ANOTHER ONE OF ALIBABA’S HEMA FORMATS CLOSES

After the Hema (Freshippo) X stores were recently announced to close down, Hema has announced closing all its Hema Linli (盒马邻里, Hema Neighbourhood) stores.

Hold on, you may think, didn’t you recently write that Hema NB were rebranding to Chaohesuan? (substack.com/@techbuzzc…)

It can get a bit confusing with the Hema naming conventions, so here’s an explanation.

▶️Hema Neighourhood (盒马邻里) (2021) was one of several Alibaba community group buying (CGB) initiatives during this trend a few years ago. Consumers would order and collect goods at a central pick-up point the next day. The idea behind CGB was that it would save the platforms a significant amount of last-mile delivery costs, thereby increasing their competitiveness.

▶️CGB became a fierce war and was eventually won by the Pinduoduo (Temu’s parent) platform Duoduo Maicai when Meituan Youxuan gave up and pulled out of all but two provinces. Despite being able to offer 20K SKUs from Alibaba’s supply chain, much more than other platforms, and having an AOV of RMB 50 vs RMB 10, Hema Linlin failed. Store staff and rental made it more costly than other CGB platforms that didn’t have their own pickup stores. Leaning on the Hema Fresh assortment, its products were also 5-30% more expensive.

▶️Hema Outlet (盒马奥莱) (2021) was basically a discount store where Hema Fresh (盒马鲜生) stores would offload products that were expiring to reduce the loss rate. But Hema Outlets had to be close to Hema Fresh stores, and moving products from 6-7 Hema Fresh stores to one Outlet was eating up the margin. The format was eventually closed, and many of the stores were converted into …

▶️... Hema NB stores. These were hard discount stores with their own sourcing (instead of selling Hema Fresh ‘leftovers’). These community stores proved quite popular and became one of Hema’s main growth strategies. Confusingly enough, Hema NB used the same NB acronym as Hema Neighbourhood had been using in its logo. It did, however, continue to use Hema Outlet’s blue and red colour scheme, not Hema Neighbourhood’s purple and yellow.

▶️Hema NB has recently rebranded to Chaohesuan NB (a homophone for "super cost-effective"), continuing to use the NB acronym and blue and red colours, as well as the 盒 character from Hema (盒马). It has 300 stores and 60% of its products are private labels.

▶️In recent years, Hema Neighbourhood has been retracting to Shanghai, scaling down from 1.500 to 200 pickup stores. These will now all close down by October 4th.

While this might seem dramatic, it is further proof that Hema is focusing on two successful concepts (Hema Fresh for the middle class and Hema NB for the price-sensitive households) instead of spreading resources over many failed formats. As such, Hema has all the makings of becoming China’s biggest supermarket retailer (it already is #3).

-Ed