New Retail and the Amazon of the East

Alibaba’s frictionless grocery store is years ahead of U.S. concepts
Photograph: Shutterstock

HANGZHOU, China — The exact name in English could be "Mr. Hippo" or "Fresh Hippo" in the United States, but in China it is called "Hema."

Hema is the frictionless grocery shopping experience courtesy of Hangzhou, China-based Alibaba—an e-commerce firm similar to Amazon—and it is years ahead of most retailers in terms of technology. “If you want to see the future of retail, go to China,” said Gray Taylor, executive director of c-store technology standards group Conexxus, Alexandria, Va., at the recent NACS State of the Industry Summit in Chicago.

Hema is an important facet of Alibaba’s overall strategy to transform shopping, which it calls New Retail. New Retail involves integrating online and offline shopping more closely by treating the two as parts of the same experience.

Alibaba has opened 150 Hema stores in 21 Chinese cities since the concept launched in 2015, according to a report from Chinese news source Caixin, and it continues to grow. Taylor said the stores double as warehouses with thousands of SKUs available for both in-person purchase and online delivery.

Any customer living within 3 kilometers, or less than 2 miles, of a Hema can place an order online with no extra charge and receive the package in about 30 minutes, said Taylor. Deliveries are made by contractors on electric-powered scooters. Shoppers can also pick items at the store themselves and have Hema’s delivery staff ferry the goods to their homes. Hema’s delivery is so popular that Alibaba’s YouTube video explaining its New Retail strategy claims that people factor their distance from a Hema location when deciding where to move in China.

New Retail’s goal is greater ease of use for customers, which is helped along by the mobile-centric payment infrastructure in China. Alipay, a payment app from Alibaba, is the primary payment method for Hema and many other Chinese stores. “Try using yuan at a convenience store. They don’t take it,” Taylor said, referring to the Chinese currency. Instead, the first time Taylor entered Hema, he allowed the grocery store to access his payment apps with a few clicks of a smartphone. With that, Hema has access to all his purchase history and other pertinent customer data.

Taylor pointed to the stores’ focus on data as another reason behind Hema’s growth. He said Hema’s IT operations are 100% self-written, API-based and rely on a self-checkout process augmented by artificial intelligence. For instance, customers can opt to check out using their faces to identify themselves on a touchscreen.

Alibaba’s grocery store is also driven by the in-store experience. Customers can buy live seafood at the seafood counters and have chefs prepare meals to eat then and there. Taylor was especially passionate when he described the innovation of putting barcodes on the live fish customers can select.

Hema has not progressed without incident, however. Caixin reported that Hema employees in a Shanghai location changed expiration dates on vegetables in November 2018 in order to claim they were a few days fresher. Hema then fired the general manager of the Shanghai stores and said it would investigate all its stores for similar practices.

Alibaba appears to be focused on growing Hema in China for now, but that does not mean retailers in the United States can avoid competing with similarly disruptive stores. Taylor was extremely confident that Amazon’s rumored grocery concept, first reported by The Wall Street Journal, will borrow many of Hema’s capabilities.

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