The encyclopedia · Strategy & Leadership · Strategic decision · 2020
Alibaba tested a new Hema store format every year — most of them quietly disappeared
Hema F2, a fast-food format for office districts, never caught on and vanished; Hema Mini stores closed too, as losses hit RMB 3 billion in one quarter.
Alibaba · Hema · 2020
What happened
Alibaba's Hema (盒马, branded Freshippo abroad) grocery chain built its reputation from 2016 onward by combining a supermarket with dine-in seafood counters and app-based delivery, then used that base to test a series of spin-off store formats aimed at different customers and locations. Hema F2 ('Fast & Freshmade') was one such format: a roughly 500-square-meter convenience store centered on fast food, tea and lunchboxes, aimed at office workers in business districts.
Hema F2 never gained the traction the supermarket format had, and the concept disappeared from the market without a wider rollout. Alongside it, Hema closed a number of its smaller Hema Mini stores as the broader business worked through years of format experimentation from 2017 to 2019 that produced multiple discontinued concepts.
The costs of the experimentation showed up in the numbers: e-commerce industry estimates put Hema's losses at around RMB 3 billion in the first quarter of 2021 alone, as Alibaba worked to consolidate its 'new retail' grocery strategy around the formats that were actually working.
Why it happened
- Hema F2 targeted office workers with a fast-food format that didn't clearly differentiate itself from convenience stores and quick-service restaurants already serving that crowd.
- Running multiple store formats at once — supermarkets, minis, F2 and others — spread investment and management attention before any one concept had proven it could scale profitably.
- Format testing continued for years without a clear cutoff for when an underperforming concept should be discontinued, letting weak formats persist and burn capital.
- RMB 3 billion in quarterly losses by 2021 show the format experimentation was expensive relative to what any single new concept, including F2, was returning.
The lesson
Testing many store formats at once without a clear kill criterion lets weak concepts drain capital for years before anyone decides to shut them down.
Aftermath
Alibaba narrowed Hema's format strategy in the years that followed, concentrating investment on its core supermarket format rather than continuing to expand F2, Mini and other experimental concepts. Hema's broader ownership and store strategy continued to evolve through subsequent restructurings of Alibaba's retail businesses.
Sources
- Staggering Hippo - Part 1: Ultimate Guide to Alibaba's Hema (Freshippo) Store Formats — TechBuzz China
- Hit and Miss – The Ultimate Guide to Alibaba's Hema (Freshippo) Store Formats, Part 2 — ChinaTalk
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