Progress in tech driving 'new retail'

Unmanned supermarkets face challenges but promise to improve efficiency and user experience in the longer term

The recent high-profile appearance of "unmanned supermarkets" in China projects an illusion of "the future is now". Is the retail industry undergoing another dramatic change?

Bill Gates once said, "We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10."

In the revolution of 'new retail', unmanned supermarkets are a new form of retail driven by progress in technology. The involved online retailers and startups are currently facing many issues that must be resolved. But in the long run, it has epoch-marking significance in terms of improving business efficiency and user experience.

Unmanned supermarkets are a potential replacement for traditional supermarkets and convenience stores, a revolution that will appear in all standardized retail terminals, such as pharmacies, clothing stores and fast food restaurants.

New retail is a new approach in which enterprises, based on the internet, upgrade the production, circulation and sales processes of products by using advanced techniques, such as big data and artificial intelligence, to reshape the retail industry and ecosystem as well as further integrate online services, offline experience and modern logistics. In short, new retail is a data-driven, consumer experience-centered format.

China's online retail sales of social consumer goods exceeded 5 trillion yuan ($750 billion; 638 billion euros; ￡582 billion) in 2016, with a year-on-year growth of 26.2 percent, accounting for 12.6 percent of the total retail sales of social consumer goods. As the average annual growth of online retail sales has been declining in recent years, online retailers began to seek a new retail format that could fully integrate online and offline retail.

Amazon introduced its new concept store Amazon Go last year, bringing the independent consumption and checkout system to a new level of technology. In July, Alibaba launched Tao Cafe, an unmanned retail store, with a "payment door" that automatically settles accounts and charges for goods consumed by customers in the store.

Will unmanned supermarkets soon generate an impact on traditional supermarkets and convenience stores? The following three criteria could measure the impact:

Consumer experience

Without cashiers, unmanned supermarkets free customers from lining up to pay their bills. However, new problems emerge. Take Tao Cafe as an example. It's easy for customers to pay their bills, but they need to line up to sweep the door code, and the additional payment door may also delay many users. In addition, arranging shelves, shopping guides and other issues of unmanned technology remain unresolved.

Data-driven

Digitally controlled, unmanned supermarkets are an extension of online-to-offline technology applied in an offline real economy. Again, take Tao Cafe as an example. When Alibaba applies the face recognition and other functions of Alipay to physical stores, consumers' online and offline related consumption information will be collected and the data can be applied to the store management in the short term.

In the long run, if the C2M (customer to manufacturer) and C2B (consumer to business) help to connect the data, combined with logistics services, a mature new retail form will come into being. That is to say, only by combining online and offline logistics will the new retail come about. Currently, these are far from achieved.

Commercial operation efficiency

From the business perspective, unmanned supermarkets have no advantage in terms of cost and operational efficiency, given that the largest cost in the operation of supermarkets lies in rent, storage and utilities. It makes no sense to simply save the labor cost of the cashiers in the short term, not to mention that more one-time investment needs to be made to launch the operation.

From the productivity perspective, will the pursuit of high speed be able to bring more revenue? Traditional supermarkets and convenience stores usually try to extend customers' shopping time to boost consumption, while unmanned supermarkets do exactly the opposite. Whether it can bring more benefits remains unknown.

Meanwhile, to meet increasingly differentiated consumer demands, retail enterprises began to introduce the concept of "scene" in the consumer field. An unmanned supermarket in a busy business district could meet consumers' need for "fast", but in a leisurely living area, an upbeat convenience store clerk may provide consumers with a pleasant shopping experience. Therefore, in different consumer scenes, unmanned supermarkets and traditional supermarkets could achieve a balanced co-existence.

Still, the prospect of unmanned supermarkets raises expectations. In the future, manufacturing will be guided by consumers, and the mixed economy that combines online and offline will greatly improve consumer efficiency as well as the shopping experience. Imagine intelligent supply and shopping guides allowing for customized and tailored goods in every store. Additionally, the varied shopping scenes offered by an unmanned convenience store could demonstrate what perfect but differentiated service is truly about.

The author is a Shanghai-based senior project manager of Roland Berger. The views do not necessarily reflect those of China Daily.

(China Daily European Weekly 08/25/2017 page9)