After the discount reform was launched in the second half of last year, "making good goods affordable" became Hema's goal.
However, recent purchases of counterfeit goods by multiple consumers on Hema have raised doubts about Hema's previous reputation for high-quality products: is Hema suspected of knowing and selling counterfeit goods? Is Hema's product still a "good product"?
The product is involved in counterfeiting, the founder runs away, the IPO is stalled, and Hema, who has left Alibaba's embrace, has been in constant turmoil in the past year. How can we stand on our own in the future?
The wave of counterfeit goods continues
Recently, news of consumers buying counterfeit goods on Hema continues to ferment, and the Shanghai police have intervened and filed an investigation.
In March, Ms. Zhao, a consumer, bought two sets of "Lancome Jing Pure Beauty Three Piece Set" (unit price: 1299 yuan) and two sets of "Lancome Brand New essence Skin Foundation Fluid 100ml" (unit price: 499 yuan) at Hema X Club Store (Dachang Store) in Baoshan District, Shanghai. This price is highly cost-effective. Ms. Zhao thought she had bought a discount by borrowing Hema, but she didn't expect it to be a fake.
Taking Lancome essence myofundus fluid as an example, the price of 50ml in Lancome Taobao official store is 1100 yuan, and that of 115ml is 1950 yuan. This means that the price of Hema is only about a quarter of the official website and counter prices, and it is also lower than other channels in the market. The reporter found that in the official flagship store of Sephora, the Lancome small black bottle 100ml combination package (50ml formal package with 50ml sample included) is priced at 1006 yuan; The 100ml specification of this product is subsidized by tens of billions of yuan in e-commerce channels, and the overseas purchasing price is about 700-800 yuan.
After Ms. Zhao sent the goods for self inspection, the appraisal result was suspected to be counterfeit and inferior products. Subsequently, law enforcement officers from Baoshan District sent the involved goods to L'Oreal for appraisal, and the appraisal result was a counterfeit product. Recently, relevant departments in Baoshan District said that they had filed a case against Shanghai Hema Internet Information Technology Co., Ltd. on March 7 for suspected infringement of the exclusive right to use a registered trademark.
This is not the first time Hema has sold counterfeit products. It is reported that before the Spring Festival of the the Year of the Loong, the consumer Ms. Zhang also bought fake Lancome products in Hema.
Ms. Zhang bought two bottles of Lancome small black bottle of essence myofundus fluid at the site of Shanghai Hema X Club (Qibao Store) at a unit price of 499 yuan (100ml). But she later discovered that the product had a different skin feel than the one she had previously used. Even so, she did not suspect Hema and "felt that Hema's membership store would not sell counterfeit products" until both product appraisal platforms showed that the product was fake.
Generally speaking, if consumers purchase problematic products in offline supermarkets, they can try to protect their rights from both the supermarket operator (Hema) and the brand owner (Lancome). Lancome told reporters that Hema is not on its authorized sales channel list. In other words, the Lancome products sold by Hema are provided by third-party suppliers.
Ms. Zhang dialed Hema customer service hotline, and the other party only stated that a refund was possible. However, when faced with the demand of "one for three compensation for fake products", the staff avoided discussing it and said, "If you have any questions, we will report them to our superiors.".
It is worth noting that in the two counterfeit sales incidents mentioned above, Ms. Zhang and Ms. Zhao both purchased through Hema X membership stores, which are membership stores under Hema. The annual membership fee is 258 yuan, and the payment threshold does not seem to bring customers a better consumption experience.
In addition to the X membership store, Hema also has multiple sub brands such as Hema Fresh, Hema Neighborhood, Fresh Olay, Hema Yunchao, as well as the high-end supermarket Hema Premier launched in the second half of last year.
The reporter noticed that the products sold through channels such as Hema Neighborhood and Hema Yunchao have also been questioned by consumers for selling counterfeit products, among which large brand skincare products are from the hardest hit areas.
According to the Black Cat website, from February to March this year, dozens of consumers complained that they were suspected of buying fake goods in Hema, including the sea blue mystery face cream, sea blue mystery repair essence water, Clarins essence, Helena black bandage face cream and other products, which mostly involved 1000 to 7000 yuan.
