Author | Liu Baodan
Editor | Zhou Zhiyu
As the core business of Alibaba's exploration of new retail, Hema has finally reaped the rewards after much hardship.
Recently, Wall Street Journal learned that Hema achieved its first annual profit in the fiscal year from April 2024 to March 2025, which also means that after a decade of exploration, Hema's business model has entered a positive cycle, and Alibaba's new retail experiment has received commercial validation.
At the earnings conference call in February, Alibaba Group CEO Eddie Wu mentioned Hema, stating, &#34;Hema's growth is steady, expansion is good, and it has achieved decent overall profitability, fully demonstrating the success of the digital retail strategy that integrates online and offline.&#34;
Eddie Wu further emphasized that currently, Alibaba Group has no plans to sell Hema, but will consider introducing strategic investors and other options with an open mind to explore how to better reflect Hema's value in the overall valuation of the group.
Behind the profitability, Hema has undergone numerous adjustments from personnel to strategy, especially as Alibaba Group moves towards strategic focus, Hema has been mired in rumors of being sold. Now, the profitability results indicate that Hema can finally start afresh.
With strong support from leaders like Jack Ma and former Alibaba Group CEO Daniel Zhang, Hema opened its first store in Shanghai in 2016 and became China's first new retail platform driven by data and technology. By reconstructing the retail industry’s &#34;people, goods, and venues,&#34; Hema has created formats such as &#34;Hema Fresh,&#34; &#34;Hema X Membership Store,&#34; and &#34;Hema Outlet.&#34;
However, Hema, which targets middle-class consumers, has long struggled to find a profitable model. It wasn't until recent years that Hema began to slowly move towards profitability.
Wall Street Journal learned that as early as the fourth quarter of 2022, Hema had achieved quarterly profitability, but this was only a temporary phenomenon. It wasn't until Yan Xiaolei became Hema's CEO in March 2024 that Hema began to achieve profitability for multiple consecutive quarters and ultimately realized annual operating profitability.
After taking office, Yan Xiaolei focused on strategic focus, returning to users, and promoting organizational development. Strategically, Hema gradually scaled back its underperforming membership stores and vigorously developed Hema Fresh stores and NB discount stores, bringing Hema back onto the path of business expansion.
In June 2024, Yan Xiaolei stated in an internal meeting that Hema Fresh stores were overall profitable, which is also the business segment with the highest user recognition, and is more likely to expand rapidly in lower-tier markets in the future. She set a plan for Hema Fresh to open 70 new stores, which is double the number from the previous year, with one-third located in second- and third-tier cities and counties.
In terms of user experience, Yan Xiaolei restored the previously suspended membership renewal, added new member benefits such as rebates and birthday gifts, and lowered the free shipping threshold to 49 yuan. This series of measures has won back the favor of Hema users. At the same time, Hema Fresh stores have also undergone upgrades, and Hema has enhanced service density by restarting front warehouses.
Wall Street Journal learned that in 2024, thanks to the supply chain network and digital operation system built over the years, Hema opens an average of one new store every five days, entering 21 new cities. Notably, in the past year, the number of customers served by Hema has increased by over 50%
In addition, after returning to growth, Hema has created more internal development opportunities and greater growth space. In 2024, Hema added nearly 200 store managers, with 10% of procurement positions promoted to category operators, and the salary reform for store manager positions has been completed. Yan Xiaolei stated that in the new year, Hema will continue to increase investment in talent development and team building.
In addition to expanding profitable business lines, Yan Xiaolei, who has a background as CFO, has also strengthened cost control. An internal employee at Hema indicated that previously, Hema focused more on innovation and branding in business expansion, but after Yan Xiaolei took office, the focus shifted to accounting first. During this period, there were reports of employees being outsourced at some Hema stores.
Standing at the starting point of profitability, Hema's future direction is also clearer, which is to continue solidifying the already validated strategic direction.
Hema CEO Yan Xiaolei revealed in an internal letter at the end of 2024 that the company is focusing on two core business formats: Hema Fresh and Hema NB. The former replicates a successful model, while the latter refines the optimal model, aiming for a scale of 100 billion.
However, Hema is still far from a worry-free situation, as new retail remains the most competitive track, and the competitive pressure Hema faces will only increase day by day.
Since the beginning of this year, Meituan's Xiaoxiang Supermarket and JD's Seven Fresh have been ramping up their layouts. The former will open offline stores, benchmarking against the Hema Fresh model, while the latter plans to add 20 warehouse stores in the Tianjin area by the end of June this year, with related layouts also in Beijing and other regions. In addition, domestic competitors such as Pang Donglai, Yonghui, and Dingdong Maicai, as well as international brands like Sam's Club and Aldi, are all competing for the domestic market.
For Hema, after breaking through profitability, new challenges have already begun

BABA

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- Hema, Alibaba's core new retail business, achieved its first annual profit for the fiscal year 2024-2025, marking a significant milestone after ten years of development.  
- CEO Wu Yongming highlighted Hema's steady growth and successful digital retail strategy, while emphasizing that Alibaba has no plans to sell Hema but is open to strategic investments.  
- Despite recent profitability, Hema faces increasing competition from rivals like Meituan and JD, indicating that new challenges lie ahead as it seeks to solidify its market position.

Hema has made a comeback