How Alibaba’s Hema grocery stores are turning the retail sector upside down in China and beyond
In China, tech and innovation seem to be part of people’s DNA. Having the newest gadget is not only something for geeks, but for everyone, as “convenience becomes the
new religion,” the Financial Times wrote in a recent report.
Expats living in China also embrace the fact that tech is not locked away in some science park or innovation lab, but part of their daily lives.
Beijing residents already use their phones as public transportation cards, to rent on-demand bikes and to order food. Even the street food vendors and beggars are using QR-code payments.
But now, another major part of daily life will be swallowed by the digital revolution – grocery shopping.
Internet companies opening offline stores is a major trend of 2018, with “integrated retail” being the buzz word. Offline retailers are looking at how they can blend consumers’ online and offline experiences.
However, brick-and-mortar stores are not going to vanish soon. After all, 85 percent of all sales still happen in physical stores, according to Boston Consulting Group.
Amazon, the US retail giant, opened up its cashier less stores in January. The stores are equipped with cameras that automatically charge a person’s Amazon account for the products they choose.
China’s e-commerce titan Alibaba introduced its “new retail” concept a month earlier, and its services combine Alibaba’s assets and local preferences.
The stores are named Hema, which means box horse or, similarly pronounced, hippopotamus – the cute logo of the futuristic retail chain.
Hema heavily relies on big data to optimize the store’s offerings. All the shoppers have to use the store’s app in order to benefit from the services.
The app can build on the already widespread use of Alibaba’s mobile payment service, Alipay.
Customers can either pay for the products by scanning them at the checkout counters and paying using the store’s app or the products can be delivered to them free of charge. Shop assistants will collect the products for them in a bag that they can connect to an in-house transportation system that is spread like a network across the store’s ceiling.
However, Hema only delivers to customers who are living within a radius of 3 kilometers from their stores.
Alibaba has already opened up 10 stores in Beijing, with 20 more to come in 2018, which will cover most of the city with the delivery service, the store’s manager Li told Metropolitan.
“In traditional supermarkets, there are usually goods on sale due to overbuy-
ing, in and the staff has high work intensity,” he explained. “But in Hema, H after our analysis, we will furnish products frequently in small batches each time, according to the updated sales performance,” he added.
It’s a smart store that recommends products for shoppers based on their previous purchases.
By scanning the barcode of a product, clients will get all the information about it, just like they would if they visited an online store.
Alibaba is the pioneer, but other stores and shopping malls in China have followed, providing clients with a digital shopping experience and gaining detailed insight into their consumption patterns and preferences to draw more customers in. But data can also help to optimize processes in the operation of physical stores.
“The point is not the trove of data itself, but to identify problems and make changes accordingly,” said Feng Yujian, the chief executive of Beijing Capital Grand, a company that runs several shopping malls and outlets in China, in an interview with the South China Morning Post.
“For example, the route data shows some places are ‘dead corners’ with few visitors, and we have got to figure out why. Two stores stand door-to-door but their sales performance varies. Why? Is it because the poor performer has few new products, or is the pricing a problem? We can help them analyze this.”
Hema has made itself a name for another service that is deeply entrenched in the Chinese food culture – freshness. Shoppers can pick their food and have it cut or even cooked by chefs on the spot. This service is especially popular for the vast selection of live seafood available at Hema.
Mrs Zong, who only wanted to give her surname, came to the store on her day off to treat her parents and her daughter to a meal.
“The seafood here is very fresh and delicious,” she said.
While Beijing supermarkets are usually crowded, Hema in Beijing’s Chaoyang district outside the Fifth Ring Road is unusually calm on a Wednesday afternoon.
Did the lack of screaming discounts or the new technology scare the shoppers away?
Zhang came here with her husband, and even though she is already retired, she enjoys the cashless supermarket.
“It’s very convenient. My cell phone can solve all my problems nowadays,” she said.
Consumers embrace ordering food or paying by scanning QR codes when dinning.
A scene in a Hema store in Chaoyang district