Management Tour Report: Innovative Retail of China

In this article we will tell you about all technological innovations and management innovations, about what trends have appeared in the retail sector and in which direction the largest trading companies in China are developing, because retail trade is changing rapidly.

 From November 17 to 24, EY - an international audit and consulting company became a member of a corporate management tour to China.  Participants visited innovative retail industry companies in Beijing and Shanghai: BingoBox, 7 Fresh, JD.com, Alibaba Cloud, Auchan 1 Minute, Carrefour - Le Marche format, HEMA, Winmart Go.

In this article we will tell you about all technological and management innovations, about what trends have appeared in the retail sector and in which direction the largest trading companies in China are developing, because retail trade is changing rapidly.  The process of sale and purchase takes on new forms.  And it is all due to the introduction of new technologies and solutions.

Members of the group
DAY 1 
Визиты в 7 Fresh, BingoBox, JD.com

Our participants visited the following companies: 7 Fresh, BingoBox, JD.com.

#interesting facts about the company 7 Fresh - a high-tech supermarket from JD.com.

  • This new store in Beijing is 4000 sq.m. and has a large selection of fresh and cooked products.  JD.com carefully analyzes existing customer data to select the layout and range of products in stores (two thirds of the products are fresh products).
  • There are two food zones, where you can taste both eastern and western dishes.  Products such as lobsters can be cooked on site at an additional cost.
  • Additional information about products can be obtained using the RFID system, the data is displayed on a digital screen above the storefront.
  • Customers are invited to scan the QR code on the package in order to track the movement of the product from farm to store via the JD application. com.
  • Buyers can receive online orders in 30 minutes within 3 km from the store.  Experimental store innovations include robotic carts that accompany shoppers during their shopping.
  • Buyers in the store can choose between traditional forms of payment or self-service, paying by card, cash, through WeChat or face recognition technology.
В 7 Fresh
  • Courier rate depends on the number of orders.  The courier itself determines the duration of the working day.
  • Goods are accepted from warehouses and from suppliers (vegetables, fresh meat and seafood) during the day and even at night.
  • The display of goods occurs from 5 to 7 in the morning, at 2 o'clock in the afternoon, goods that ended on the shelves in the hall can be refilled.
Ready for the holiday!

 # Interesting Facts_ff About JD.com, Jingdong Mall is a Chinese online trading and e-commerce company located in Beijing.

JD.com office
  • One of the largest merchants on the Chinese Internet in the B2C segment.  The company began international trade in October 2012 with the launch of an English-language website.
  • The company was founded by Liu Qiangdong (Richard Liu) in July 1998, the online store opened in 2004. Initially, they sold magnetic and optical media, and then expanded the range, selling electronics, cell phones, computers, and more.
JD.com office interior

 # interesting facts_ff about the BingoBox company.

  • The startup has installed 200 automated stores on mainland China.  Now the company plans to expand the business, entering the markets of Hong Kong, East Asia, and later the whole world.  By the end of 2018, the number of robot stores is planned to increase to 5,000.
  • Expansion will allow to collect more data on individual preferences of the residents in different areas and offer a special range at competitive prices.
  • The appearance of BingoBox reflects the tendency to abandon traditional supermarkets with cashiers and security guards.  To enter the store, you must use a QR-mobile scanner.  Having chosen the goods, customers place them on a special counter, which determines their quantity and issues a check.
  • Payment is made through mobile wallets.  Surveillance cameras and RFID tags are used to provide security in stores.  Each product is supplied with RFID, the security system can recognize if not all products have been paid for.  The door opens only upon completion of the payment. In the store there are additional surveillance cameras with recognition of the customers’ faces. 
  • Shops occupy an area of ​​approximately 1,315 square meters and contain 500-800 items of goods.
BingoBox
  • There is a "dynamic shelf" that works only for promotional items.  The technology is very expensive, so it is not yet launched.
  •  Product identification occurs by face recognition.
  •  There is a robot technology that makes more than 7,000 photos of goods.

Company statistics:

  •  0.2% theft
  • payback period of 5 months
  • revenue per day 2-3 thousand yuan
  • solution cost 1 box - 200,000 yuan
  • There are about 200 customers and about 2,000 visitors.  Conversion is 10%.  The cost of an average check is 20-25 yuan.
  • The company has 600-700 employees: 300 in the main office, 240 people are developers, and the rest are present in other cities, as representatives.
  • 1 shop is served by about 5 people (a seller, 2 cleaners, 2 loaders).
DAY 2
Alibaba

Participants visited one of the most famous companies in China - Alibaba.  The format of this meeting is a presentation on New Retail Solutions.

