Is Fresh Hippo’s First Store Closure the Beginning to an End?
Fresh Hippo announced its closing its first store in Suzhou Kunshan Plaza as Alibaba's grocery e-commerce rapidly expands.
Apr 30, 2019 /EqualOcean/ - According to LinkShop, Fresh Hippo (盒马鲜生) will close its doors in Suzhou’s Kunshan plaza (苏州昆山) due to its business strategy adjustment. Regardless, it plans to open more stores in the area in the future, hinting that the Alibaba owned fresh e-commerce has no plans to stop nor slow its rapid expansion.
Currently, Fresh Hippo has 149 stores across China. On May 1st, the company will open its 150th store in Beijing. In an interview with LinkShop, Fresh Hippo’s CEO, HOU Yi (侯毅) denied Fresh Hippo’s gradual decline and confirmed that rapid expansion equates to more sales.
Fresh Hippo’s competitiveness comes from learning from others, HOU Yi said in an interview, which he further mentioned that doing retail is to copy and learn from each other. In the past, Fresh Hippo sold large seafood products such as crayfish and Shanghai’s “hairy crabs” which wasn’t a hit with its customers. Therefore, HOU Yi is scaling back to smaller seafood items.
During the second half of 2018, the company had numerous negative news. Therefore, Fresh Hippo plans to switch its focus to constructing its corporate culture, its employees’ long-term performance system, promotion system, and an incentive system to help employee growth.
One of Fresh Hippo’s biggest obstacle is its operational management while rapidly expanding. Despite playing to technological advantages such as using electronic price tags to track inventory changes in real-time, it had food safety concerns at the end of 2018. Therefore, perhaps more investment and attention to the upward supply chain is necessary not to damage its development. It may also be beneficial to automate parts of its supply chain to reduce costs and provide better efficiency which means more expenses on R&D.
Alibaba’s R&D spending increased by 79.06% YOY (from 2017 to 2018), according to its financial statement. However, Fresh Hippo's amount was unknown.
Regarding its traditional competitor, RT-Mart, was speculated of going downhill after closing its first store, HUO Yi commented that Fresh Hippo would advance with the times. As Alibaba owns fresh Hippo, it relies on the Internet giant’s resources. However, it had yet to introduce or implement any new technological advancements to its operations or its offline stores.
According to Alibaba's financial statement, Fresh Hippo operates predominantly in tier one and two cities with higher disposable income and commodity prices. Therefore, depending on where Fresh Hippo works, it may also need to adjust their prices to fit market demand and win against its competitors.
Fresh Hippo was supposed to be the “explorer of new retail.” Currently, it appears to be stuck with the times, and the first store closure may ultimately lead to a series in the future.