Within four months, Hema will implement multiple rounds of price reduction and reform of its inherent model, and this transformation will come rapidly and surely.
Starting from February 18th this year, Hema has launched a synchronous online and offline price reduction in three pilot cities: Beijing, Nanjing, and Changsha, with a price reduction of about 20%, covering almost all categories such as fresh produce, baking, and standard products; At the same time, the free shipping threshold will be adjusted from 49 yuan and 39 yuan to 99 yuan.
This is another new initiative since Hema implemented "offline exclusive pricing" in October last year, and it is also a bolder attempt compared to others. Undoubtedly, in an environment where consumers are becoming more meticulous and calculating, a general reduction in product prices is an effective way to boost sales.
Fortunately, Hema's adventure paid off. It is reported later that in the two weeks from February 18th to now, the order volume of the three pilot cities has increased by more than 10%.
Fist to flesh, the transformation of combination boxing has achieved initial results
In this discounted transformation, raising the threshold for free shipping and a 1 yuan packaging fee have put Hema at the forefront of controversy, even under the sharp knife of consumer condemnation.
This is a bold attempt and also demonstrates Hema's determination to reform. For ordinary consumers, lowering product prices and the threshold for free shipping is the most pleasing measure, but for Hema, which focuses on long-term development, this is not the most optimal choice.
"On the surface, adjusting the freight threshold is a way for businesses to improve the per customer price, but from the outside to the inside, it is also a way for businesses to optimize the transport capacity resources and improve the economy of commodity distribution," said Lao Ailing, director of the E-commerce Research Center of Shanghai University of Finance and Economics and a distinguished researcher of the Chinese path to modernization Research Institute
Discounted transformation requires simultaneous efforts throughout the entire supply chain. Looking back at the past four months, Hema has started from multiple aspects such as procurement, SKU, organization, etc., and has launched a complete set of discount optimization combination punches, "hitting the flesh with punches".
Hema first cancelled the paid membership system, followed by a significant reduction in SKUs, reducing the original number of SKUs from over 5000 to over 2000, hoping to create a "wide category, narrow depth" category structure. Meanwhile, Hema has also increased the proportion of self operated products. In terms of procurement, Hema's previous procurement method was "product based procurement", but now it is implementing an organizational reform that separates procurement and sales. A new "prescription specialist" has been established, who will propose product requirements and plan to purchase new products based on market research needs.
After four months of extensive optimization, the price competitiveness of Hema products has significantly improved. In the three pilot cities of Beijing, Nanjing, and Changsha, Hema has achieved synchronous low prices both online and offline. From the proportion of meat, poultry, eggs, seafood, vegetables, and fruits that consumers often purchase, users in pilot cities can save an average of 15% to 20% of expenses. From February 18th to the present two weeks, the order volume in the three cities has increased by over 10%.
Discounted transformation is destined to be a long-term battle. Price wars are only the first step, and supply chain competition is the deeper and more important focus of competition.
Cui Lili, a professor at the Department of Digital Economy at Shanghai University of Finance and Economics and executive director of the E-commerce Research Institute, mentioned that there has long been a conclusion in classic supply chain management books that future business competition is nothing more than competition across the entire supply chain. To demand costs from the supply chain, core enterprises need to collaborate with all parties involved in the entire supply chain to achieve it, and reasonable allocation of benefits and resources is the key to shaking off the optimization of the supply chain.
Whether it is "de KA" or bidding farewell to the traditional "rent collection" model of big stores, it is inevitable to touch the interests of upstream and downstream industries, causing supply chain shocks. Before initiating the discount transformation, Hema had already realized this.
In recent years, Hema has continuously put in great effort to polish and integrate its supply chain, establishing a new zero supply system: direct procurement from the base source, establishing its own brand and OEM/ODM procurement system... step by step, Hema has finally created a fully controllable supply chain system, established a relatively complete own brand system, and thus fully formed independent terminal pricing capabilities.
New Path of Transformation: Leading with Hema and Industry Relay
The province should spend more time riding bicycles and going to bars. Currently, the consumer market has undergone a transformation, and the mainstream consumer group has begun to pay more attention to the planning of consumer spending and the cost-effectiveness of goods, in order to buy "good things" that meet their own consumption needs.
It can be said that in the face of this new change, Hema's "adaptation to change" is extremely fast and timely. At the age of eight, Hema has already taken the lead in entering the uninhabited area of China's retail reform, and its retail industry peers who have "crossed the river by touching Hema" have also stepped into the "discount transformation" river.
Similar to the approach taken by Hema, many retailers have optimized their transportation resources by adjusting the free shipping threshold through market-oriented means. At present, the free shipping threshold for Hema Fresh, Sam's Speed, Oroqi, and others is 99 yuan. Park Park Supermarket also raised the free shipping threshold in some cities in November last year.
Yonghui Supermarket has opened "authentic discount stores" in multiple stores across the country, and opened a "one store, one discussion" flagship store in Kunming, Yunnan before the Spring Festival. Through supply chain optimization and refined management, it focuses on "affordable prices". Aoleqi proposed "good quality, low price" and launched a lower priced "super value" series at the end of last year. The regional supermarket Hunan Bubugao has also announced a 15% reduction in product prices to comply with the low price strategy of the retail industry.
Hema CEO Hou Yi once emphasized that discounting transformation is a life or death issue for Hema. Long term pain is not as good as short term pain. There is no way out during difficult times, and Hema can only walk its own path.
Now, the list of players entering the game is increasing, and Hema's transformation combination punch has also been effective, all of which prove the correctness of Hema taking this path. Transformation inevitably goes through a painful period, just wait and observe, time will prove everything, and the era of "good goods are not expensive" is slowly unfolding.