The Age of New Retail in China

People who have heard a lot about China but havenamp8217t traveled there can be excused for thinking most Chinese retail takes place online In fact a recent Ministry of Commerce report showed that online activity in China makes up less than onefifth of total retail sales Thatamp8217s because most Chinese consumers continue to shop at brickandmortar stores amp8212 which is why New Retail has much more in common with traditional retail than most people understandThe two supermarket chains that have become the poster children for New Retail are Alibabaowned Hema Fresh Hippo in English and 7Fresh launched by Alibabaamp8217s chief ecommerce rival JD Hema and 7Fresh have much in common and itamp8217s their overlap that really defines New Retail Both chains were founded so that their parent companies could leverage their existing digital technologies to make them important players in the physical retail space where most Chinese still shop Offline thus becomes the new onlineAlibaba has gone allin on its new play The idea behind Hema headquartered in Hangzhou was to take the online shopping experience that Alibabaamp8217s customers already enjoy and transpose it from the virtual space into the physical world Hema chief executive office Hou Yi sees no reason why his customers canamp8217t have the same digitized shopping experience instore as they have online To that end shopping at a Hema store is similar to shopping online at Alibaba except that instore customers can actually inspect the food they are buyingHema accomplishes this by labeling all of its offerings with bar codes After installing the Hema app customers can use their smartphones to scan the codes giving them access to the same information they would find on Alibabaamp8217s eretail site The code on a carton of eggs for example displays details of the supply chain that carried the eggs from farm to store as well as nutritional information and reviews of the eggs by customers who have purchased them The app even displays relevant government inspection certificatesUnlike the typical American supermarket which is primarily organized by aisles Hema stores make use of a new design concept that individualizes each department with separate counters similar to how some US groceries highlight their fish and meat departments Filling the store with counters slows down the process of shopping but in a way that encourages customers to engage more with the products they are buyingHema stores also double as distribution facilities unlike American markets Anything that can be purchased instore can also be ordered online if a customer lives within a threekilometer radius of a store delivery is guaranteed within 30 minutes Commuters are thus incentivized to order groceries on their way home confident that their order will arrive before they do For this reason according to an Alibaba survey home prices within each Hema delivery radius have soaredThe Beijingbased 7Fresh stores also function as both offline markets and online distribution hubs Much like Hema they integrate online digital technologies extensively into the shopping process 7Freshamp8217s most remarkable innovation the RoboCart is a soupedup shopping cart that customers link to their smartphones while instore Usually the cart follows a shopper around the store without having to be pushed But if the shopper canamp8217t find an item it can also lead the way As customers find what they want and place those items in its basket the RoboCart automatically registers products obviating the need for scanning When the shopper is finished the Robocart makes its way to the checkout 7Fresh charges the cost of the items to the customeramp8217s digital wallet and JDamp8217s fleet of delivery vehicles takes care of the rest As with Hema 7Fresh guarantees delivery in thirty minutes within a threekilometer radiusSome aspects of New Retail have already made their way into the American marketplace The new Amazon Go stores for example have also done away with checkout Shoppers use the Amazon Go app to enter the store take what they want from the shelves and simply walk out Amazonamp8217s technology identifies what has been taken and charges the cost of those items to the customeramp8217s Amazon account No scanning no checkout Shoppers can also use the Amazon Go app to find out remotely what items a particular store has in stockThe business implications of New Retail are profound and farreaching Because both Hema and 7Fresh require customers to download apps and open accounts they essentially bind these customers amp8212 and their data including shopping preferences amp8212 to Alibaba and JD respectively In terms of new customer acquisition if nothing else New Retail is clearly the winning playDespite all the doomsayers prophesying the coming retail apocalypse the demonstrated success of New Retail in China shows us conclusively that a future does exist for legacy brickandmortar establishments willing to embrace new digital technologiesPhoto credit Kevin Grieve UnsplashClick the social buttons to share this story with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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The Age of New Retail in China

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Daniel Hodges

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