Click to read the original article for details In two bustling neighborhoods in Beijing's Huangsi and Hepingli communities, two new blue "Hema" stores have opened, marking Hema's first two mini stores in the capital. From a location perspective, the Hema mini Huangsi store sits near a street full of local life, while the Hepingli store faces a busy intersection. Inside, the large seafood that helped Hema establish its reputation has been reduced, replaced by more fresh produce, grains, oils, and condiments. Both stores also feature takeout windows for traditional Beijing-style pastries. Hema mini Hepingli store From shopping malls to busy, noisy old residential areas, from high-end to street-side small shops, Hema has finally stepped down from the pedestal of new retail. Now, Hema's goals appear clearer, but at the same time, a new race has begun between Hema, traditional retailers, and fresh food e-commerce players. -01- Hema Abandons "Hema" In these two stores, it's hard to see the original Hema Fresh format. It has begun to shed some elements that once earned it attention. First, Hema is no longer "high-end." Compared to Hema Fresh, the Hema mini stores are smaller: the Huangsi store has a total area of less than 800 square meters, with a front area of about 500 square meters and a back area (including warehouse) of about 200 square meters. The Hepingli store's front area is 600 square meters. Huangsi store: "checkout counter" with a tobacco and alcohol counter Hema mini's SKU count has also been streamlined, maintaining around 2,000 SKUs, which is typical for a mature convenience store. Compared to Hema Fresh's several thousand SKUs, this number has been reduced by more than half. For reference, the Hema Fresh store in Shilibao, Chaoyang District, covers 10,000 square meters and has nearly 10,000 SKUs. Hema Fresh built its reputation with various imported live seafood, but the current mini format is a streamlined version based on Hema's supply chain, abandoning large seafood that requires high cooking skills. For example, eye-catching items like king crab and Boston lobster are not available at the Huangsi store; only some fish, shrimp, and shellfish that are cheaper and easier to cook are kept in the live seafood section. Huangsi store: aquatic area Hepingli store At the same time, Hema mini has increased the proportion of ready-to-eat items like staple foods and cooked foods. Both stores have entrances dedicated to Beijing snacks, mainly pastries, with street-facing takeout windows. Hema's self-operated fried food and seafood workshops are retained but much smaller. The Huangsi store also has a simple dining area (the Hepingli store does not). The simplified Hema mini has also removed the hanging conveyor belt system. Li Ling, head of Hema mini in Beijing, told media including Huxiu that the removal is because the picking process differs from Hema Fresh; due to the small size, a single staff member can pick items throughout the store. More importantly, Hema has abandoned the "scenario" aspect. Hema once positioned itself as a multi-scenario, integrated shopping place combining ready-to-eat seafood, shopping, and food court dining. However, Hema mini now only serves community users within 1.5 kilometers. As the operating and service areas shrink, simple scenarios become the norm, and Hema mini is downplaying the "scenario" concept. Clearly, the community scenario is the last bastion for physical stores. Although everyone continues to emphasize the growth in online order share, retailers cannot yet rely solely on online traffic. On a deeper level, although Hema Fresh has always been a high-profile player in Alibaba's new retail camp, serving as a banner and model, it has not yet achieved overall profitability. Now, Hema mini may become the main driver to meet profitability KPIs— According to Ni Xiaojun, head of the Hema mini project, stores open for more than three months achieve average daily sales of 200,000 yuan per store, with sales per square meter more than six times that of ordinary community retail stores. Since June, Hema mini has achieved overall profitability every month, and construction costs are basically one-tenth of Hema Fresh stores. Having stepped down from the cloud of new retail, Hema finally has the confidence to talk about "making money." -02- The "Fill the Gap" Battle Hema's focus on mini stores aligns with current retail trends. In recent years, with the development of e-commerce and home delivery, consumer shopping needs have shifted from large hypermarkets with cluttered merchandise to small boutique stores. Especially accelerated by the pandemic in the first half of the year, mini stores will soon be everywhere. According to Lianshang.com, RT-Mart is also testing mini stores, with the first Xiaorunfa MART-mini set to debut in Nantong. Xiaorunfa is also positioned as a new retail community fresh food supermarket, with fresh produce accounting for more than 60% of categories, and FMCG categories also available. The area is about 200-500 square meters, close to communities, and does not offer live seafood. Image from Lianshang.com For large retailers needing to consolidate and expand market share, mini stores are expected to "fill gaps" for large stores and existing markets, while also attacking lower-tier markets. Ni Xiaojun said this time that Hema mini in Beijing "mainly serves to 'fill gaps' alongside Hema Fresh stores. We hope Hema mini will fill blank areas that Hema Fresh cannot cover. In the next one to two years, combined with the overall store opening plan, we will promote both models (Hema Fresh + Hema mini) to achieve full coverage of the Beijing market." Huxiu previously wrote that due to its initial positioning, Hema Fresh, known for live seafood, is not easy to move "downmarket." Theoretically, Hema mini can help Hema, which is located in city centers with relatively high average order values, expand into relatively lower-tier areas outside first- and second-tier cities like Beijing, Shanghai, and Hangzhou, as well as suburbs far from CBDs and bustling shopping districts. However, the rise of the mini format will inevitably bring new challenges. Yonghui Superstores President Li Guo once admitted that the reason for developing Yonghui's mini format is to promote performance growth by supplementing blank markets. However, "Yonghui mini and entrepreneurial community fresh food stores have similar positioning and user service intentions, competing on supply chain strength and refined operations." Supply chain capability, small store operational effectiveness, consumer experience, and online-offline synergy—whether they can achieve effective linkage remains to be seen. Moreover, when the service scope narrows and the target customers become more precise, local retail faces greater challenges: the accuracy of product selection, delivery efficiency, and experience requirements will increase, and the in-store experience must be better than existing community supermarkets, wet markets, and mom-and-pop stores. However, Hou Yi has already expressed confidence in facing convenience stores and mom-and-pop shops. He once explained why Hema doesn't open smaller stores but chooses an area of 500-1,000 square meters: because the "positioning is different" among formats. "Hema advocates that whether it's a large or small store, it should solve one-stop shopping needs, from Monday to Friday, from buying vegetables and fruits to daily food and ready-to-eat items. Such stores are basically above 500 square meters, so we believe that above 500 square meters, a store can truly win absolute competitive advantage in a community." Coincidentally, at the entrance of the alley where the Hema Huangsi store is located, there is a small "vegetable basket convenience service station" selling bulk vegetables. On the other side of the store is a Miss Fresh front warehouse. Thus, in this small alley, three fresh food formats form a dramatic scene. Regarding the location, Li Ling said it was a "coincidence." But clearly, Hema, which has abandoned the front warehouse model, is destined to compete with rivals through Hema mini. Mini has entered Beijing, but the overall expansion of Hema mini has not yet accelerated. Currently, there are six Hema mini stores in Shanghai. Ni Xiaojun said that within this year, Hema mini will achieve full coverage of core business districts and communities in Shanghai, and then expand to suburbs and towns along the subway. As Hema mini just entered Beijing's alleys, it is educating the elderly residents on downloading and using the Hema app. In this process, Hema, once high in the clouds, is returning to the ground, to the streets. Source: Shiyi Xiaofeizhe (ID: gjgc168), author: Liu Ran