Unmanned Convenience Stores Now Internet Celebrities, But Still Quite Far From Reality

(Chinese Version)

To be an Internet celebrity in China, one has to be either cool, or cute. That’s how you game in the fan economy. Besides that, special skills and unique characteristics are also required to be successful in this realm.

Unmanned convenience stores that showcase cool tech are now new viral celebrities on the Internet.

Recently, the unmanned convenience store concept has been trending in China. F5 Future Store and BinguoBox have successfully seized financing at a volume of ¥130 million. China’s Internet giant Alibaba has also unveiled its very first unmanned supermarket Tao Café. Even traditional FMCG (Fast Moving Consumer Goods) company Wahaha is entering the unmanned retailing sector.

From entering the store to paying for the products, the whole shopping process is a take-it-and-go autonomous experience. It seems high tech is empowering the retailing business to become something else. But will this trend last?

Convenience stores the new Internet celebrities

In 2016, the shared bike industry had been the main focus of the capital market, but up till now the unmanned convenience store sector is breaking the ice.

Ever since retailing giant Amazon introduced the grab-and-go unmanned convenience store concept Amazon Go last year, the trend has been spreading and brewing. In 2017, the trend entered China, becoming a direction VCs are looking at.

In February 2017, Zhuang Chenchao resigned from Qunar and entered a whole new realm. Zhuang opened five new generation convenience stores named Bianlifeng, in which the customers can order merchandise online and go to pick them up at the store. It’s said that Zhuang has invested in a total of 300 million in Bianlifeng. It’s reported that Bianlifeng has prepared a fund of three billion yuan to acquire more convenience store brands in an attempt to deploy more unmanned stores in the country.

After the emergence of Bianlifeng, search key words centering unmanned convenience store surged in China in terms of click rate during June and July this year.

Traditional FMCG enterprise Wahaha had rolled out its unmanned store Take Go, which is similar to Amazon Go, in February. After that, the company teamed up with the Deep Blue Technology project to open a hundred thousand new stores in the country in the upcoming three years, and a million in ten years. Following that, Yili is planning to promote its convenience stores cooperating with Deep Blue Technology in over 2000 communities.

Besides traditional companies, brick-and-mortar convenience store chains are also having similar craze.

In early June this year, Beijing-based Easyhome announced its unmanned convenience store EAT BOX. Later in July, Japanese convenience store giant LAWSON set up two pilot autonomous stores in Shanghai. According to the company, the autonomous concept will be introduced to stores near office towers after the pilot. Other five major convenience store brands including 7-11 and FamilyMart etc. have also announced to adopt autonomous cashier system by 2025.

As the unmanned store rush reaches a peak in July, Sinovation Ventures’ project F5 completed its A+ financing at 30 million. The project utilizes autonomous machines and software to replace manned 24/h convenience stores, planning to open up 30 to 50 stores in the upcoming three or six months. BinguoBox on the other hand had finished piloting in Guangzhou last year and schedules to launch an official store in Shanghai in June. BinguoBox now has already completed a 100-million scale financing and holds ambitious expansion plans, as it plans to deploy 5000 stores within a year.

It’s apparent that the development of IoT, facial recognition, and mobile payment tech has made unmanned convenience store a natural trend, empowered by flooding capital and the entry of tech giants such as Amazon and Alibaba. Using IoT solutions such as biometric technology and thirdy-party payment etc. to transform traditional retail can no doubt gain the attention of the capital.

Behind the heated concept, lies appealing offline potential use cases. The dividend offered by the Internet is gradually fading, making offline scenarios the next explosion point. In recent years, we have witnesses the rise of cab-hailing platforms, shared bike companies etc., companies that combine application with use scenarios.  Their success is making e-commerce companies, smartphone makers and traditional companies to eye the offline scene as they hope to find new fuel to make new products or services.

At present, unmanned convenience stores are located in busy areas such as high-end shopping areas, residential communities, tourist attractions, work areas etc. According to data from iResearch, the GMV of unmanned convenience stores is expected to reach ¥38.94 billion in 2017. On the A-share market, the share price of companies related to the field of unmanned store technology like INVENGO (unmanned retail powered by IoT tech and RFID solution) and NewCapec etc. have been rising continiously.

Needless to say, unmanned store is now an incredibly hot scene.

The concept of unmanned retail

 “From a VC’s perspective, we don’t really believe in unmanned stores,” Mao Shengbo from Panda VC Fund said.

Mao mentioned that VC investment is limited by its model, and prefers projects that target large scale markets. “We expect them to grow big in a short time,” Mao said. However, unmanned convenience store providers would find it hard to do so. Aside from that, people play a major role in this process because most products in these convenience stores are daily necessities. Stores would have to set themselves apart from the crowd by providing unique products like coffee, takeout, and services, which involve people.

Although unmanned convenience stores do sound like a prominent direction to go for, they still have many shortcomings.

It’s undeniable unmanned retail should be able to replace human labor with machines, so as to reduce the cost generated by the product allocation and check-out process, adding up the service scale. According BinguoBox’s introduction, a 15-square-meter BinguoBox’s SKU is similar to that of a 40-square-meter traditional convenience store. The former only requires an investment of ¥100,000 while the latter requires ¥400,000. The unmanned model can lower the cost and increase efficiency. Furthermore, unmanned retail can free man labor, while satisfying consumers’ demand for convenience in shopping.

However, it should be noted that unmanned stores are still in the early testing phase with technologies involved far from mature. It’s still early to say we can truly run stores without any human staff.

In reality, these unmanned stores are not operated completely by machines. They are more of big vending machines. They provide products that are more diverse and allow customers to actually touch the products. As for the payment process, in most of these stores you can’t really grab the products and go. You basically still have to scan your phone in a certain area to pay for your groceries. Exiting stores on the market are more like self-help shopping stores, powered by new technologies with better services.

There are three thresholds in unmanned retail: high cost presented by technologies and product management; special requirements from site selection, targeted audience, positioning and product structure, which set up obstacles for store replication in scale; customers’ discipline. Just look at all those broken shared bikes on the street. Unmanned store runner also have to take facility damage and theft into consideration.

That said, the ultimate unmanned store concept is not something that can be achieved easily. It’s so much more than those up-and-running unmanned stores on the market.

Let’s look back into retail itself. Retail is highly connected to supply chain. BinguoBox was able to promise to deploy another 5000 stores next year for the fact that Binguo only provides the box and technologies. BinguoBox’s products and supply chains are provided by Auchan. Wahaha and Yili have similar conditions.

It’s no doubt that unmanned retail provides services and consumption scenarios that could supplement new retail businesses. Unmanned retail’s channel entrance match with the new retail concept. And because of that, giants like Alibaba and Amazon etc. are entering the arena. Alibaba invested in Yintai in 2014 and started its exploration in using online business to transform the offline, restructuring the staff, inventory and space with technological methods to accelerate the implementation of new retail.

However, unmanned retail is not the mainstream yet.

According to relevant data, the retail industry in China has reached a scale of $4.5 trillion and it’s still growing at the speed of 10%. So how to make rooms for new retail? Several brands have made their attempts to experiment. But one thing is for sure, that its offline businesses like supermarkets and convenience stores are the core value of new retail.

Many concepts nowadays are only concepts, still far from a reality.

As a new tech trend, the seemingly cool unmanned convenience store concept is like a blazing flame. It has immense IP value.

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The article is published with authorization from the author @itlaoyou-com, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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