Ali finally made up his mind to concentrate on doing community group buying.
Editor’s note: This article is from the micro-channel public number “entrepreneurial state” (ID: ichuangyebang), Author: Yu room, edit: and Yi Rong.
On March 1, Hema celebrated its fifth birthday. Hou Yi, founder of Hema Xiansheng and vice president of Alibaba Group, sent a meaningful circle of friends, which can be regarded as a review of Hema’s five years and a prospect for the future. Hou Yi at this time, in fact, should have known the news that went viral in the retail circle the next day.
Picture source: Author’s circle of friends
Because in the personal summary of Hou Yi’s circle of friends, Hema Xiansheng, Hema MINI, Hema X Member Store were mentioned, but Hema Bazaar was not mentioned. Hema Bazaar is a brand transformed from Hema Optimum, focusing on community group buying business.
On March 2, news from many industry media including New Distribution revealed that the layout of Alibaba’s new retail sector has undergone major adjustments. “Hema’s community group buying section Hema Bazaar will formally merge with the retail through community group buying business.” The screenshots of multiple retail practitioner groups also show that the merged trader may no longer be Hou Yi. It was made by Ali veterans (one of the eighteen arhats). As of press time, Hema did not respond to Chuangyebang’s verification of this news.
The meaning of this merger can be summarized in one sentence. Hema handed over the community group purchase. Perhaps there is a second meaning. When Hema celebrates its 5th birthday, Ali’s new retail layout may undergo a major shift.
It may not be a good thing for Hou Yi himself to say that Hema handed over the community group purchase. Although Hou Yi publicly stated at the end of 2020 that community group buying will subvert traditional e-commerce and become a decisive force in the future retail industry. But privately, a person familiar with the matter pointed out that Hou Yi himself is not entirely optimistic about community group buying. From the perspective of business logic, Hema’s new retail route is also inconsistent with community group buying.
New things always grow in controversy. On March 3, the State Administration of Market Supervision imposed administrative penalties on five community group buying companies (Meituan Optimal, Duoduobuying, Orange Heart Optimal, Shihui Group, and Food Sharing Club). In the announcement, the State Administration of Market Supervision pointed out that “in the second half of 2020, some community group buying companies will use their capital advantages to carry out a large number of price subsidies, disrupt the market price order, and cause widespread concern from all walks of life.” This explains the background and reasons for the punishment.
For Ali, who has just made deployments and adjustments, this may be a very delicate moment, not only because Ali is an investor in the Shihui Group, but the most important thing is that this misaligned layout in time is a blessing or a curse. ? As mentioned above, the second half of 2020 will be the hottest period in the first phase of community group buying. A certain Chinese cabbage promotion of 0.01 yuan appeared at that time, and it has now been banned. However, at that time, Ali just planned the layout of intra-city retail in April 2020, and the entire business direction will not be able to adapt to changes in the future.
Now this time of merger, it is obvious that Ali needs to merge resources to develop community group purchases. Is this too late?
Why Hema handed over community group purchase
In September 2020, the Hema business group established the Hema Optimal Division, which was directly in charge of Hema CEO Hou Yi and reported to Dai Shan, the president of Ali’s B2B business group. This move is regarded as the official entry of Hema Community group buying track.
So far, the development of community group buying has made capital most excited about its lower barriers to entry and higher growth rate. According to the data of the Times Weekly, as of December 30, Meituan Optimal has opened about 310 municipalities and about 1,200 townships. The “Thousand Cities Plan” planned in September has been completed. At the same time, Duoduomai has opened about 237 municipal-level restaurants (as of December 31, 2020).
Different from the start-up company’s prosperous selection, Meituan and Pinduoduo are both “rise from the ground” to do community group buying business. They are new from staffing to the battlefield. The rapid development proves that the barriers to entry in the industry are not high. The growth is very fast. It can start quickly without too much infrastructure investment in the early stage, and run with light assets.