The world famous giant Alibaba

# interesting facts_off about Alibaba:

  • Chinese public company operating in the field of Internet commerce.  The headquarters is located in Hangzhou.
  •  The main types of activity are trading operations between companies using the B2B scheme and retail online trading.
  •  In 2012, sales on the two portals of the Alibaba group amounted to 1.1 trillion yuan ($ 170 billion) Alibaba Cloud, also known as Aliyun, is a cloud computing company in China, a subsidiary of Alibaba Group.
  •  Alibaba Cloud provides cloud services for online businesses and Alibaba's own e-commerce ecosystem.
  •  Alibaba has come up with the phrase “new retail” to describe a step beyond the approach to online and offline retail.  The key is the interaction of people, product and place, regardless of whether it is a physical or virtual place.  Retailing will become more “event based” when brands will adapt events and promotions for their community that will evolve online and offline.
Pass to the Alibaba Group
 DAY 3
Visit Auchan Minute and Carrefour Le Marché
 Can you imagine a shop “without sellers”? And what about the fact that the buyer is identified through a mobile application on the smartphone and the payment is made by the phone?

All these innovations have been the norm for the visitors of the supermarket self-service Auchan Minute and the Carrefour Le Marché “smart store” for more than a year.

# interesting facts_off about Auchan Minute:

  • The shop covers an area of ​​18 square meters.
  • The range includes about 500 items, such as fresh products and packaged goods (drinks, snacks and fruits).
  • To use the store, the buyer needs a smartphone with the WeChat messenger installed.
  • Having scanned the QR code at the entrance, the buyer goes into the store.
  • The same codes on the goods allow you to put them in a virtual basket.
  • Payment is made through WeChat Pay or Alipay (the two most popular payment methods in China).
  • The capacity of about 7,000 people per day and about 3,500 online (orders through the Taobao app).
  • Meat labeling helps to track from which region the product is delivered.
  • Freshness of products is tracked through a special application.
In the store Auchan Minute

 # interesting facts_off about Carrefour Le Marché:

  • The first “smart store” Carrefour Le Marché was opened in Shanghai in May 2018.
  • This is a supermarket with a large focus on imported goods, restaurants and fresh goods category.  This is Carrefour's first global initiative in smart retail that they do with Tencent.
  • Payment through the scan & go function allows you to skip the cash offices without contacting the sellers (since the money has already been withdrawn from the buyer's account).  At the moment, this new format has just started, and criteria are being developed for evaluating the success of the store.  But we can already say with confidence that 40% of visitors who use scan & go are young people, active users of gadgets and applications.
  • Технологиес: “Scan and Go” payment, face recognition payment, self-checkout, electronic price tags, etc.
  • The store’s area is about 4 thousand square meters on two levels, about half the size of the standard Carrefour hypermarket.
  • The restaurant area occupies about 700 square meters and the customers can order the cooking of fresh food that they bought at the store.
  • Buyers can scan any product in the Carrefour program in WeChat and add to the electronic cart.
  • You can pay via WeChat Pay or through the special “scan and go” zone.
  • As for delivery of goods, the customers can place an order through the online store Carrefour.  Goods will be delivered within a radius of 3 kilometers within an hour.
В магазине Carrefoure
DAY 4
Unmanned supermarket Winmart Go

Some years ago the opportunity to pay for the purchase with a bank card seemed to be innovative for China's citizens, but now it seems strange if institutions and shops accept cash only.

The development of the payment industry in China was helped by biometric identification and verification technologies.  Now, many users are choosing contactless payment technology from their Touch ID smartphone, which allows you to pay with a fingerprint (you need a smartphone for this).  In more innovative scenarios, no devices are required for payment, and the person becomes the payment tool.

On this day, the participants of our tour were able to learn about the biometric technologies used by the unmanned supermarket “Winmart Go!”.

