Launched by Alibaba Group in 2015, Hema Xiansheng is the pioneer in O2O fresh produce retailing and has captured a lot of attention in the “New Retail” era. Hema’s first physical store was opened in Shanghai in January 2016 and it has been speeding up its expansion since 2017. As of August 2017, it has 13 stores in China, 10 in Shanghai, two in Beijing and one in Ningbo.

Key highlights

Hema is one of the best illustrations of Alibaba’s notion of “New Retail” – the seamless integration of online and offline, with efficient logistics and big data capabilities. Hema also uses its physical store as fulfillment center to speed up the delivery process. With the Hema app, the company can track every purchase made by the customers and create a personalized product page for them on their app. User experience is greatly enhanced through big data.

Hema provides delivery service for customers who live within 3-5 km from the store, and the delivery will be completed within 30 minutes.
80% to 90% of its customers are aged 25 – 40; they have high income and enjoy high quality of life. Fresh food and imported goods are the key. Hema has also started offering private label goods so as to differentiate itself from other fresh supermarkets.

Hema provides great shopping and dining experience for different customers. This is a revolution to traditional supermarkets.
Previously, Alipay (launched via Hema app) was the only payment method accepted in-store as Hema wanted to gather all consumer profiles and their shopping preferences. Starting from August 2017, Hema has started to accept cash payment in selected branches.

Hema’s first store, Shanghai Jinqiao store, has reportedly become profitable for the first time in August 2017 since its opening in January 2016. This is a truly remarkable achievement for the company as it could reap a profit in the low-margin fresh food business in just 20 months. We believe Hema’s strategic focus on catering and dining is the key to make the store profitable so quickly. Catering, especially in the form self-owned food booths, could generate higher profit margins than the grocery business.