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China leads the charge on automated retail

China leads the charge on automated retail

For a glimpse into the future – and what automation means for retail – experts are looking to China. It’s fully embracing unmanned stores, where shoppers can walk in, select their products, pay and walk out, all without needing to interact with another human.

septembre 10, 2018

Unmanned stores are starting to emerge around the world as retailers of all shapes and sizes experiment with different formats, yet one country in particular is at the forefront of the concept.

For a glimpse into the future – and what automation means for retail – experts are looking to China. It’s fully embracing unmanned stores, where shoppers can walk in, select their products, pay and walk out, all without needing to interact with another human.

Since last year, Chinese retailers have been on a mission to open and test these cashierless shops. Alibaba has launched Hema grocery stores, Tao Café and a wine shop. Biu by the Suning Group has opened a group of unmanned retail shops in cities across the country where customers pay using facial recognition technology. Meanwhile, Bingobox launched its first store in Shanghai in 2017 and JD.com is planning to open a string of unmanned convenience stores across the country.

The adoption of unmanned retail in China was a matter of when, not if, says James Hawkey, Head of Retail, JLL China. “Alibaba and JD are two of the biggest retail companies in the world. Both have a background in tech and both have a whole range of initiatives,” he says. “They are leading thinking on tech in retail.”

Unmanned across Asia

The appeal behind unmanned stores lies mainly in greater convenience, and a way for retailers to reduce costs. Also, because there are no cashiers, store design means valuable real estate can be used more efficiently.

Amazon earlier this year launched a much-discussed checkout-free grocery store, known as Amazon Go, in Seattle. Other retailers are racing to launch their own concepts, with unmanned stores opening across Asia. Taiwan’s 7-Eleven recently launched its second unmanned X-Store, Singaporean convenience store chain, Cheers, piloted an unmanned outlet within a tertiary institution last year, while Malaysia has seen a couple of stores open for business this year in Kuala Lumpur and Sabah.

But China is, in particular, ahead of the crowd. According to Chinese market research firm, Daxue Consulting, the total market size of unmanned stores in the country stood at 40 million yuan in 2017. It’s estimated to reach 3.3 billion yuan by 2020.

Automated blues

The advent of unmanned stores has come with requisite growing pains. Chinese start-ups such as Guoxiaomei and Xingbianli, which supply unmanned shelves, are laying off staff while grappling with issues of theft and low profits.

And critics observe that unmanned stores are hardly seamless. For all the talk about the advanced technology involved, much of it remains inadequate in handling large number of shoppers and is ironically more troublesome than a traditional store with staff. Others say there’s really little efficiency gained in speeding up check-out process and saving on labor costs.

“At present, the concepts are so new that retailers are struggling with the technology, and how to integrate multiple technologies into concepts that provide a good user experience,” says Hawkey.

He also points to the fact that the payback period for technology solutions will vary enormously between locations such as Japan and Korea for example, and countries where labour costs are low such as India and Indonesia.  “It may be worth investing heavily in a technological solution in somewhere like Tokyo or Singapore to reduce labor costs; but in India or Indonesia, the equation is different, and different solutions will be appropriate,” he says.

Yet that’s not deterring retailers as technology advances rapidly and the big players within the space keep a close eye on what their competitors are doing. Indeed, there’s still a long way to go in refining their unmanned stores to get more targeted and sophisticated to better suit consumer needs, Hawkey says.

And despite the rise of automation, there’s still a place for human touch. As key technologies like facial recognition, product recognition, and unmanned checkout mature, “the challenge will be more about the user experience,” Hawkey says.

“We’ll have to answer questions like, ‘What does the consumer want retail to be?  At which stages of the retail experience do they need help, where would they like people rather than machines, and what keeps them engaged and gets them to come back?’” says Hawkey.

Unmanned stores may become a more common sight around the world in years to come but people will still feature heavily in creating a successful shopping experience – even if it’s more behind the scenes than on the shop floor.