Want to know what the future of retail looks like - it’s time to take a trip to China
By Tricia McKinnon
If you want to know what the future of retail looks like perhaps it’s time for you to take a trip to China. China is considered to be two to three years ahead of the United States when it comes to merging digital with offline retail. In the United States Amazon has made the most significant advances in creating tech enabled retail stores with its Amazon Go stores. The first Amazon Go store opened to the public in 2018 to much fanfare. Three years earlier in 2015, eCommerce giant Alibaba opened its first Hema supermarket in China.
Hema, whose English name is Freshippo, is a high-tech supermarket designed around your smartphone. Your smartphone is used for everything in the store, from placing items in a digital shopping cart while you shop for groceries, to getting product nutritional information, to paying for your goods.
Hema is part of Alibaba’s “New Retail” strategy. New Retail according to Jack Ma is “the integration of online, offline, logistics and data across a single value chain.” It is an initiative aimed at connecting online and offline retail and digitizing stores in order to provide a better customer experience. True to form Hema stores also double as fulfillment centres for Hema’s online grocery orders. Speaking about Hema stores, Alibaba Group President Michael Evans said: “consumers don’t think about the world online versus offline.” “Neither should brands and retailers.”
Customers enjoy the shopping experience at Hema with millions of people signing up for the Hema shopping app and more than 60% of Hema’s gross merchandise value coming from online orders. To get a sense of how quickly Alibaba is expanding these stores consider the fact that Amazon opened eight Amazon Go stores in the same amount of time that Alibaba opened 100 Hema supermarkets. It does not look like the growth of Hema stores is slowing down anytime soon with Alibaba planning to open 2,000 of these stores by 2023. If you are curious about the future of retail here are some of the features you should look out for.
1. Scan and go. To shop at Hema customers have to download the Hema mobile app. Once it is downloaded customers shop by scanning QR codes on each item they wish to purchase then the item is added to their digital shopping cart. Scanning a product’s QR code also provides the customer with information about the product including how fresh it is (by looking at when it was delivered to the store). Other data that is available includes nutritional information, customer reviews, recipes the customer can make using the product as well as delivery options if the customer wants the item delivered to their home.
Part of Alibaba’s success in designing a store around a smartphone app is due to the high mobile phone usage in China. Most internet traffic in China is generated on a mobile phone vs. only 48% of web traffic in the United States.
2. Personalized shopping recommendations using artificial intelligence. The Hema app also remembers shopper buying behavior and leverages machine learning to make personalized product recommendations for customers.
3. Digital price tags. Products have digital price tags that can be updated in real time. They can be particularly useful if Hema wants to, say for example, update the price of seafood based on market rates. It also allows the retailer to ensure that prices online match in-store when necessary.
4. Stores as fulfillment centres. Employees pick online orders in store and once they have been picked they are placed on a conveyor belt that carriers the order to the back of the store to get it ready for delivery.
5. Digital payments including facial recognition. When customers are finished shopping they pay using Hema's mobile app which is linked to Alipay. Alipay, founded by Alibaba, is an online payment app that has more than 1 billon monthly active users. It is the world’s largest online payment platform with more users than PayPal.
At Hema locations, when available, customers have the option of paying using facial recognition payment technology. At self-checkouts a camera imbedded in the screen of a kiosk scans the customer’s face. Then facial recognition payment technology is then used to verify the customer’s identity. Customers also enter their phone number into the kiosk as a safeguard against fraud.
Initially digital payments were the only option for Hema customers but customers resisted this and the Chinese government found the practice to be unlawful. Hema supermarkets now take cash as well.
6. Super fast delivery (even faster than Amazon). Customers shopping at Hema can have groceries delivered in 30 minutes for free, if the delivery address is within three kilometres of a Hema store. This applies to customers that shop in store and want their orders delivered to their homes or if they made the purchase online. This service is even faster than Amazon’s.
7. Stores as delivery hubs for other retailers. To improve its delivery capabilities in China, in 2018 Starbucks added Starbucks Delivers Kitchens within selected Hema stores. The partnership allows Starbucks to leverage Hema’s delivery capabilities to service Starbucks’ online orders quickly and efficiently.
8. Experiential retail. Hema supermarkets are essentially grocery store / restaurant hybrids where customers can shop for groceries as well as sit down and have dinner with their family if they choose to. Customers like the fact that they can easily choose a fresh piece of seafood and then it is cooked fresh for the customer to eat while they are at the restaurant. Hema is not the only grocer that has this offering, many grocery stores in China have restaurants onsite including 7Fresh.
9. Automated service using robots. In one of Hema’s supermarkets there is a restaurant called Robot.He where the majority of food dishes are delivered to customers using robots. The restaurant isn’t fully automated, employees are available to answer questions. Employees also do something they haven’t gotten the robots to do yet, and that’s cook the food. If you want a seat at the robotic restaurant you have to check-in at a kiosk using the Hema app. When a customer arrives at their table they simply scan a QR code at the table then they can order food using, of course, the Hema app.
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