Since 2017 I have been researching and writing about new retail in China. I have spent many weeks visiting and trying out various concepts in China and have taken Dutch retailers on study tours to show them how these concepts work. You can imagine my excitement when news reached me that Chinese e-tailer JD.com was opening a new retail concept in my own backyard in The Netherlands. In a series of articles, I am sharing my experiences and thoughts about JD’s Ochama stores.
In the past 3 articles I have evaluated Ochama’s introduction campaign, pick-up and home delivery ordering process and web, app & store, uncovering many flaws in the shop’s offerings. In this last article I am wrapping up by evaluation the proposition that Ochama presents the consumer, comparing it to reality.
Let’s start by going back and have a look at the text from the Ochama commercial.
‘Once upon a time there was a very special store … where robots are your friends … and where you can really find everything. From big brands to small groceries. From new gadgets to timeless tableware. A shop where you can pick-up or have delivered to your home. Go for A-brands. Go for benefits. Go everything. Go Ochama. Become a member for free and always receive 10% shopping credits.’
Let’s unpack that.
… where robots are your friends …
Ochama’s robots are mentioned in both its consumer-facing communication and press releases. They are presented as a unique novelty that will attract and delight customers. The problem is the customer never really sees those robots.
Ochama basically has two types of robots. First, there’s the robots that move racks around in the Ochama warehouse, as can be seen in their promotional video. This logistical process, in which the racks move to the order picker instead of the other way around, is not unique to Ochama. Nevertheless, it is impressive to see, but since this takes place in the central warehouse, the customer will not catch any glimpse of this spectacle.
The second robot is a mechanical arm in the pick-up stores (see this segment of the video). At the stores you will spot the circular racks behind the conveyor belts and pick-up stations, but the robot arms that finds crate(s) containing your order are behind those racks, largely hidden from view. As a result, the whole experience feels rather underwhelming after all the promotional talk about high-tech and how the shop’s robot friends will help you.
But even if you do catch a glimpse of the industrial robot, this is a gimmick that quickly wears off, as I have seen many times in China. It is cool to have a robot make your coffee, juice, or ice cream but I noticed that after a couple of weeks, few people seem to care anymore. The same goes for Alibaba’s Robot He restaurants in a handful of Hema supermarkets (link In Dutch). Alibaba had big plans with Robot He but seems to have never rolled them out beyond two locations. Pesonally, the experience itself did not call for repeat visits when I tried it out in 2018.
JD.com, Ochama’s mother company, is known for its cutting-edge logistical processes and services. And without a doubt their highly automated warehouse is impressive, as is the idea of replacing store staff by having a robot collect a customer’s crates from a storage space. But what Ochama does is basically tearing down the wall between front-end (a store) and back-end (a warehouse) and present it as something unique for the customer.
I fail to see the lasting advantage of pulling back this veil on ‘the wizard of Oz’. Having worked in various distribution centres for a few years, the whole experience of picking up your order feels much more like walking into a warehouse and doing part of the staffs’ work (having to transfer the products into bags yourself) than something that’s highly customer friendly. As such, the showroom in the stores (see the third article) seems like an attempt to make the place feel a bit like you are walking into a store instead of a warehouse.
… and where you can really find everything … Go everything. Go Ochama.
In a press release Ochama wrote: ’The pioneering retail innovator offers both food and non-food products, a complete range that is available almost nowhere else in this way. At Ochama, customers can get everything at once, via click and pick.’ Also, in the press launch event Ochama’s COO mentioned that ‘already you can find practically everything you need with us.’
What makes Ochama relatively unique is that they offer food and non-food, whereas consumers are used to buying this in separate stores. I am not so sure that this is an advantage that the consumer is looking for. Shopping for electronic gadgets or winter jackets while you are also ordering groceries does not feel all that natural (yet). Maybe it takes time for consumer behaviour to change, but I wonder how long this will stay a USP for Ochama now that e-tailers like Amazon are also starting to cover cross-category deliveries with initiatives like Amazon Fresh.
But most importantly, the ‘everything’ claim in Ochama’s proposition is a bit problematic. It creates the perception of a very deep and wide assortment. Ochama currently has just 7.000 SKUs in its assortment, half of which Ochama considers grocery store products. Leading supermarket chain Albert Heijn has almost 30.000 SKUs in its online assortment; 8,5 times as much. The chances of not finding what you are looking for are substantial. When placing an order, I quickly found that many of the products I would normally have home-delivered by Albert Heijn were not available.
