience. Through algorithm upgrades, Hema significantly increased the proportion of orders delivered within 30 minutes. Second, starting from product strength, it returned to user value. Over the past year, Hema has continued to make efforts in product development, supply chain innovation, and pricing.
For example, in the bakery category, Hema optimized the ingredients of its classic product "Strawberry Box Cake," reducing sugar in the cream by 90%, and also established a self-operated strawberry planting base in East China through cooperation with suppliers, reducing pesticide residues during planting. Today, retail brands that can survive well in the market, such as Sam's Club, Pangdonglai, and Costco, all have strong response and innovation capabilities on the supply side. Hema is trying to settle down and continue exploring at the more peripheral end of the supply chain. Over the past year, Yan Xiaolei focused on advancing Hema's systematic combat capabilities, such as strengthening coordination across the entire chain in terms of product standard definition, raw material planting, processing technology improvement, production equipment upgrades, precise customer demand acquisition, and cost control.
In advancing organizational construction, Hema added nearly 200 store manager positions this year, 10% of procurement personnel were promoted to category managers, and completed the store manager grade and salary reform. Yan Xiaolei stated that in the new year, Hema will continue to increase investment in talent cultivation and team building, improve the selection system, and create a more competitive salary incentive system. After leaving Hema, founder Hou Yi recently said in an interview with Caijing magazine about the importance of the retail team: "When Chinese retail started in 1993, Carrefour and Metro entered the Chinese market with high salaries. At that time, a large number of talents from prestigious schools went to Metro and Carrefour. But after 2000, when e-commerce rose, traditional retail basically had no talent. Today, many enterprise personnel are generally aging, with post-70s still working on the front line. To carry out new organizational changes today, we need a group of young teams to rise." Retail is an industry that frequently interacts with people. Focusing on "people" should not only be on consumers but also on internal teams. Only when every internal and external perspective is convincing can users truly establish their perception of Hema.
The Contrarian If we take Carrefour's entry into the Chinese market in 1995 as a node, defining it as the first year of China's modern retail industry, it has just passed 30 years. At that time, most local supermarket chains regarded Carrefour as a reference textbook for the industry. But whether due to the impact of e-commerce or the inevitable changes in consumer trends, China's retail industry has entered a painful period of transformation and change. Traditional retail supermarkets have begun to "exit." The former leader Carrefour has declined from prosperity, with store numbers plummeting from over 200 at the end of 2021 to 41; Yonghui Superstores, Bubugao, and others are also not optimistic, having suffered losses for three consecutive years since 2021; Lianhua Supermarket, RT-Mart, and others have also closed stores. For traditional chain supermarkets mired in difficulties, survival is the most important thing.
In 2024, "adjustment and reform" became the keyword for traditional chain supermarkets. Pangdonglai successively assisted Bubugao, Yonghui, and other supermarkets, adjusting displays, lighting, and product selection. But Hema founder Hou Yi did not quite agree with this approach. He believed that adjustment and reform only solve problems temporarily: "Treating the head when the head hurts, treating the foot when the foot hurts, copying the business practices of some good enterprises only solves short-term problems, which is far from enough." Hou Yi's view of the future is not optimistic. He believes that under this difficult cycle, 80% of retail enterprises will still be eliminated, and the 20% that remain will gradually become world-class retail enterprises. Who has the opportunity to cross the cycle? If we use data to extract possibilities, it is retail enterprises that still grow against the trend. According to Business Observer, Sam's Club's omni-channel sales in China in 2024 exceeded 100 billion yuan, reaching 100.5 billion yuan, with online accounting for more than 48%; ALDI, which has 62 stores in China, is expected to have annual sales of about 2 billion yuan in 2024, with a comprehensive gross margin of about 20%; Pangdonglai, deeply rooted in Henan, had overall sales of nearly 16 billion yuan in 2024, with profits exceeding 800 million yuan; in addition, Hema, which has been profitable for nine consecutive months with double-digit growth, is also among them. Such retail enterprises all have distinct business labels: understanding the consumption needs of target customer groups, emphasizing development and innovative products, and valuing supply chain capabilities.
Sam's Club has already taken the lead in reaching the 100 billion scale. Among domestic retail enterprises, Hema has the greatest possibility of impacting the 100 billion scale and competing with international brands. Retail is essentially about scale. When a single-store model can be successfully replicated and scale leads, it is easy to achieve a growth flywheel. Pangdonglai is worth learning from in terms of service and product quality control, but its 14 stores are all in Henan, mostly concentrated in Xuchang, and Pangdonglai has not yet revealed its intention to expand beyond Henan. After Yan Xiaolei took office, in addition to focusing on user value and organizational construction, the most drastic change was in business focus. Originally, Hema had more than ten business formats, including Hema Fresh, Hema X Membership Store, Hema Neighborhood, Hema Xiaozhan, Hema MINI, and Hema Fresh Outlet. After Yan Xiaolei took over, she integrated resources and clarified a dual-line strategy with Hema Fresh and Hema NB as the core in terms of development direction. Hema Fresh, as the main format, targets the lower-tier market, replicates the model, and accelerates store openings to seize market share. A Hema spokesperson once told the media, "Before this year, many third- and fourth-tier cities and county-level cities did not have Hema. The absence of Hema stores does not mean consumers have no demand." Hema NB, as a community (discount) supermarket, focuses on self-owned supply chain and private label products, emphasizing high cost performance. Compared with the large Fresh stores, Hema NB is more flexible in expansion, like a cavalry unit, and it relies on the supply chain capabilities accumulated by the main format over the years. Its current task is to refine the optimal model. The opportunity to break through the 100 billion mark may lie in whether these two formats can flexibly combine to form a dense network covering a broader tiered market.
