In the first part of this two-part article that aims to ‘dehype’ some of the PR around New Retail, I shared some of my attempts to visit and try out gadgets that Alibaba has been promoting as part of their New Retail initiatives. I found that many ‘magic mirrors’, ‘cloud shelves’ and other gimmicks were often not even switched on by the staff. In some cases, I found upon subsequent visits that they had even been removed. In this second article I will look at a few other widely discussed New Retail concepts and how real life often differs from the picture that is painted in PR.
Nobody home at JD Home
One of the store concepts I used to include in my study tours was JD Home. The idea behind these showroom-like shops, the first of which was opened in the summer of 2017, is that e-tailer JD.com analyses the online buying preferences of people in a certain area and puts popular products on display in that location. The theory behind this online-goes-offline concept is that consumers might be reluctant to buy certain kinds of products online without having touched and tried them first. This seems to be especially true for more technologically advanced products. Strange enough though, the JD Home store I visited on several occasions also has a shelf of instant noodles and cookies. After trying out the products shoppers can purchase them in the store and take them home or have them delivered later.
The shop in Beijing’s Chaoyang, which has been part of my program for a while, was closed when I visited it on my regular checking rounds. It also seemed eerily empty compared to my previous visits. I decided to return later that day and found the staff packing boxes. I checked with the manager if they were indeed permanently closing, which he confirmed. ‘But you can visit one of the three other JD Home stores in Beijing’, he told me. When I looked up the Chinese name for JD Home on Dianping, I found 16 addresses of JD Home stores in the capital and surrounding area. If the store owner was right, most of these must have already shut down. I decided not to bother finding out which three had still survived. Probably a good decision because one and a half month later I found that this specific store was still listed on the JD Home website as one of eleven stores in Beijing. I wonder how many of the 171 stores listed on that website still exist. It also makes me wonder if the closing of these stores is part of the lay-offs and budget cuts that JD has recently been going through. Or maybe, even though these stores are run through a franchise model, this form of New Retail simply hasn’t been all that successful.
Manned unmanned stores
Another area in which JD seems to be struggling is unmanned stores. Now, the term ‘unmanned store’ is never completely correct since there is always staff linked to these stores. Think of logistical supplies, customer service, etc. The CEO of Bingobox, one of the unmanned store concepts in China, has told me that he can manage 40 stores with 5 people. Normally these people should be relatively invisible to the shoppers; you should not encounter clerks or cashiers in the unmanned stores. In some cases, like at the Bingobox I visited in Beijing’s Zhongguancun area, this is indeed the case. But at the JD X unmanned stores I often found a remarkable number of employees present. After observing the stores for a while, the reason became clear. Despite the extensive explanation of the way these shops work on the outer walls, many consumers do not yet seem to understand how to gain access. They try to enter with their usual QR code in WeChat, not realising it is necessary to first register in a separate JD app or JD X-mini program in WeChat. Often the store clerks have to explain how the stores should be used. On one of my visits to a JD X store, I even found myself trying to explain a desperate Chinese couple how to enter the store. The need for additional staff is probably temporary, until the consumer is used to these types of concepts. But the implementation is definitely not as smooth as you might believe based on the press releases.
The choice of locations for these unmanned stores doesn’t always seem to be well thought out. In Beijing, I have visited two JD X unmanned stores on several locations. One of them was located on the ground floor of an office building in the Guomao area. This one seemed to be doing relatively well; whenever I visit it there are always be some office workers getting snacks. The other one, located in Huanyu Plaza shopping mall, seemed to draw much less traffic. Upon my second visit it was inaccessible and had a sign on the window claiming it was temporarily closed because of technical problems.
Temporarily closed for maintenance of the equipment. Thank you for your understanding.
When I visited Huanyu Plaza again a few months later, the JD X shop was gone. That didn’t really surprise me since the store had been located right next to a Yonghui Superspecies supermarket. Unlike the JD X store in the office building, where no other convenient stores were present, the JD X store at Huanyu Plaza had to compete with a neighbour that offered a much larger assortment.
Another ‘unmanned store’ in Shanghai is the Zhida unmanned bookstore, opened in April 2018. Theoretically you get access to the store by scanning a QR code in Alibaba’s Alipay payment app at the entrance. At the same time, facial recognition links your face to your Alipay account. When you take any books and leave the shop products are recognised by a scanning aisle. After another facial recognition scan the payment amount is automatically deducted from your Alipay account and you can leave the bookstore. Well … that’s how the store will be presented in press releases. No mention will be made about the lady that is sitting at the entrance explaining how people can get in and the second person that is inside the store glued to her phone and not all that interested in helping a customer that’s trying to locate a specific book (me). So maybe in a way this should indeed be considered an unmanned store?
A well-known Alibaba campaign from 2017 concerns the convenience store Weijun in the company’s hometown of Hangzhou. The shop had been an example of how Alibaba turned a messy and old-fashioned pop-and-mom shops into a bright and shiny professional convenience store. As part of the campaign to promote their ‘integrated retail’ approach Alibaba widely circulated a set of ‘before and after’ photographs of the store and made a promotional video about the shop’s facelift. The new shop was bright, organised and came with an impressive LED signage. Having read about the shop in January 2018 I decided to pay it a visit when I was in Hangzhou last April.
I had located the store using the Chinese name, Baidu maps and the address that can be seen in the pictures below. When I arrived, I first thought I’d made a mistake. I walked back to verify if I was in the right street and I closely compared the pictures from the press releases to what I saw in front of me. I noted that the concrete planters and larger street number 418 were no longer present, but the sign with street number 420 still was. Yes, the store in the location on the map was indeed the famed Tmall convenience store; it had the same name. But there was no LED screen and inside the shop was messier than the one in the video and pictures. With a little effort you could still see the bright Tmall Weijun store from the PR messages through the clutter on the counter, stacked up boxes and the outdated Singles Day advertising in the shop. Since that shop’s facelift it seems to have fallen victim to the ‘organised chaos’ that is so common in China’s pop-and-mom shops.