Hema Fresh Accelerates Store Closures Amid Financial Difficulties

At the end of February, supermarket chain Hema Fresh (also known as Freshippo) announced the closure of its store in the Zhongshan district of Dalian in Northeast China. Three more stores in Wuhan were also set to be closed by the end of March. Hema Fresh, once regarded as a prime example of the “new retail” model, appears to be accelerating its pace of store closures.

Recently, many urban stores have been reducing their number of permanent staff and electing to instead hire third-party employees on hourly or part-time contracts in order to reduce costs. When viewed alongside Hema’s recent discount strategy and other measures designed to minimize costs and increase efficiency, it is clear that Hema is under significant business pressure.

In early February, media reports suggested that e-commerce giant Alibaba Group was even considering selling Hema, but this was immediately denied in an official statement. Hema stated that it has maintained good growth momentum since last year and has not slowed down its pace of store openings.

Hema Fresh opened its first store in Shanghai in 2016. The earliest reports of store closures came in April 2019 with an outlet at Wuyue Square in Suzhou. At a media briefing in early 2020, Hema founder Hou Yi bluntly stated that poorly managed Hema Fresh stores would be closed down, as Hema embarked on a process of expansion while constantly experimenting and making adjustments.

In addition to fresh food stores, Hema has tested various business formats, including fresh produce stores, convenience stores with ready-to-eat products, specialist stores focusing on specific produce categories, online stores, Hema Neighborhood stores, Hema X member stores, and Freshippo Outlet stores offering discounted and clearance products. After years of trial and error, the main remaining formats are Hema Fresh, Hema X member stores, Hema Mini, Hema Neighborhood and Freshippo Outlet stores.

Last September, Hema Fresh announced the postponement of its initial public offering plan. Unable to secure financing from the primary market, Hema has also faced difficulties raising money from the secondary market. At present, however, the current revenue scale and profitability level may not be the most important considerations for Hema. Rather, the company may need to continue to think about how to achieve long-term and sustainable development to make progress in the future.

Image: Hema

This article was based on a Chinese article. Read the original article.