Players big and small are contributing to China’s new retail revolution
In the two decades since China saw its first-ever internet shopping purchase on March 6, 1998, online retailing in the country has enjoyed explosive growth, swelling to an expected RMB 9.4 trillion in 2018. Today China is the world’s largest e-commerce market, having far eclipsed the US two years ago.
Homegrown e-commerce giants Taobao, JD.com and Pinduoduo are local household names, attracting shoppers with their low prices and convenience. Yet, sales at brick-and-mortar stores still account for 80–90% of the overall market.
That’s because online shopping still can’t beat the experience of physical stores. People want to feel the goods in their hands. They want to know if a dress looks good on them or if the greens are fresh enough to make a delicious dinner, before committing to spend.
With such a massive offline market waiting to be cracked, online players have continued to rack their brains to come up with ever more retail innovations.
“The hundreds of millions of consumers [today] don’t just need physical goods. As they upgrade their lifestyles, they need more digital content, more services,” said Alibaba CEO Daniel Zhang.
E-retailers branch offline
In October 2016, Jack Ma predicted a new retail order featuring the seamless merger of the online and the offline. He named it “new retail.” But even before the concept was made public, Alibaba had already taken major steps to grow in that direction.
A year earlier, the e-commerce giant incubated Hema, a superstore offering complementary online and offline shopping features. Consumers can use the Hema mobile app to order fresh food that gets delivered to their doorstep for free in 30 minutes, within a 3-km radius.
For those who prefer to see, touch and feel the items first before buying, they can also visit a Hema physical store to handpick their fresh vegetables and seafood. Hema even has chefs to transform their purchases into meals, whether as takeout to be delivered to their desired locations, or eaten on the spot in the store’s dining area.
On average, online orders account for over half, or even as high as 70%, of total sales in some Hema stores.
As other e-commerce platforms play catch-up, new lines of smart grocery stores are mushrooming across China, including 7Fresh by JD.com and Tencent’s Le Marche.
Startups, too, have joined the fray, hatching every possible form of integrated online and offline shopping experience (albeit with much lesser resources) – whether it's unmanned convenience stores or smart vending machines.
For example, Zailouxia (literally meaning “downstairs” in Chinese) has installed its smart vending machines in residential blocks in Beijing. Users place their orders for fresh produce and daily necessities online and collect their purchases downstairs right away. The company's CEO, Zhang Ying, has defined Zailouxia as a supplement to traditional retailers.
Traditional players go digital
Meanwhile traditional retailers, mainly malls and supermarkets, are rethinking their business model too, as they try to maintain market share or even regain some of the ground lost to their aggressive online rivals.
According to Richard Liu, Chairman and CEO of JD.com, online retail will increase to 40% of the overall market by 2027.
So, if you can’t beat them, join them. Traditional retailers have turned to tech firms, hoping to use the latest technology to jump on the internet bandwagon and build on their existing strengths to create compelling consumer experiences.
Sun Art Retail, which operates some 450 hypermarkets in China under the brands of RT-Mart and Auchan, received an investment of about US$2.88 billion from Alibaba in November 2017.
As part of going digital, all the physical stores run by RT-Mart would be equipped with interactive point-of-sale kiosks developed by Alibaba and big data systems that track and analyze customer behaviors, according to RT-Mart CEO Peter Huang.
“By digitizing the store’s operations, the online and offline businesses merge into one. This will boost retailer’s [sic] online transaction volume,” said Huang.
Tech firms, including a raft of startups, also boost the emerging new retail sector by providing the necessary technologies to help offline retailers go digital. Such services include online payments, smart shelves, tech-enabled last mile and supply chain capabilities, and big data and analytics.
Aibee is a young retail-focused AI startup founded by Lin Yuanqing, who used to head Baidu’s Deep Learning Institute. In May 2018, Aibee entered a strategic partnership with K11, a Hong Kong-based shopping mall brand founded by Adrian Cheng, the 39-year-old heir to the New World and Chow Tai Fook real estate and jewelry empire.
Under the deal, Aibee will boost the tech setup of all K11 and Chow Tai Fook stores to deliver the best of online and offline commerce, including improving shopping experience and in-store fulfilment of online orders.
Shoppers checking out some of these new retail stores might think they have stumbled upon a sci-fi set. Since January 2018, robots created by Shenzhen-based startup Ubtech have been serving customers at thousands of stores countrywide owned by Easyhome Furnishing, China’s second largest home improvement supplies and furniture chain. These robots communicate with shoppers and answer their queries, such as helping to locate the requested goods.
And that’s no longer such a rare scene now in China. At the 7Fresh stores run by JD.com, shoppers can use its app to link an autonomous shopping cart to their smartphone, just by scanning a QR code. The robot cart can even follow you around, or show you the way as you browse the aisles after you put on one of the store's smart wristbands.
Better yet, the store has been fitted with futuristic screens that display information about every item that a shopper picks up, such as a fruit’s place of origin, nutritional facts and relative sweetness. Its facial recognition payment scanner provides another payment option: you can scan your face to finish the transaction.
Given the advanced pace of technological progress and adoption, it’s indeed hard to imagine what a retail store in China would look like in the future.
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