In Beijing, where e-commerce growth is slowing, the future appears bright for new retail supermarkets – or physical grocery stores that focus on data-driven user experiences while integrating online and offline channels.
As online markets become increasingly saturated, domestic e-commerce giants are exploring brick-and-mortar options to increase customers and grow profits – and this may lead new retail supermarkets to rise as the next ‘disruptor’ in retail. In the same way that Amazon transformed the grocery industry in the US, China’s most competitive players in this emerging space are starting to reshape consumer habits in Beijing – and other cities around the country.
In the last half of 2017, new retail supermarkets entered Beijing with five Alibaba ‘Hema Supermarket’ stores and two Tencent-backed Yonghui ‘Super Species’ stores. Concentrated in densely populated suburban locations, these openings were closely followed by Suning’s ‘Su Fresh’ new retail supermarket and JD.com’s ‘7Fresh’ brand.
Drawing people into physical stores with live crab and lobster – and other treasures from the sea unavailable at ordinary grocery stores – these new retail supermarkets are all about the experience. Customers can have their “catch of the day” prepared on-site for them to eat in-store. Cafes and food stations are also present, enhancing the experience to keep shoppers around longer.
In an effort to fully integrate online and offline channels, customers are encouraged to return for more – online. Seafood orders and other ‘fresh’ items, including meat, dairy, and produce – along with daily essentials – can all be delivered to customers within designated delivery zones in 30 minutes. Considering that an estimated 90 per cent of the fresh food market in China remains offline, online growth prospects in this largely untapped area are promising.
And with technology, data, smart retail, mobile payments, and logistics networks at their fingertips, China’s internet giants are well-poised to rule the new retail supermarket arena. For example, Hema Supermarket exclusively gives Alipay users the convenience of going cashless, while Super Species allows mobile users to skip queues as they scan-and-go.
As Chinese web giants extend the retail war onto the new retail supermarket battlefield, we can expect the market to grow quickly. Alibaba is set to open several more Hema Supermarket locations in Beijing – and enter its central areas – by end-2018. JD.com is also planning to cover the city with multiple new locations, while Tencent and Yonghui are considering investing in Carrefour’s China arm to expand their physical presence in the market.
Prime shopping malls surrounded by huge residential populations with high spending power will be key upgrade targets for the most competitive new retail supermarket players fighting for market share. Mall landlords will welcome these tenants as their high sales per sqm – already estimated to be three to five times higher than traditional supermarkets – serve as a new source of rental growth.
Fast development of this rising sector may also encourage more traditional grocery chains like Beijing’s Wu-Mart to join the new retail supermarket race. The true disruption might just start there, if the ‘disruptors’ push new retail concepts into other industries entrenched within the physical space.
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