Alibaba’s Futuristic Supermarket in China Is Light-Years Prior to the U.S. — and Shows Where Amazon WILL PROBABLY Take Whole Foods

With facial recognition payments and 30 minute online deliveries, this supermarket chain is about being ‘insanely convenient’ for the client.

This story originally appeared on Business Insider

By Harrison Jacobs

With a valuation over $500 billion, Chinese tech giant Alibaba is second and then Amazon in e-commerce. But it’s seeking the offline world to keep growing.

A long time before Amazon purchased Whole Foods for $13.7 billion, Alibaba was forging into physical retail with investments in supermarket SunArt, department store operator InTime, electronics seller Suning, and furniture store EasyHome, amongst others. Overall, Alibaba has spent $10 billion on traditional retailers since 2016.

The investments have aimed to greatly help the business develop its "New Retail" concept, a term coined by Alibaba founder Jack Ma to mean the fusion of physical retail and e-commerce.

At its core, it’s about rendering it insanely convenient to get the thing you need or want in any manner is the easiest for you – whether at the store, online, sent to your home, found at a nearby store location. By integrating online and offline, Alibaba thinks it could radically change customers’ shopping experiences for the better while boosting business because of its partners.

"Which means that the complete inventory and offer chain is one solution for whatever your preferences are. Whether or not [your purchases] are generated online or offline, it’ll be fulfilled in whatever may be the most efficient path to you," Jet Jing, President of Tmall, Alibaba’s brand-focused e-commerce platform, told Business Insider recently.

Nowhere may be the "New Retail" idea more on display than in Hema Xiansheng, Alibaba’s futuristic supermarket. Launched in 2015, Hema has expanded to 46 stores in 13 cities in China, with plans to start to 2,000 more branches within the next five years.

The new food-focused supermarket offers customers the opportunity to shop in-store or on its app, start to see the origins of the merchandise in the store, have food delivered free of charge or prepared for pickup within thirty minutes, and pay with facial recognition technology.

We recently visited a Hema branch in Shanghai to see what the business’s vision into the future of food shopping. One can’t help but believe Alibaba’s deep integration with Hema signals how Amazon will integrate Whole Foods later on.

Have a look inside.

There are over 40 Hema Xiansheng locations in China. The majority are located in high-end stores or mixed-used developments near where Chinese people both work and live. Core to Hema’s model is that it provides free 30-minute grocery deliveries to a 3-kilometer radius.

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The joke used to be that Chinese people prefer to live near good public schools, Liyan Chen, manager of international corporate affairs at Alibaba, told Business Insider. "The joke now in China is that they would like to live where in fact the Hemas are. Because they can get everything sent to them really easily."

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As a way to shop at Hema, you will need to download the app, which logs your entire purchases, saves your requirements and delivery address, and lets you pay with Alipay, Alibaba’s mobile payments provider. After shopping at Hema, you will have a personalized product page predicated on your requirements and purchases.

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The name Hema Xiansheng means "boxed/packaged freshness and liveliness" and can be a pun in Chinese for Mr. Hippo, hence the hippo mascot. Hema’s major feature is its ultra-fresh meat, veggies, fruit, and seafood.

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Freshness is a big deal in Chinese culture, particularly given how inconsistent it usually is at other supermarkets. There are two words for freshness in Mandarin, one for "crisp" fruits and vegetables, and another for freshly butchered meat and fish. There are many testing stations so customers can taste the freshness and sweetness of the produce in-store.

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All technologies aside, the primary draw of a Hema store is its expansive live seafood section. It’s like putting a normal seafood market in the center of Whole Foods. Except Hema’s is spotless and organized.

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There are rows and rows of fresh, live oysters, scallops, shrimp, prawns, lobsters, and fish. While Chinese have a tendency to like picking their own seafood, I opted to possess a Hema employee help me decide on a mixture of clams and scallops.

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I’ve no idea the type of crab this is – perhaps a Chinese hairy crab – nonetheless it looked tasty. I made a decision to buy that one, too.

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Some purchases happen through the app or through a cashier-less checkout counter, the seafood section still needs you to definitely weigh and price the merchandise. But one scan of a QR code on Alipay and I was ready.

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Furthermore to its traditional grocery items, Hema comes with an expansive prepared foods section. It’s similar to a high-end food court, with enough room to seat 100 people. Because Hema stores are often near office buildings, it’s an extremely popular lunch spot.

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There’s a Cantonese food counter that sells roast duck, pork, and other popular dishes.

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Gleam counter where one can bring your seafood once you buy it to own it cooked in several different styles. I made a decision to have the crab, scallops, shrimp, and clams that I purchased cooked by Hema.

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While I waited for my seafood to be cooked – it requires around 20 minutes – I wandered around the store. In comparison to a Whole Foods in america, it’s pretty small. Nonetheless it packs a huge amount of variety of products in to the shelves. Hema are able to get a smaller footprint.

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Because of Alibaba’s deep trove of data on consumers – the business had 515 million active consumers on its platforms in 2017 – in addition to the data collected by the Hema app, each Hema store can tailor its stock predicated on the spending habits of these who frequent the shop.

