After seven arduous years, Hema has finally turned the tide, heralding a triumphant dawn of profitability.

At the close of last year, when Hema announced nine consecutive months of overall profitability alongside double-digit growth, the market eagerly anticipated news of its full-year triumph. Recently, multiple media outlets confirmed that data spanning April 2024 to March 2025 indicated Hema had met its full-year profitability target, officially marking the end of a seven-year loss cycle.

This interim achievement stands as irrefutable evidence of the efficacy of Hema's strategic repositioning.

The "bleeding stoppage" strategy has yielded remarkable results.

Once a trailblazer in business model innovation, Hema launched a multitude of formats ranging from upscale Hema X membership stores to community-focused Hema MINI stores, aiming to comprehensively capture the consumer market. However, the pitfalls of a multi-front strategy soon became evident, with resources thinly spread, hindering each format's ability to deeply cultivate its niche, and profitability remained elusive.

Learning from its mistakes, Hema adopted a "streamlining" approach: focusing on core businesses, divesting non-core assets, realigning with user value, advancing organizational development, and relentlessly pursuing cost reduction and efficiency enhancement.

Firstly, Hema gradually phased out underperforming X membership stores and vigorously expanded Hema Fresh and NB discount stores, returning to a more focused expansion trajectory. The once-promising Hema X membership stores were reluctantly abandoned due to operational challenges. The closure of three such stores in Shanghai marked Hema's definitive shift away from a phase of blind experimentation.

Secondly, Hema reconnected with user value through multiple dimensions, including channels and products, precisely aligning with consumer needs. In 2024, leveraging its established supply chain network and digital operation system, Hema opened a new store every five days on average, entering 21 new cities, and witnessed a over 50% increase in customer base year-on-year.

In terms of product innovation, Hema vigorously invested in the research and development of PB products (private brand products), deeply exploring consumers' latent needs. Recognizing the quest for unique flavors, Hema explored the extensive application of matcha in food and launched specialty products like Guizhou matcha cream rolls, Guizhou matcha mousse cakes, and Hema matcha milk.

Regarding channels, Hema actively expanded its offline presence while continually optimizing the online shopping experience, striving to provide consumers with more convenient, efficient, and high-quality services. For instance, Hema's "Hema Cloud Super" was upgraded to "Cloud Enjoyment Club," offering an enhanced online shopping platform.

Thirdly, Hema made significant strides in organizational development, fostering employee enthusiasm and creativity through a series of reform measures.

Over the past year, Hema increased investment in talent development and leadership succession, adding nearly 200 store managers and promoting 10% of buyers to category managers. Furthermore, Hema reformed store manager salary grades, closely linking pay to performance, fully motivating store managers to actively improve operational performance.

Hema's profitability is not a fortuitous outcome but the culmination of consistent, multi-faceted efforts. As retail industry competition intensifies, it remains uncertain whether Hema can sustain this momentum and profitability.

The Retail Landscape Continues to Evolve

With full-year profitability, Hema has shed the stigma of "burning cash through experimentation," yet the underlying crisis in the new retail sector remains concealed. On this smokeless battlefield, rivals like Sam's Club, PDL, Meituan, and JD.com have long been preparing for battle, intensifying the competitive pressure on Hema.

Sam's Club, leveraging its mature membership system and efficient supply chain, continues to expand in the high-end market, encroaching on Hema's survival space. By sourcing high-quality products globally and cooperating directly with suppliers, Sam's Club reduces intermediaries, ensuring product freshness and quality while maintaining a competitive cost advantage, positioning it as a formidable competitor to Hema.

On the other hand, PDL, with its unparalleled service, is reshaping the regional retail landscape, prompting Yonghui Supermarket to embark on a "PDL-style transformation." In this service-centric regional retail competition, differentiating Hema's service offerings to attract more local consumers has become a significant challenge.

Renowned for its exceptional service, PDL meticulously attends to every detail, from the sincerity and enthusiasm of its staff to stringent product quality control and a meticulously crafted shopping environment, all reflecting deep respect and care for consumers. This unique philosophy has garnered PDL a loyal following in local markets. Observing this success, Yonghui Supermarket decisively adopted a "PDL-style transformation," aiming to borrow from PDL's success to enhance its competitiveness.

Additionally, giants like Meituan and JD.com, leveraging their capital and traffic advantages, are encroaching on Hema's fresh food retail market share through both online and offline channels.

Meituan's Little Elephant Supermarket plans to open offline stores, directly targeting the Hema Fresh model, leveraging Meituan's accumulated user data and distribution network in local lifestyle services to swiftly enter the fresh food retail sector. Similarly, JD.com's 7FRESH is accelerating its expansion, adding 20 new warehouse stores in the Tianjin region by the end of June this year, with simultaneous expansion in regions like Beijing.

The robust distribution systems and e-commerce platform experience of JD.com and Meituan provide a solid foundation for their fresh food business. In this fierce competition among giants, Hema's advantage of online and offline integration is no longer distinctive. Standing out in the intense traffic battle and stabilizing its user base has become an urgent issue for Hema.

In summary, competition in the new retail sector has reached a fever pitch, with Hema facing rivals on all fronts. To maintain a leading position in this cutthroat environment, Hema must identify and solidify its differentiated competitive edge.

New Challenges Await

Following its profitability breakthrough, Hema now confronts new challenges.

In the new fiscal year, Hema has clearly prioritized the expansion of its two core formats, Hema Fresh and Hema NB, planning to open nearly 100 stores and enter dozens of new cities. New store locations continue to penetrate deeper markets, with about one-third of new stores targeted at second- and third-tier cities and counties.

In the broader retail landscape, the lower-tier market has emerged as a critical battleground, and Hema, with ambitious plans, has taken a significant step into this seemingly boundless potential field. Official data reveals that in 2024, Hema Fresh entered 21 cities and regions, including counties such as Changshu, Tongxiang, Yiwu, Zhuji, Deqing, and Zhangjiagang.

However, while aspirations are high, realities are fraught with challenges, and Hema's journey into the lower-tier market is fraught with difficulties.

As Hema delves into the lower-tier market, aiming to spread supply chain costs through scale, its over-optimism about county-level consumption power could become a hidden risk. Many county-level markets have limited consumption capacity, with consumers being more price-sensitive, less receptive to high-quality fresh food products, and prioritizing cost-effectiveness. While Hema Fresh's large-store model and Hema NB's community store model partially address the needs of lower-tier consumers, further optimization and adjustment in product variety, pricing strategies, and service methods are necessary to better align with the consumption patterns of these markets.

Moreover, traditional supermarkets and hypermarkets have deep-rooted local presence and a broad user base, intimately familiar with local consumer preferences and needs, enabling them to offer more tailored products and services. In comparison, Hema's advantages in product diversity and distribution efficiency are less pronounced in these markets.

In first- and second-tier cities, Hema has established a reputation for high-quality products, efficient delivery, and a comfortable shopping environment. However, as it expands into second- and third-tier cities and counties, a noticeable decline in user experience has been observed. Regarding delivery services, the vast geographical area and scattered population in lower-tier markets, coupled with relatively underdeveloped logistics infrastructure, make it challenging for Hema to maintain the delivery efficiency standards set in first- and second-tier cities.

Profitability marks the beginning of Hema's new journey. As retail industry competition shifts from "model innovation" to a "supply chain endurance race," Hema must prove it is not merely a "survivor" adept at accounting but a "disruptor" capable of redefining the retail value chain. #Hema #Retail #Sales