 # interesting facts_off about Winmart Go!

  • “Wendai, a local smart retail operator, opened its first “Winmart Go!” in the Watson Pentium building in Shanghai.
  • "Home Shop" covers an area of ​​about 5 square meters and is intended for office workers within a radius of 100 meters from the store.
  • Winmart Go sells more than hundreds of fresh food items and can satisfy customers' nutritional needs, including breakfast, lunch, afternoon tea and dinner.
  • The intellectual store is managed by the Mengdian social e-commerce incubator platform.
  • The store uses a machine that scans the retina of the buyer’s eye and thereby identifies it in the system.  (We want to note that scanning the retina remains one of the most reliable methods of biometric identification and authentication of the person. The system is widely used to control access to highly secret objects, but now it can be used to pay for purchases).  After that, the initial quantity of the goods is automatically displayed, and after the person has taken the goods, the machine scans the remaining quantity of goods and deducts the desired goods and quantity, charging payment via WeChat.
  • All the company's stores are equipped with vending machines - this is the sale of goods and services using automated systems.  The machines are equipped with the WeChat payment system and a biometric palm recognition system (the buyer brings his hand to the terminal screen and special scanners identify the individual drawing of the blood vessels of his palm).
  • The operation principle of the device: the buyer must scan the code through WeChat and then the door opens.  The buyer takes 1 or more goods, and the cameras located in the machine, like lasers, scan the goods and display the name and quantity on the screen.  As soon as the door of the machine closes, the money is debited from the account in WeChat.
  • Each bottle or package has a different shape, which makes it easier for the system to identify the product.
Winmart Go Showcases
DAY 5
HEMA supermarket chain

HEMA supermarket chain with its logo - a very famous Hippo.  Alibaba uses this network as a testing ground for running new technologies.  Shopping in Hema can be both in the store itself and at home.  In the first case, customers scan product bar codes using smartphones and get all the necessary information.  Payment for purchases can also be made directly from the phone through the payment system Alipay.  Moreover, in the Hema app, the buyer can indicate in what form he wants to get some products (for example, fresh fish) - in raw, cooked and packaged or on a plate to eat right in the store.  And for those who live within a radius of 3 kilometers from Hema stores, the company offers prompt delivery.  Placing an order through the application, you can get the products within 30 minutes.

Well-known Hippo

# Interesting_ff about HEMA FRESH:

  • Trading area is 1,200 - 1,400 square meters, restaurant area - 600 - 750 sq. m.  and a pick & pack area is ​​about 300 sq. m.
  • There is also a replenishment and distribution area about the same as the retail space.
  • Most stores allocate 15-20% of the area to the restaurant area.  In the last open stores, this zone takes up to 50%.
  • The store contains about 3 thousand units of goods, of which about 30% are fresh and frozen food.  The first store became profitable about 20 months after opening.
  • Buyers can buy fresh products in the store and ask them to cook on the spot.  The restaurant area is a good source of revenue, since, in addition to rent, a 20% commission is charged on sales.
  • Delivery is available to customers who live in a radius of 3-5 km  from the store, within 30 minutes.  At the moment, the share of orders placed through the Hema app is about 50% of all orders.  There are shops in which it reaches 70%.
  • Each product has an RFID that allows you to view product information: price, origin, date of manufacture, recommendations for similar products, etc.
In the store HEMA FRESH

 # interesting facts_off about HEMA HQ

  • Since the beginning of 2016, Alibaba has opened 64 Hema HQ stores in 14 cities with more than 10 million customers buying at these supermarkets.  
  • On average, the Hema supermarket, which has been open for at least 1.5 years, has average daily sales of over 800,000 yuan (US $ 116,500) - about 60 percent of them come from online orders.
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The participants of the management tour have learned the secrets of the largest companies in the world from first hand.

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The impressions of previous tours participants:
Having already taken part in educational tours, these people are happy to share their knowledge and impressions.
Anton Nesiforov
Anton NesiforovProcess Manager for fruit and vegetable preservation, beverages, and alcohol

On our tour of Germany, we visited the most famous food exhibition, the Green Week, as well as numerous retail chains and enterprises operating in various interesting industries. We have a lot to learn. We must take the best and use it. Thank you, FastForward, for your careful approach to creating this tour.

Alena Nesiforova
Alena NesiforovaUnified Concept Manager for Izbenka and VkusVill

We visited several retail stores in Germany, as well as manufacturing facilities. What we liked the most about the stores we visited was the high quality standards of German retail. Retailers know how to sell high-quality goods at affordable prices, and this is probably the main secret of Germany's retail success. As for production, we were inspired by some of the small family businesses we saw.

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