Shanghai, the largest commercial city in China, is the hub of global logistics. Most of the world’s top 500 companies have a presence in Shanghai, and some companies’ largest distribution centers are located in Shanghai. This metropolitan city has seen a retail revolution that will lead the way to innovative patterns of distribution and consumption. In every corner of Shanghai, one can witness efforts to disrupt the boundaries between offline and online shopping.Platum staff recently visited Shanghai and discovered three compelling models that are leading this revolution. Let’s take a look:
1. Hema store
Hema store or Hema Xiansheng in Mandarin, received investment from Alibaba. In a Hema store in Shanghai, there is a shopping cart on the ceiling of the mall. Employees pick up items, put them into carts, check them using a mobile device, and then send them to the rails. There are QR codes all over the store in order to encourage customers to sign up for a membership.
Hema store was founded in 2015 by Hou Yi, the former logistics general manager of JD, an e- commerce giant comparable to Alibaba. In January of the following year, the company opened its first offline store in Shanghai. Two months later, in March 2016, Hema store attracted investment from Alibaba and soon became a symbol of innovation in the retail industry.
When a customer’s order is received, either through their purchase on Hema store’s own mobile app or in one of the offline stores, a staff member rushes into the store, places the product in the shopping cart, and sends it to the logistics center. The store itself is the warehouse and delivery center, where hundreds of employees handle the orders everyday. This new logistics delivery system enables incredibly quick deliveries. As long as the customer’s house is within 3km, deliveries take less than 30 minutes.
Because of their fast and safe delivery system, Hema store is able to target “fresh products.” Their stores boast a particularly high proportion of seafood space and semi-prepared food spaces relative to other malls. While fresh products typically experience severe price fluctuations, this is not the case at Hema store, which utilizes electronic price lists. This ensures that consumers are purchasing products at the same price both online and offline.
Hema store does not accept cash. Payments are made only with Alipay. In offline stores, they encourage customers to use Alipay by promoting their own Hema store app. Immediately after making a payment, you can check your purchases on the app and rate the products. Such a system allows the company to collect consumer data online and offline so that they can track and analyze customer consumption patterns.
Hema store has opened seven stores in Shanghai. On July 17, it opened three new stores in Beijing and Shanghai, according to Alibaba’s press release. However, because those stores are located in the suburbs, their service is available only to the residents living in those areas. To meet a growing demand, they are planning to expand the boundary of their shipping area by collaborating with Taobao Mall’s fresh food delivery service.
2. Bingo Box
In a big container box in the parking lot of a large mall in Shanghai, you can find Bingo Box, an unmanned convenience store. Recently, convenience stores have been taking various steps to innovate, and unmanned convenience stores are getting lots of attention for their potential to reduce costs through technology. Bingo Box is currently located in two places in Shanghai, and one of them is made in collaboration with the French distribution corporation, Auchan.
In Bingo Box, everything can be done with a smartphone. To enter the store, customers scan the Wechat QR code on the door, which allows a mobile authentication that opens the door. Pretty much everything is sold there, from drinks, sweets, bread, and umbrellas, to mobile phone cables.
All products are tagged with RFID tags, and up to five products can be automatically recognized on the RFID reader. Purchasing is made easy by mobile payment systems such as Wechat pay and Alipay. When a customer completes a purchase, the door opens automatically. If a customer does not purchase anything, he or she must scan the QR code to exit. A tag attached to the product allows the system to identify whether or not the product has been paid for, thereby preventing theft.
However, Bingo Box is still far from perfect. As inventory management has not been fully automated, 2-3 employees remain present at the stores. Moreover, purchasing at the automatic payment counter is not always smooth, as some customers had to try repeatedly before their payment went through. Even worse is the issue of safety. People can enter the door without scanning the QR code themselves, simply by following others in who do.
While it may take some time to smooth out the bugs, unmanned convenience stores are indeed an innovation that can provide a more sophisticated and efficient shopping experience, somewhere in-between traditional convenience stores and vending machines.
3. Meitian Huashan Market (美天华山菜市场)
Among the various innovative attempts in China’s retail industry is market innovation. Meitian Huashan market is moving away from a traditional distribution structure and transforming itself into a ‘smart’ traditional market.
The interior of this location is bright and neatly arranged. Again, one can spot QR codes attached to each product. By scanning the QR code, you can immediately see when and where the crop grew and ripened. Meitian Huashan was able to solve the problem of an uneven price list by using a digital display, which makes changing the price easy through the back-end integrated management system.
This kind of new management system is made possible by going B2C, rather than C2C. That is, they make contracts only with the corporations and vendors, not the individual sellers. This way, they can keep everything on the system. Simply by scanning a QR code, information on companies, products, and distribution processes of agricultural products are readily accessible to everyone. By cooperating with a trusted corporate brand and simplifying the distribution process, they made it possible to lower the price by up to 30%.
Of course, systems that can trace the history of food products by reading a barcode have existed for decades, but people aren’t really using barcodes anymore. Unnecessary or inconvenient systems are destined to be neglected, as everything is being streamlined.In China, for example, mobile payment methods have become habitual.
Traditional markets are changing in a variety of ways to provide an optimal shopping experience. Today, customers can buy goods more safely and for a better price.
(Top photo from MoBagel website)