Over the past year, Hema opened a new store every five days on average, the fastest in five years. Currently, Hema has nearly 430 stores nationwide, covering 50 cities, and this year it newly entered 21 cities and regions. In addition to penetrating lower-tier markets, Hema has also extended its reach overseas. Last year, Hema's private label products reached e-commerce platforms and offline supermarkets in the United States, Australia, Singapore, and other countries, including popular domestic internet-famous bakery items like durian mille crepe cake and osmanthus wine lees daifuku. This CFO-turned-leader has set a new goal for Hema: to break through the 100 billion GMV mark within three years. By then, Hema will become one of China's top retail brands. However, reaching the 100 billion scale is not easy. Although Hema has quickly corrected course and seen profit recovery over the past year, competition has become more intense. Sam's Club, ALDI, and others are accelerating their expansion plans in second- and third-tier cities. When they meet on a narrow path, there will inevitably be a battle.
New Retail Has Not Died At the beginning of 2025, Alibaba threw a "bomb" into the retail industry—Alibaba sold all its shares in Gaoxin Retail, the parent company of RT-Mart, for no more than HK$13.138 billion (approximately RMB 12.3 billion).
At the end of 2016, Jack Ma first proposed the concept of "new retail," and then, under the leadership of then-CEO Daniel Zhang, Alibaba strategically invested in Suning, Intime, Gaoxin Retail, and others, and created the new species Hema. At that time, new retail almost changed Alibaba's business direction—Alibaba transformed from an e-commerce-focused internet company into a comprehensive economic entity driven by multiple businesses, covering both online and offline. With Alibaba's investment and support, the digital transformation of RT-Mart and Intime was realized. But now, RT-Mart has been sold, and Intime has been sold to Youngor. Alibaba's current strategy is extremely clear: focus on the main business and shrink non-core loss-making businesses. "We still have some traditional physical retail businesses on our balance sheet, which are not our core focus, so it is also very reasonable to exit," said Joe Tsai. Similarly, JD.com also sold its physical retail business, continuously reducing its stake in Yonghui Superstores, and eventually sold it to Jun Cai International, a subsidiary of Miniso. For a time, the claim that "new retail has died" was rampant, and the industry was also guessing whether Hema would be Alibaba's next physical retail business to be sold.
Alibaba's sale of physical retail assets is a planned "slimming down." According to Alibaba's fiscal third-quarter 2024 financial report, revenue from "all others," including Gaoxin Retail, Intime, Hema, and other businesses, was RMB 47.023 billion, down 7% year-on-year, with adjusted EBITA down 87% year-on-year. But if the above physical retail operations were excluded, Alibaba's total revenue would grow by about 8%, and the adjusted EBITA margin would increase by about 4 percentage points to 24%. Under high pressure, Hema fought back and finally delivered a strong report card at the end of the year. Although Hema, RT-Mart, and Intime were all "three carriages" bearing Alibaba's new retail expectations, Hema is fundamentally different from the other two businesses. As a natural "new retail" model, Hema is lighter and has almost no historical baggage. This means Hema can more easily break free from constraints and blaze a new path. And the claim that "new retail has died" is also mostly disagreed with by industry insiders. Wu Zhonghua, founder of Wumart, once said in an interview: "Retail is inevitably an amphibious species integrating online and offline. The various challenges we face now further prove that there is no way out without digitalization."
Nine years ago, Hema opened its first store in Shanghai Jinqiao. At that time, it also faced many doubts: "Is having an APP and being able to deliver food considered new retail?" But now, APP and delivery have become the basics for most chain retailers, and the "30-minute delivery to home" that Hema emphasized back then has also become the basic perception of users for online retail. New retail has not died but has become the norm, integrated into the retail industry, and will carry the next stage of competition. However, new retail enterprises should seriously consider how to allocate online and offline channels most reasonably after the game reaches the middle stage. Only by combining the data advantages of online user operation and conversion with the characteristics of offline experience and product delivery can the entire system be truly revitalized from the root.
Hema is still valuable to Alibaba. But obviously, Alibaba will focus more on its main business in the future and will find it difficult to continue to provide blood transfusions and pay for willfulness as before. In the tenth year of new retail's birth, Hema, which is about to turn 10, needs to face its own growth issues and prove itself once again.
[New Order · Symbiosis] The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China