New forms of unmanned convenience stores are emerging in China

Venture capitalists, fresh off successful forays into the sharing economy market, are chasing investment opportunities in the unmanned retail business. Companies such as F5 future store, Xiaomai, Xingbianli, and CityBox have secured investment financing for unmanned retail ventures, thereby positioning themselves as players in the industry, one that currently takes several forms: smart vending machines, unmanned convenience stores, and unmanned smart shelves in offices. Additionally, other concepts, such as unmanned cafes and bookstores, continue to emerge.

Why is unmanned retail flourishing?

To answer the question, we should take a look at the concept of ‘New Retail’. Alibaba’s Jack Ma popularized the term and used it to describe the emergence of retail forms that integrate with online and offline services. For example, Alipay and WeChat are promoting their payment methods in offline retail areas.

Meanwhile, these forms of new retail have several advantages; with the help of new technologies, the cost of unmanned retail is much lower than that of traditional retail forms.

Unmanned convenience stores, for example, cover a smaller area and do not require manpower management, so they cost only one tenth as much to open as a normal convenience store. It costs just RMB 100,000 to launch an unmanned convenience store in most places. Usually, an unmanned convenience store can produce a turnover of RMB 2000 with a 35% annual gross profit margin.

New retail techniques, such as placing unmanned convenience shelves in offices and smart vending machines in crowded places, can attract more customers and lead to higher purchasing rates.

For investors, unmanned retail is a good way to make money, as the technology can maintain a high rate of profit in a period of increasing rent and manpower costs.  

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Can new retail deal with customers’ personal demands?

We have discussed the monetary benefits of unmanned retail for companies and investors, but we have yet to delve into the user experience. More important than corporate profits will be how this new retail technology can meet customers’ personal demands.

The best-selling convenience store items are currently snack foods, fresh foods, and pre-made meals. Unmanned retail can process people’s demands for snack foods and some relevant instant foods, but employees are still needed to prepare cooked meals.

Furthermore, unmanned retail can improve user experience by using big data and advanced technologies to analyze customers’ preferences and optimize sales to better meet buyers’ demands.

A drawback of unmanned retail is that it provides no additional services for the elderly, people with disabilities, or those who are not familiar with the new technology. Moreover, if the store experiences internet connectivity issues, customers may spend a lot of time trying to pay, a problem that could be solved in minutes if there were employees around.

Is the technology that supports unmanned retail advanced enough?

Of these three forms of new retail, unmanned convenience stores is the most complicated and critiqued. These stores use cameras, sensors and algorithms to track users, but sometimes the implementation process contains extra difficulties, like network delay. Also, the advanced technologogical equipment is the most expensive feature of the store. Because the pure computer vision technology is not quite advanced enough, customers usually face many issues while shopping at the stores.

These unmanned convenience stores are designed to accommodate fewer than 20 customers at one time. Once more than 20 customers are inside, the situation becomes complicated, as it is difficult for these unmanned stores to cope with more customers during peak hours, and the machines will be slower to react to customers’ demands. Additionally, customers may need to wait outside during peak business hours.

Moreover, the technologies used to mitigate crashes are not so smart and convenient for customers; consumers will encounter miscalculations or problems during the checkout process. Meanwhile, cash-free systems, though good for first and second-tier Chinese cities, are not so friendly to customers in third-tier cities, as the markets are not large enough.

In conclusion, unmanned retail seems to be profitable for companies and investors. For other groups, however, it can be improved.

The support technologies need to further advance so that customers can truly enjoy a better shopping experience.

We can expect more companies to join this fierce competition. Many of them may fail. The game is on.

(Top photo from Baidu Images)

Kaikai Shi

Kaikai Shi writes for us. He holds a bachelor's degree in Biotechnology at Zhejiang University. His interests are in new technology and reading. Kai believes that new technology will change the world we live in, and is trying to engage himself in this process.

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