Although Ali proposed intra-city retail in April this year, it later saw the huge potential of community group buying. At the beginning of November 2020, “Hema Optimum” was officially launched in Wuhan, claiming that there will be 10,000 groups in the first battle. After the water test began, there was even a rumor in the industry that Hou Yi personally went to Wuhan to investigate and supervise the battle.
In December, the renamed Hema Bazaar recruited soldiers to buy horses in Changsha, and went directly to the birthplace of community group buying. This shows that Hema is serious about doing community group buying.
However, compared to the fast-paced light assets of Meituan and Pinduoduo, Hema’s community group buying based on its own genes has inherently greater challenges.
Hema’s core business is Hema Fresh. From the perspective of stores, asset investment is relatively heavy. At the same time, 30-minute delivery to home is mainly self-operated, and it is also a heavy asset. Even in terms of food delivery, Meituan has already figured out a light asset model through labor outsourcing, and turned around to do community group purchases that do not require delivery to the door (self-pickup model), and there is no pressure on the performance side.
Another core issue is the supply chain. On the surface, Pinduoduo attaches great importance to agricultural productsHema also attaches great importance to the product supply chain. Hou Yi himself is also the president of Alibaba’s Digital Agriculture Division. The question is, does the fresh food supply chain that Hema painstakingly builds meets the requirements of community group buying?
In 2019, Hou Yi made a comparison when interviewed by industry professionals including the author in Shanghai. He compares Hema with Yonghui, the leading supermarket in China, to the effect that Hema is in the business of Shanghai Inner Ring, and Yonghui is in the business of Shanghai Waihuan. The implication is that from the perspective of hypermarkets, Hema’s user base is more white-collar workers, and Yonghui’s user base is more common people.
This sentence is very interesting in the context of the current community group buying. The early game of community group buying, the first is to take the route of explosive models, and the second is to low prices. Low prices or even large subsidies are one of the core demands for users to purchase. Without price advantage, it is more difficult to play.
For Hema, it is a bit difficult for Hema to use its original positioning that is more refined and high-end than Yonghui to explore the fruits and vegetables purchased by Pinduoduo through the wholesale route. Because the front-end business model is well adjusted, but the supply chain of the retail industry, especially the purchase chain of fresh food, does not mean that change can be changed.
Liu Ge, the founder of Cayman 4000, who has been paying attention to community group buying for a long time, told Entrepreneur State: In the community group buying business, Hema’s path to become a hypermarket is relatively obvious. He once pointed out that “KA’s supermarket genes make it very difficult to adapt to the Hema Bazaar supply chain. For example, the Hema Bazaar at the merchandise end has an account period of nearly one month, requiring suppliers to invest on a large scale for a long time, and the product selection concept stays. In the KA hypermarket.”
Of course, Hema can also be purchased from the wholesale market in the early stage, just like Meituan and Pinduoduo. However, will this again cause the user’s brand perception to be blurred?
Another problem is the speed of development.
Under the leadership of Hou Yi, the Hema business group has tried a variety of business formats, once described by the media as a collection of “seven weapons” (seven business formats). There are Hema fresh in big stores, and Hema MINI in small stores. But no matter which type of business, there is a gene that remains unchanged, that is, insisting on self-employment. This also means that the development speed will not be too fast. This is true even in the era when Hema gave up his life and ran wildly.
In addition, Hema’s “me-oriented” store structure started from the first- and second-tier markets. The advantage is that high-quality stores in the first- and second-tier markets can still gather surrounding traffic. Community group buying is essentially to sink and cover scattered traffic in third- and fourth-tier markets. Therefore, it is necessary to pull group leaders and decentralize performance, and even grid warehouses need to find franchise. The two styles of play are very different.
“Hou Yi himself once stated internally that he does not support group buying in the community.” A former executive of a fresh food retail company told VentureBang, but in the end the company decided to go, he could only support it. . Looking at it this way, if the merger rumors come true, it may be a good thing for Hou Yi himself. He can concentrate on doing what Hema currently has.