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The supermarket offers around 3,000 different products in each store, as the Hema app has over 50,000 items. Prices are synchronized between online and offline via electronic shelf labels. The purpose of the store, according to founder Hou Yi, is "to operate a vehicle offline customers to look online." 85% of sales in China still happen offline.

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While around 80% of the merchandise are packaged food and about 20% fresh products, a lot of the living area is dominated by fresh products and in-store dining.

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All items in the store have a barcode which can be scanned in the app to supply information regarding a product’s origin, the business behind the merchandise, cooking instructions, nutritional information, and pricing. Customers may also put in a product to an online order to be delivered at another time.

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China has already established a whole lot of food safety issues during the last twenty years. Hema’s transparency and guaranteed quality, reinforced by the knowledge on the app, is an enormous draw for Chinese consumers who’ve been burned over and over.

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Key to changing consumers’ mindsets around online purchasing is Hema’s ultrafast delivery, which promises grocery deliveries within 30 minutes for all those living within 3 kilometers. Some stores offer 30-minute delivery 24-hours a day.

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All around the store, you can view Hema employees searching through aisles and selecting products. When I was there, at 2 p.m. on a weekday, there were as much employees as customers in the store. Around 50% of a Hema store’s orders are online delivery. Some stores get right up to 70%. Hema’s founder is hoping to push that to 80% or 90%.

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Each Hema employee targets a specific section – dairy, meats, produce, etc – so they know where each product is and may move fast. The bags are color-coded for the section and tagged with a QR code corresponding to the web order.

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Sometimes you will see employees working together to locate a rare item. Each employee posesses scanner to allow them to add each item to the order immediately. After the order is complete, they hook the bag onto a conveyor belt that sends it to a distribution center in back.

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When you research, you see a great deal of bags traveling along these conveyor belts along the ceiling. It’s unobtrusive, but feels a bit like being in the factory. In the trunk, the bags automatically go in to the system where various areas of the order are combined into one bag and delivered for delivery.

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The complete process is crazy fast – ten minutes to pick the things, ten minutes to sort them in the back-end, and ten minutes for delivery. Within my hour roughly at the store, I saw lots of Hema employees sprinting to get orders completed.

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It could not look like a big deal to Americans, however the fact that produce is packaged and sealed is major for Chinese consumers. Most Chinese supermarkets, even Walmart, look more comparable to neighborhood markets, where cleanliness isn’t the most notable priority.

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The perfect scenario for Hema and Alibaba is a customer makes the store, buys an individual orange on the app, tastes it in the store, and decides to order a bulk delivery to his / her home for then or later. Later on, the client then trusts that the oranges at Hema are top quality and doesn’t hesitate to order more online.

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In the event that you stumbled upon a fruit, vegetable, or fish you’ve never seen before, you can immediately scan that and learn what it really is, nutritional information, and a variety of popular recipes for how exactly to cook it. It creates being adventurous in your shopping much less scary.

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Or you can just try among the products at many of the testing stations create around the store.

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As opposed to most American supermarkets, Hema is approximately making shopping so convenient you do not need to buy a whole lot (like Costco), nevertheless, you buy often.

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After about 20 minutes roughly, the seafood was ready. And, I must say, I traveled for per month in China which still may have been the very best seafood I had. It had been super fresh, perfectly springy and tender, and cooked in three completely different (and complicated) preparations. This is simply not your average supermarket takeout.

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While Hema can be an innovative concept, many analysts have questioned if the business can make money. The stores can be found in prime locations, this means high operating costs, and do not have sufficient locations to disseminate logistics costs, Bain & Co. partner Jason Ding told Forbes this past year.

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While Alibaba certainly gets the capital to purchase Hema until it gets big enough to be profitable, both companies maintain that, despite plans to grow to 2,000 stores in five years, desire to is not to build up an enormous grocery chain. "When the model is competent, it can be distributed to other traditional retailers to greatly help them transform in the digital age," Hou told Forbes this past year.

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It had been time to leave, however, not before taking a look at checkout. There are no cashiers, but several checkout kiosks where you must pay with Alipay. If you would like to pay with cash, you need to visit the service center on the proper. Hema and Alibaba want people to stay static in their app.

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Hema is pretty much a "prototype" for how Alibaba envisions retail later on, based on the company. You can imagine similar principles around convenience, delivery, simple purchase, and product information to get which range from electronics to clothing to furniture. For the reason that context, a store becomes the area to convince you to (or dissuade you from) purchasing one thing or another, instead of another chore to complete.

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Perhaps among the coolest -or creepiest, based on your views – features in the store may be the facial recognition payment. Because sales are associated with Alipay, the checkout can merely scan your face to verify your purchase. It’s near instantaneous. You devote your contact number after as an extra layer of security.

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As I walked through the store, all I possibly could think about was just what a tech company of Alibaba’s size could do if it had been handed the keys to an already existing major grocery chain.

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Which brings us back again to Amazon and Whole Foods. The technological advancements that Alibaba has taken to Hema – simple in-app ordering, ultra-fast delivery, price-matching, facial recognition payment, tailored stocking of shelves predicated on spending habits, etc – could easily be brought from Amazon to Whole Foods. And, for me, given Amazon’s obsession with efficiency, it’s a matter of when, not if.

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