Alibaba’s Hema supermarket receives backlash and support

12/02/2018

Fresh food is the most complicated sector of the retail supply chain, but it also occupies the highest purchase rate making it a lucrative target for well-known e-commerce platforms.

Retail Backlash and Consumer Support

Hema supermarket is Alibaba’s new retail initiative.  An increasing amount of Chinese people are shopping at Hema thanks to its offering of fresh products at reasonable prices. Hema also offers a delivery service that promises thirty-minute delivery within three kilometers radius.

But that’s not the end of the story. Hema is facing backlash due to policies that exclude it from the greater fresh food retail space.

First of all, Hema requires that consumers download the Hema app, and purchase goods with Alipay. Some say that this exclusive payment policy goes against consumers rights to cash.

In addition to its exclusive payment methods, Hema is garnering controversy for disrupting the retail rental market. Hema offers to pay higher rents than surrounding businesses – usually one to two times the amount of other vendors – but large shopping malls are still refusing to let them settle in. Hema plans to introduce over ten deli stores after renting, which it will sublet for a very low price. As a result, the rental system of the mall is thrown out of whack and vendors are discouraged from renting neighboring shopfronts.

Finally, the visitor flow rate in the shopping mall – perhaps the most important retail metric – risks decline. Hema initially boosts human flow at shopping malls, but the majority of repeat Hema customers choose to purchase goods from home taking advantage of the mobile app and quick delivery.

Chinese Consumption Characteristics

The term New Retail, which was first proposed by Jack Ma in October 2016, has been transformed from a concept into a retail revolution. Meanwhile, changes in consumer shopping habits have promoted changes in the retail industry.

As of late, young Chinese people display pointed consumer characteristics.

Immediacy: Young consumers don’t like to wait, and they are not willing to buy from offline stores if online shopping can meet their demands.

Social Consumption: They are willing to visit offline stores for the sake of activities, events, and to make friends by purchasing and sharing in real life.

Experience First: Shopping is not just about buying necessities – it’s part of happiness through shared and immersive experience.

Understanding the psychology of young consumers has become the core of new retail. The Hema supermarket is the product of these patterns of innovation. It creates an immersive consumer experience, including better cost performance, family activities, and purchase and delivery support via mobile. These attributes separate it from the farmer’s market and fresh supermarket.

There may be tension between Hema and big malls, but that doesn’t discourage internet companies and retailers from transforming retail. This tension is inevitable for any new player on the market, and is likely to be even more drastic in 2018.

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