---
title: "New Retail Hits the 'Seven-Year Itch'"
description: "From food safety crises to fundraising at a 40% valuation discount, Hema Fresh, the flagship of new retail, has fallen from grace. This signifies that the once-vibrant new retail movement may be ending in disappointment. Yonghui Superstores, Hema's most formidable follower, plans to return from new retail to traditional retail after massive losses."
author: "徐霁"
publisher: "New Distribution"
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published: "2022-07-25"
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# New Retail Hits the 'Seven-Year Itch'

> From food safety crises to fundraising at a 40% valuation discount, Hema Fresh, the flagship of new retail, has fallen from grace. This signifies that the once-vibrant new retail movement may be ending in disappointment. Yonghui Superstores, Hema's most formidable follower, plans to return from new retail to traditional retail after massive losses.

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From food safety crises to fundraising at a 40% valuation discount, Hema Fresh, the flagship of new retail, has fallen from grace. The broader significance is that the once-vibrant new retail movement may be ending in the most desolate way.
Yonghui Superstores, Hema Fresh's most formidable follower, after a massive loss of nearly 4 billion yuan last year, continued to lose 120 million yuan in the first half of this year. As a result, the company plans to return from **new retail to traditional retail.**
At this point, it has only been seven years since Mr. Ma proposed the concept of new retail in 2016 and Alibaba launched Hema Fresh. Under the coercion of internet giants, offline supermarkets bowed into the game, seemingly seeing a glimmer of hope at the turn.
Seven years later, it's all a mess. The proposer of this concept has long been absent from the scene; his biggest competitor and also the most lavish supporter is similarly quiet, last heard of due to the Minnesota incident in the U.S. and rumors of purchasing a super mansion in Europe.
Yonghui Superstores and others have realized that no matter how difficult the transformation, it must be completed by the chain supermarkets themselves. Will membership-based supermarkets be the industry-wide direction going forward?
**01 Ebb Tide**
During the scorching summer, offline retail is still cold despite the warmth. These days, Hema Fresh is being put on the fire.
On July 10, a woman in Hangzhou found live maggots in a crab dish while dining at a Hema Fresh store. In fact, food safety issues have occurred from time to time in its stores across the country, but this one was so bizarre that it trended on hot search.
**If even the most basic food safety cannot be guaranteed, what is the point of retail innovation?**
Two days later, media reported that Hema Fresh is seeking to raise funds at a valuation of $6 billion. Earlier this year, it attempted to raise funds at a $10 billion valuation but failed.
At the end of 2021, under the pressure of group performance, Alibaba internally implemented an "operating responsibility system," and Hema Fresh, which had been supported by blood transfusions for years, began to be responsible for its own profits and losses.
Last year, Hema Fresh's general manager Zhang Guohong quietly resigned, and the position has remained vacant since; in May this year, founder Hou Yi stepped down as chairman. After the turmoil at the top, there was a major reshuffle of personnel, followed by business adjustments.
As the flagship of new retail, the collapse of Hema Fresh's myth effectively declared that China's retail industry's new retail experiment ended in disappointment.
Among traditional chain supermarkets, the one that pursued the new retail strategy most closely was Tencent-affiliated Yonghui Superstores (601933.SH).
In 2016, when the new retail concept just became popular, Yonghui Superstores established Yonghui Yunchuang, launching new retail businesses such as Super Species, Yonghui Life, and Yonghui Home, benchmarking against Alibaba in all aspects, with Super Species being a follower of Hema Fresh.
After a sudden massive loss of nearly 4 billion yuan last year, Yonghui Superstores made the most realistic decision—to retreat from new retail back to traditional supermarkets.
The transformation has not yet yielded results, and the company continued to lose 120 million yuan in the first half of this year. After the earnings forecast was disclosed, Yonghui Superstores' stock hit the limit down.
**New retail formats such as Yonghui's Super Species, Suning's Su Xiansheng, and Meituan's Xiaoxiang Fresh (renamed from Zhangyu Fresh) have gradually faded from the market.** Those traditional chain supermarkets that claimed to transform into new retail, including Bubugao, Xinhua Du, and Renrenle, have also fallen into their own troubles.
The once-flourishing new retail world could be mapped out in a business layout diagram. Now, just a few years later, some of the brands involved have lowered expectations after the boom faded, some have contracted due to declining performance, and several have even disappeared in the wind and rain.
**02 Coercion**
In 2016, at the "Yunqi Conference," Alibaba launched Hema Fresh, which adopted a "supermarket + restaurant" model. Mr. Ma announced the beginning of an era: **"In the next ten or twenty years, there will be no e-commerce, only new retail."**
In the first year of new retail, people marveled at the product selection, service, and internetization in Hema Fresh stores, much like when supermarkets first entered the Chinese market in the 1990s.
