Chinese retail enterprises are passing through their first cycle. In the era of great change, product strength remains Hema's only core competitiveness. "On November 22, Hema CEO Hou Yi stated at a conference targeting hundreds of suppliers that new retail has entered the 2.0 era and the focus has shifted to improving product price competitiveness. At the meeting, the second batch of 19 cooperative enterprises that have been cooperating with Hema for more than 3 years and have a revenue scale of over 100 million were awarded the title of "Box Brand". At the same time, a group of enterprises such as Yunling Fresh, New Hope, Kashi Dairy, and Jinmailang have established strategic cooperation with Box Motor for nearly 10 billion yuan.
There is huge development space for comprehensive food discount stores targeting the middle class, and the Chinese supermarket industry will usher in new development opportunities. "Chen Liping, a professor and executive dean of the Consumer Big Data Research Institute at Capital University of Economics and Trade, stated at the meeting that there are no winners in the zero supply relationship game, and the development of discount stores is the trend.
Focusing on improving price competitiveness, Hema began "shifting pricing" at the end of July this year, and began promoting discount reform in mid October. In addition to accumulating 8 years of service and differentiation capabilities, Hema has been focusing on price competitiveness.
From the perspective of the global retail evolution trend, the discount model is the trend. "Zhang Yibo, global partner of BCG Boston Consulting and head of the retail sector in China, stated at the conference that the proportion of the middle class in China continues to rise, reaching 35% by 2030, but the consumption willingness of the middle class is significantly tightening.
An increasing number of "high end buyers" are pursuing a high-quality lifestyle while also being frugal, which has created emerging business opportunities.
Taking Spanish retailer Mercadona as an example, this company established in 1977 has been undergoing transformation since 2008, refocusing its customer base and creating a customer-driven private brand product pool. It has leapt all the way to become the largest retailer in Spain, with a market share of 22% in the country in 2021; LOPIA is currently the supermarket with the highest attention in the Japanese supermarket industry. Its fresh food growth has remained the first in the country for six consecutive years compared to the same period last year. Its core business model is to provide high-quality and low-priced goods, and maintain low-cost and efficient operation.
Entering the market through price destruction and establishing competitive barriers through first mover advantage, "Chen Liping believes that behind discounted price destruction is actually a strategic choice for sustainable growth.
Faced with the first round of transformation initiated by Hema, many suppliers have expressed their optimism and actively cooperated, embracing the blue ocean of discount transformation for Chinese retail enterprises.
Large brand merchants have scale advantages, technological advantages, and food safety advantages, and are still partners that Hema attaches great importance to. The core goal is to enable consumers to obtain higher quality to price ratios and comply with consumption trends. Hou Yi stated at the meeting that going to KA business model does not mean abandoning KA, and Hema will continue to embrace KA suppliers who are willing to adapt to changes together.
Craft beer, fresh milk, and toast are typical middle-class goods. When the price of fresh milk in a 950ml container is as low as 9.9 yuan, the price of craft beer is as low as 13.9 yuan, and the price of toast is as low as 6.9 yuan. Behind this is the further compression of costs brought about by scale and digitization, as well as the ultimate benefits brought by vertical supply chains, which is also a win-win situation for both suppliers and suppliers.
Sichuan New Hope Dairy, which supplies daily fresh, fragrant taro milk, and juanshan milk to Hema, not only sells fresh milk on its stores every day, but also continuously delivers the milk to Hema's self built baking factory in Kunshan as raw materials for the production of fresh milk toast. This not only ensures the quality of the toast, but also brings about a significant reduction in overall costs.
At the meeting, Hema also presented the second batch of 19 "Box Brands" awards - enterprises that have cooperated with Hema for more than 3 years, with a maximum of 8 years, and an annual cooperation scale of over 100 million yuan. It is reported that among the first batch of enterprises to win the "Box Brand" award last year, a listed company - October Rice Field, which has been cooperating with Hema's own brand Wuchang Rice since 2016, has been successfully listed this year.