Header photo source: Hema (Freshippo).
In the first half of this year, Hema NB generated revenue of about RMB 8 billion (USD 1.1 billion), marking double-digit growth from the same period last year. The supermarket chain now operates nearly 300 stores, doubling its footprint in six months, with most clustered in central and suburban areas of major cities in eastern China.
Hema declined to comment on the figures.
Earlier, the company introduced a private-label line under a new Chaohesuan sub-brand, replacing labels on hundreds of items including rice, vegetarian foods, tissues, fresh milk, and ice cream. Sources told 36Kr that Hema NB will soon be rebranded as Chaohesuan NB.
According to people familiar with the company, after several years of experimentation, Hema NB has reached a stage of maturity. Last year, Hema identified Hema Fresh and NB as its two core business verticals. Spinning NB off as an independent brand signals that the business is strong enough to face competition on its own. It also differentiates NB from Hema Fresh, which targets mid- to high-end consumers, by offering more affordable products and services in line with China’s increasingly segmented retail market.
Unlike Hema Fresh, which typically anchors larger shopping complexes, Hema NB outlets are located in street-level storefronts and community malls. With an average basket size of about RMB 40 (USD 5.6), fresh groceries account for 45% of sales, attracting consumers who previously preferred traditional wet markets over Hema Fresh.
To boost sales, Hema NB rolled out nationwide delivery services ahead of this year’s Lunar New Year. Online orders are expected to contribute about 30% of revenue, and the company has been hiring pickers in multiple cities to support the service.
Hema NB sources products in two ways: over half of sales come from private-label goods, primarily fresh produce, bakery items, household essentials, and alcohol. The remainder comes from established key account brands.
The chain keeps prices low through a lean supply chain, a high proportion of private-label goods, and simplified store formats. For example, rice is limited to just five or six high-volume items purchased in bulk under its own brand to cut costs. There is no live seafood section, and stores have fewer temperature zones, with goods sold in pre-packaged form to reduce spoilage.
A price comparison conducted by 36Kr found that Hema NB’s small cakes are priced about 30% lower than at Hema Fresh’s larger stores. A 450-gram pack of grain-fed beef rolls costs RMB 19.9 (USD 2.8), while the same sells for nearly RMB 30 (USD 4.2) at Dingdong Maicai. Half a kilogram of edible clover, a leafy green vegetable, costs RMB 2–3 (USD 0.3–0.4) at Hema NB, compared with RMB 4–5 (USD 0.6–0.7) at nearby wet markets.
Hema NB is the company’s latest step in discount retailing. In 2021, it launched an outlet format, selling soon-to-expire stock from Hema Fresh stores at 30–50% off. Some of those outlets have since been converted into Hema NB stores, while others have shut down.
Since Yan Xiaolei became CEO of Hema, the company’s biggest achievement has been achieving annual profitability through reforms in product strategy, tighter focus on core offerings, and clearer store formats.
The product overhaul included ending attempts to compete directly with Sam’s Club, such as aggressive low-price strategies and single-product promotions. Its latest approach doubles down on two formats: large-scale Hema Fresh stores and the more community-oriented Hema NB, with the latter now positioned as a cornerstone of Hema’s growth.
At the end of 2024, Yan wrote in an internal letter that Hema would concentrate on two business lines: Hema Fresh, responsible for scaling its established model, and Hema NB, tasked with strengthening its community presence. The company also shut down all of its Hema X membership stores, once a growth driver, signaling full commitment to this new strategy.
At the same time, Yan set a target for Hema: reaching RMB 100 billion (USD 14 billion) in annual gross merchandise value (GMV) within three years. As of March 2024, the company had already reached RMB 75 billion (USD 10.5 billion).
Hema has since returned to expansion mode. On one day alone, it opened four Hema Fresh stores in Zibo, Lishui, Xinghua, and Jingjiang. Meanwhile, Hema NB faces the challenge of scaling rapidly while developing more competitive products and testing its supply chain resilience. The company also needs to balance the distribution of small and large stores to avoid cannibalizing foot traffic.
Parent company Alibaba is steering its consumer-facing businesses toward greater integration. Taobao is evolving into a broader retail platform, with new services like Taobao Shangou and revamped membership programs including 88VIP, which now combine benefits across Hema, Fliggy, and more.
Speaking at Hema’s tenth anniversary celebration, Alibaba CEO Wu Yongming said that Hema’s main priority is strengthening product capabilities. “Within the group, Hema is the only business that directly operates its own merchandise,” Wu said. “As we scale up, Hema will take on even greater responsibility for delivering essential product strength and consumer experience.”
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Peng Qian for 36Kr.