Soon, a host of internet companies and traditional offline retail enterprises joined in, engaging in an arms race across three dimensions.
The core of new retail is still the store. In addition to typical new retail stores like Hema Fresh and Super Species, traditional hypermarkets like RT-Mart underwent new retail transformation; convenience stores, though not a novel format, also sprang up in the Chinese market.
Overseas brands like 7-Eleven and Lawson were popularized in the Chinese market, and local convenience store brands also rose with the trend, such as Bianlifeng, Today, and Youjia. Of course, the most ferocious were the high-profile moves of the giants. Suning Xiaodian, with strong execution, opened 5,000 stores in two years. Liu Qiangdong, who frequently made bold claims, once declared that JD convenience stores would open 1 million stores. Yes, you read that right: 1,000,000 stores.
Secondly, there was control over the supply chain. Before this round of public opinion storm, Hema Fresh was still highlighting its supply chain advantages. On July 5, Hou Yi announced on Toutiao, "After three years of hard work, our self-raised 'Hetian shrimp' is finally on the market."
The leading enterprise Yonghui, leveraging its capital advantages, invested in a large number of supply chain-related companies, such as Guolian Aquatic Products and Xingyuan Agriculture, formed a joint venture with Moutai called Youyi Shizhe, and incubated Caishixian. Smaller players like Bubugao and Jiajiayue also had supply chain-related layouts.
Downstream, they used the common burning-money model of mobile internet to connect with users, accumulating users for O2O portals through discounts and promotions.
However, new retail not only failed to solve performance difficulties but also made them sink deeper into the quagmire of retail business transformation and upgrading.
The most typical examples are Gaoxin Retail and Yonghui Superstores. While foreign hypermarkets and traditional supermarkets were retreating, the two giants of Chinese chain supermarkets could still carve out their own independent trends with their respective advantages. But after years of new retail turmoil, they lost their existing advantages.
In 2021, Yonghui Superstores suffered huge losses, not only due to declining gross margins and store closures, but also largely because of losses from investments in projects like Guolian Aquatic Products and Zhongbai Group.
In previous years, giants like Yonghui Superstores and Suning.com had transferred loss-making new retail businesses outside the listed companies to save performance.
**The retail industry was coerced by internet giants**, and the seven-year itch of new retail arrived on schedule—internet giants reaped traffic and concepts, but the retailers who clung to this lifeline felt they were being harvested.
**03 Return**
In terms of the business model itself, the vigorous **new retail movement overemphasized 'innovation' while ignoring the 'essence' of retail.**
What is the essence of retail? Selling things, how to sell better products to more consumers.
The competitiveness of good products has never been in doubt, but that doesn't mean you need to do it yourself. If you are in retail, why would you raise shrimp with an industrial mindset? Which is more competitive: your shrimp or those raised by the most professional and experienced shrimp farmers? The social division of labor dictates that professionals should do professional work.
After the rise of high-end convenience stores, they have largely replaced the street-side mom-and-pop stores. But what does this format bring to consumers? The most intuitive feeling is actually price increases.
A bottle of the most common green tea has an official suggested retail price of 3 yuan. Some small supermarkets, to sell more at lower margins, can sell it for 2.5 yuan, but many convenience stores sell it for 3.5 yuan. The cost is spent on brand, stores, and supply chain expansion, not on consumers.
In connecting with consumers, the value of products and services is always more enduring than the value of discounts.
Henan's local Pangdonglai, with product selection no less than premium supermarkets and service comparable to Haidilao, is called the "ceiling of supermarkets" and China's "light of retail."
Of course, there is also Costco, which Lei Jun and others particularly admire. In fact, the withdrawal of foreign chain supermarkets from the Chinese market—Carrefour being acquired by Suning.com and Metro sold to Wumart—is not a retreat by retailers but a strategic adjustment, closing hypermarkets that do not fit Chinese consumers. Instead, they are opening high-end stores, fresh convenience stores, and membership-based supermarkets that better represent future consumption habits.
Under the guidance of returning to traditional retail, Yonghui Superstores began piloting warehouse membership store models in May 2021, and as of the end of April this year, 53 have opened. This format widens store aisles to enhance shopping comfort; reduces SKUs, uses multi-position large displays to let products become salespeople; supports "daily clearance" for fresh products; and creates on-site shopping scenes like baking and BBQ...
**More retailers are walking on such a pragmatic path**, exploring new models for the survival of China's retail industry.
Source: Zebra Consumption (ID: banmaxiaofei) Author: Xu Ji
 _**-END-**_


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