For the umpteenth time, the Hema is in heavy weather. The debt is so high that it is no longer possible to pay off repayments with low turnover. The creditors have now made the proposal to cancel Hema’s € 300 million debt in exchange for the shares. They are clearly fed up with the mud. A short analysis of how things could have gone so wrong.
Hema Nederland is a sophisticated formula without innovation
It is generally known that for the survival of a store it is necessary to completely renew the store formula at least once every 7 years. This way you keep it exciting for the customers. That is something that has hardly happened at Hema in recent decades. Placing presentation tables was a nice idea, but has nothing to do with renewing your formula.
The store shelves have been the same for decades. They are ugly and make the shop image boring. De Hema even manages to continue using these racks in the Schiphol store, which still has to have international allure.
Experience is hard to find in the shops
* The famous quality of Hema stuff is calving.
* The innovation in the stores is sad. Everyone knows the icons of the last century such as the Tompouce, Jip and Janneke, the sausage and the baby clothes. We are still waiting for the icons of the 21st century.
* Logistics is a huge problem. That has been going on since the eighties. The store has too much to do with empty shelves. If logistics is not your core competence, you have to go this outsource.
* The stores have too many products. This creates logistical problems. It would have been wiser to focus more.
* The shops are often dirty and dirty. You see that especially in their own shops.
* The relationship with the franchisers is downright sad. However, listening to franchisers is crucial for optimal collaboration.
* Hema is unable to implement a strict and uniform policy for their restaurants. It has become a mixed bag.
* The Hema brand, which was once so strong, has been severely damaged. Especially with the youth, the Hema appeals much less. There has been absolutely insufficient investment in the brand. The Hema brand has to become contemporary again.
* Hema has not been able to find an answer to competition from discount brands such as Action, Big Bazar and Primark.
* The head office is too heavily staffed. Those costs can no longer be borne.
* There are too many shops and many shops are too big.
* In-house bakeries are unnecessary. Only needs management attention. Better to find a good external party for this. They are only interested if there is a good strategic plan.
* The collaboration with Jumbo is an emergency. Jumbo will also face logistical problems with Hema products and will not be happy about that. Moreover, this will further affect the relationship with the Hema franchisers.
In summary, Hema’s value proposition is partly obsolete. The consequences are clear. De Hema has to deal with declining visitor numbers and as a result the retail brand is unable to keep up with the growth of the market. If you want to reduce the debt burden, market growth is more than necessary to make repayments. It is also immediately clear that if money is the problem, it is better to invest in the Netherlands than to embark on costly adventures abroad.
You must first put things in order in your own country
These problems have been known for a long time. However, no project has been started to completely renew the Hema formula. A chain like Blokker has had the courage to convert all stores and is now able to cope well. Such a costly and major conversion operation has never taken place in the Netherlands. De Hema has left it completely. That is a huge missed opportunity. Hema must not refresh, Hema must transform. The aforementioned points should have been addressed. That certainly would have cost a lot of money, but with a good plan it would have been an idea to hand over many stores to franchisers and let them make the investments. Then your debt burden drops. These conversations never took place in openness. This means that the Hema has continued to muddle through and that the beautiful and exciting brand of yesteryear is slowly but surely losing its brain position among consumers. The insane solution that Hema has chosen is that of the migration abroad. Hema wants to become an international brand while the brand is under heavy pressure in the Netherlands! How can you think so shortsighted?
Foreign expansion is difficult and expensive
Foreign expansion only works if your base in the Netherlands is good. Just think of formulas like Action and Rituals. These formulas have their business and image well organized and can then focus on expansion abroad in peace. However, that is not the case with Hema. If you have a problem formula in your home country, you don’t have to be a strategist to understand that an adventure abroad makes things even more complex. After all, you have to free up resources and money to start up those formulas abroad. You also have to create a brand. It is an illusion to think that this is possible without major brand investments. You are juggling with far too many plates in the air. That can never or never work. The main mistakes that were subsequently made are:
1. Expansion in many countries at the same time
Think of France, England, Spain, Luxembourg, et cetera. It is naive to think that you can manage this as an organization in trouble. You only make the problem worse in this way. Moreover, there has been little or no profitability in those countries.
2. A trade deal with Walmart in the USA
This company milks the cows with pincers. Hema itself is not a producer and therefore has to buy. The margin at Walmart is therefore negligible. In addition, Walmart imposes fines if the items do not arrive on time. Let logistics be one of the worst skills of the Hema! Moreover, you have to set up management here, which again costs money.
3. Expansion in countries that make little sense
The cooperation in Dubai has been a megalomaniacal step. It sounds nice, but you have no business there if you do not know exactly which products are popular there. The taste is different and the market research you have to do to understand this is expensive.
When does the light really come on at Hema?
It will be exciting to see if Marcel Boekhoorn chooses eggs for his money and will close the deal with the creditors. That is certainly to be hoped for Hema. The megalomaniacal way of operating internationally has brought nothing to the Hema brand. My advice to creditors is to immediately stop most international activities and to put things right in the Netherlands. I would certainly do that with a completely new management team that has proven successes from previous positions. The Hema brand deserves to continue to exist. It’s history you don’t want to lose. There are still a few foundations that you can use to start over and develop a relevant value proposition. This is only possible with the right vision and strategy and especially with the right sense of reality. Build before expanding!
(author’s books, image above preview: Marketa Star / Pixabay)