Welcome to the future: inside Alibaba’s Hema Fresh stores

Date : 18 July 2017

Ecommerce giant Alibaba has opened another three Hema Fresh stores, advancing its ‘new retail’ strategy, which aims to reinvent retail.

What’s Hema Fresh?

Hema Fresh was founded by Hou Yi, a former executive at JD Logistics, the logistics arm of Alibaba’s rival JD.com. The first Hema Fresh store was opened in Shanghai in January 2016. Alibaba bought into the company soon afterwards. It currently operates thirteen outlets in Shanghai, Beijing and Ningbo.

The O2O business model

The Hema stores double as fulfilment centre for its Hema app. When shoppers place their orders online, they can have their purchases delivered within 30 minutes if they live within a 3km radius. Staff run around the stores with mobile devices to pick up products from the shelves and put them into shopping bags with digital tags. They then put them up on the hangers, which lift the bags to the ceiling and onto the overhead conveyor belts. According to Hou Yi, the conversion rate on the app for its first store is around 35%.

All price tags in the stores are digital. Shoppers can scan QR codes on the tags for product information. It also enables the retailer to change prices online and offline simultaneously.

Hema Fresh stores are also cashless. All shoppers need to download the Hema Fresh app, and pay through Alibaba’s Alipay. This enables the retailer to gather shoppers’ data both online and offline.

Retail + food service

As the name suggests, the stores are known for its fresh products, especially seafood. Shoppers choose live seafood from the tanks in the centre of the stores, get it cooked on site and eat in the spacious seating area. As a result, sales per unit area could be three to five times higher than traditional supermarkets, according to the retailer.

Our view

Hema Fresh stores are a hybrid of online, offline retail and food service, and an example of how ecommerce is transforming the grocery shopping experience. We expect to see more Hema stores opening at a faster pace, and other retailers follow suit to exploit the opportunity in the ‘new retail’ space.

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