What is intriguing is Hema's attitude towards consumer questioning.
On March 7, a consumer suspected that he bought fake Sea Blue Mystery face cream and Clarins essence in Hema Yunchao, and asked Hema to issue a certificate of authenticity. The other party did not issue a certificate, but asked the consumer to send it for inspection first to prove that the product was fake.
On March 24, consumers bought Helena Black Bandage face cream in the name of Women's Day activities on the Hema Linli platform at a price of 1799 yuan (the price of the product on the official website is 3880 yuan for 50ml). It stated that the product does not match the genuine product in terms of packaging, texture, and usage effects. After taking the product to the laboratory for testing, it was found that the dissolved state was different after comparison with the genuine product.
The consumer stated that Hema only stated that its products are genuine and its after-sales attitude is very bad. They can only provide the "Customs Declaration Form" for review (photography and video recording are not allowed), and other materials (such as the certificate of origin of the batch of products and the certificate of sales entrusted by China Duty Free Products (Group) Co., Ltd.) cannot be provided. In addition, Hema requested that the consumer must obtain a report from a national inspection agency to verify whether it is genuine, and then hung up the phone and stopped any after-sales communication.
The above cases show that whether it is X member stores or other Hema channels, Hema has always been unable to provide traceability information to prove that the relevant products are genuine when faced with consumer doubts about "buying counterfeit goods".
Rumors of selling oneself
Hema, backed by Alibaba Group (hereinafter referred to as "Alibaba"), was born with a golden spoon in its mouth. The first Hemamen store opened in January 2016 bears the expectations of Alibaba founder Jack Ma for new retail. Boston lobsters priced at 99 yuan per kilogram and king crabs priced at 245 yuan per kilogram in the fresh produce area were once favored by middle-class consumers.
After 8 years of growth, Hema has about 360 stores, but it has been rumored multiple times since the end of last year that it will be sold by Alibaba.
On March 16th, it was reported that Alibaba plans to sell Hema to COFCO, with an estimated valuation of about 20 billion yuan. Hema denied this and stated that both the sale and price were false information.
Selling rumors is not just a groundbreaking trend.
In February of this year, the management of Alibaba Group stated in a performance conference call after the financial report was released that if businesses with physical retail operations such as Gaoxin Retail, Hema, and Intime were excluded in the fourth quarter, Alibaba would perform better in both revenue and adjusted EBITA rate. After exclusion, the total revenue of the group increased by about 8%, and the adjusted EBITA rate would also be about 4 percentage points higher to about 24%.
The management pointed out that Alibaba will focus on investing in its core business in the future. The core business here is mainly e-commerce (including domestic and overseas) and cloud computing.
Regarding the sale of non core assets, Alibaba Group Chairman Cai Chongxin stated that in the nine months from fiscal year 2024 to present, the company has completed the exit of $1.7 billion in non core assets and has established a dedicated team to execute the exit of some listed company stocks. Cai Chongxin stated that traditional physical retail business is not Alibaba's core business, and it is reasonable to withdraw from such business. However, this will take time and be gradually realized according to market conditions.
It is worth mentioning that just two days after the rumor of Hema selling himself, Hema founder Hou Yi announced his resignation amidst the storm.
On March 18th, Alibaba Group CEO Wu Yongming sent an email to all employees of Hema announcing the official retirement of Hou Yi, who will be replaced by Hema CFO Yan Xiaolei.
The CFO's move to take control of the company has made Hema's financial situation and IPO trends a focus of market attention.
On March 28, 2023, Alibaba launched its largest organizational change in history, splitting its business groups into "1+6+N". Qualified business groups and companies have the possibility of independent financing and going public in the future.
In April of the same year, Hou Yi stated in a media interview that "with the scale and brand influence of Hema today, it has already met the conditions for listing." In May, the Alibaba Group Board of Directors officially approved the launch of Hema's listing, which is expected to be completed within the next 6 to 12 months.
However, six months later, Alibaba's attitude changed sharply, stating that Hema would temporarily suspend its listing, and Hema did not disclose plans to restart its listing thereafter.
