China Consumer

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Teething trouble for the next generation of shops

Rong-Guang-w

Miss Fresh founder: Xu Xiaohui

The biggest myth about China’s new unmanned stores is that they don’t require any people to operate.

Take a recent case from Tianjin, where personnel from two ‘automated retail’ companies were fighting over a space in a local mall.

A team from Miss Fresh turned up to impersonate the staff of their key rival Xiao E, telling the mall they no longer wanted to rent the space.

Miss Fresh employees then pulled out Xiao E’s shelves and fridges – stocked with food and beverages – and sent in another team to put in their own ‘smart’ shelves.

According to Xiao E’s chief executive Rong Guang, it wasn’t the first time that Miss Fresh has removed their equipment – behaviour that he charitably dubbed as “unfair competition”.

Rivalries in China’s unmanned store sector are heating up as companies battle to seize market share. And as examples from other industries have shown, intense competition can lead to crazy behaviour – think of the dispute between two Hebei construction firms in 2016 which led to a bulldozer battle on the streets of Xingtang, or the recent videos showing Ele.me food deliverymen shouting “Kill Meituan, Crush Didi, Ele.me is fighting with you” (Meituan and Didi are Ele.me’s rivals in the delivery sector).

A quick search of video sharing sites shows how frequently couriers from Ele.me and Meituan are getting into confrontations as they collect food from the same restaurants and race against each other on delivery times. In one clip posted in February Ele.me employees tried to storm a neighbourhood base of Meituan in Fujian. The two sides – looking like gangs in their brightly coloured uniforms – kicked and punched each other.

“What makes you think you have the right to deliver in this area?” shouts one of the men.

Unmanned shops have been calmer by comparison – although still not without their issues.

Various retailers are piling into the sector – a bit like in the frenetic early days of bike-sharing. JD.com, Suning and SF Express are opening or investing in outlets, as are the two biggest tech giants Alibaba and Tencent (which has a stake in Miss Fresh). But industry insiders anticipate that many of the players will drop out as the market matures (as was the case in bike-sharing, now dominated by Mobike and Ofo).

Secondly the technology for the retail outlets is, as yet, still a little clunky. Many of the unmanned stores are little more convenient to use than a regular shop. You choose your items, you scan them, and you pay via a mobile app payment.

The holy grail of being able to walk into shop, take items and leave, as Amazon Go claims to be offering in the US, is still some way off. Stores that do allow something similar have to limit the flow of customers to one at a time because the facial recognition technology can’t handle multiple visitors.

Then there is the issue of how to get out of the shop if you don’t buy anything. One South China Morning Post correspondent got stuck inside a BingoBox store in Shanghai because the company hadn’t provided the QR code needed to exit without making a purchase (see WiC 371 for our first mention of BingoBox).

Another challenge is restocking the shops. They are often very small – sometimes just shelves and a fridge – so they require regular refills.

And then there is the issue of so-called ‘moral loss’ – people not paying or underpaying. According to recent Xinhua reports this amounts to an equivalent of about 7% of monthly sales.

“The threshold to entering this industry is low, but the real difficulty lies in refining operations after scaling up,” Xinhua quoted a professor from the School of Economics and Business Administration at Chongqing University as saying.

Clearly, the sector still has to find its feet. But there has already been a round of closures at some of the outlets this year. Xingbianli has closed all of its outlets in third- and fourth-tier cities, Xinhua added. And Miss Fresh is reported to have laid off some of its staff too.


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