In February of this year, Cai Chongxin responded to the issue of Hema's listing during an Alibaba performance conference call. He stated that the previously planned spin off listing mainly aimed at showcasing the value of each business in the capital market, but whether and how these transactions proceed depends on market conditions. The company believes that current market conditions cannot reflect the true value of these businesses. We will consider separate financing for different businesses, but we will not act too hastily.
Frequent swaying
On April 10th, the official Hema app publicly solicited opinions from consumers and planned to restore the membership system.
It stated that it plans to resume the card opening and renewal services for X Gold/X Diamond members on April 24th, and the original Hema X membership store VIP will be upgraded to Hema X Gold members. In addition, Hema has also adjusted the original membership benefits by adding shopping rebates, birthday gifts, and adding "every Monday" and "every Thursday" as optional options for member days.
In less than half a year, Hema's membership system underwent a major transformation. At the end of last year, Hema quietly closed the membership registration and renewal portal on the app, with the aim of gradually canceling the 8.8% discount on membership days and replacing it with a solution of using hard discounts to achieve synchronized low prices online and offline.
In addition to the membership system, in the past year, there have been many changes such as Hema's discount reform, delivery threshold adjustment, and product SKU adjustment that have left consumers confused.
All of these changes originated from the organizational change of Alibaba Group in March last year. Hema, who left the group for "blood transfusion", no longer pursued glamour, but put down his body to learn and take responsibility for his own profits and losses.
The "online+offline" membership model of Hema consumes a lot of funds, but has not achieved the corresponding harvest. In the fiscal year 2023, Hema's overall GMV exceeded 55 billion yuan, with online transactions accounting for over 65%. At present, most of Hema's stores are located in the urban areas of super first tier cities. However, the revenue contribution of the company's heavily invested offline stores is not as good as online stores. In contrast, Sam and the market opening customers in the suburbs continue to flow.
In response, Hema is attempting to increase the revenue contribution of offline physical stores and attract consumers to the offline market.
Last October, Hema announced that it would set exclusive prices for offline stores, with over 5000 products expected to experience price reductions. Hou Yi stated on his social media that there are high delivery costs online and low costs offline, so it is reasonable for offline prices to be lower than online.
However, Hema has shifted the cost of offline store transformation to consumers to bear. At the beginning of this year, it announced a mandatory 1 yuan packaging fee for each online order and raised the online shopping and delivery threshold in some regions. Starting from February 18th, Beijing, Nanjing, and Changsha will pilot raising the threshold for free online shipping for Hemamen stores to 99 yuan. Previously, the free shipping threshold in Beijing was 49 yuan, while in Nanjing and Changsha it was 39 yuan.
At the beginning of this year, reporters visited the Hema store and found that the staff were adjusting the shelf positions of the products - removing a part of the Sanyang turkey noodles and replacing it with Hema's self operated turkey noodles. The adjusted Hema's self operated products occupied more display spaces, and the price was only half of the Sanyang turkey noodles.
Water hibiscus/Photo
This change will soon be repeated on the product display shelves in other areas of Hema. Since Hema announced the streamlining of SKUs, more and more consumers have found that Hema's self operated products are placed in prime positions on shelves, with relatively cheaper prices.
This may be Hema's desperate pursuit of profitability, as the profit margin of self operated products is generally higher than that of other brands. The research report of Xinda Securities points out that the core elements of the retail super discount business model are streamlining SKUs, focusing on high-frequency and essential categories, and laying out their own brands; Customized products; Direct procurement at the source to achieve a low price strategy, ultimately achieving low gross profit, strong cost control, and efficient turnover, jointly driving store profitability.
Faced with frequent changes in Hema, many consumers do not pay the bill: "The things they want to buy are taken down, and Hema's self operated products occupy half of the sky." "Only by raising enough 99 yuan can delivery fees be waived." "Offline stores have become crowded, and the quality of products is not as good as before.".
This has disappointed consumers who pursue product quality and shopping experience with Hema, who were the core consumer group of Hema in its early days.
The market is concerned about whether Hema can still make up for its reputation and retain consumers after experiencing counterfeit sales incidents. How will the new CEO run to save himself after taking office.