What’s more, the non-food assortment seems rather random and largely driven by Chinese sourcing from manufacturers like Xiaomi, as well as some low-priced clothing items. Part of the assortment consists of products of Ochama X private label. But being able to buy Ochama X minced meat, Ochama X shoarma, an Ochama X air purifier and Ochama X men’s pyjama’s feels a bit awkward to me.
Another thing I found remarkable was that despite the limited number of SKUs, many products often went out of stock. Also, sometimes a product shows a label saying that only 5 or 6 are left. Either they are trying to trick me into quickly buying (like booking.com does with ‘only 2 rooms left’) or Ochama has serious inventory control issues.
The assortment of Ochama is supposed to change weekly or monthly based on algorithms that analyse the behaviour of members. Maybe it will take some time for Ochama to figure out what people want.
… A shop where you can pick-up or have delivered to your home …
In a press release Ochama wrote: ‘[Customers] can pick up their online ordered groceries and non-food items at the nearest Pick-up Shop, or simply have them delivered to their home.’
As we have seen, reality turns out to be frustratingly different. Fresh, chilled and refrigerated food cannot be home delivered (see the second part in this series). Meanwhile, ‘bulky goods’ cannot be picked up, probably because they don’t fit in the blue crates and therefore mess up the logistical process.
In the press launch event Ochama’s COO mentioned that Ochama is ‘the first shop in Europe’ where in one delivery you can get ‘a piece of cheese and a new vacuum cleaner’ home-delivered or can pick them up in the store. He could not have picked a less fortunate combination. Vacuum cleaners are bulky goods that can only be home-delivered, while cheese is a fresh item that can only be picked up in the store, as can be seen in this image.
In the press event, the COO explains how he would expect planner-type consumers to use the store most. But wouldn’t planner-type consumers like myself prefer home delivery at a specific time instead? As we’ve seen with my home-delivered order, planning for a specific next-day timeslot is not possible with Ochama.
… Go for benefits … become a member for free and always receive 10% shopping credits …
As many apps in China, Ochama works with memberships. This basically means that you have to register in an app and place your orders there (membership is free the first year and who knows if you will ever need to pay). Without a doubt this app usage leads to lots of data collection, but as such it is not particularly different from other e-retailer apps and websites in which you need to log in. This requirement to use the app does however mean that there is no other way to buy from Ochama. As we’ve seen in the third article, even though the pick-up store has a showroom you won’t be able to buy anything there or add something to the order you are picking up.
Another typical Chinese conversion strategy is handing coupons out to new customers. Where Chinese apps normally display these as virtual versions of traditional red envelopes (hong bao, link in Dutch) they are vouchers in the Ochama app. I got a voucher for signing up to their mailing list as an early bird and another one for registering in the app, €10 and €15 respectively, to be used on 2 orders. On top of this, you get 10% of your current order as points that can be used for discounts on your next order(s). This creates the feeling of having some money left in the app and stimulates repeat purchase, especially since points expire within 12 months. Since you can only spend credits in multiples of 100 you will always have some credits left.
I do wonder if communicating this as ‘10% discount on your orders’, as Ochama does in certain communications, is actually correct and allowed according to legislation on sales promotions…
Besides the inconsistencies in the commercial, there are a few more promises that Ochama made:
You can pick up your order the same day in one of our innovative Pick-up Shops or have it delivered to your home at a time that suits you. (source)
Yes, you can pick-up an order in the shop the same day, as long as you order before 11 AM (see second article) and as long as it’s not a bulky product. If ordering before 11 AM the order can be collected at a pick-up store after 3 PM. If you order before 10 PM you can pick up the next day after 8 AM (or 10 AM on Sundays). Note that when ordering frozen products, they might spend many hours in a Styrofoam cool box before you pick them up (theoretically up to 12 hours).
With home delivery, you cannot pick a time that suits you. Your order will be delivered sometime between 8 AM and 10 PM the next day, but only if you order before 6 PM. Also, as mentioned before, you can’t have fresh, chilled and frozen products delivered.
‘a full range of A-brand products at a bargain price’ (source)
Ochama promises to give the 10% cost savings from efficient logistics (robots) back to the consumer through bargain prices. Distrifood compared the total price of a shopping list between Ochama and three leading Dutch supermarket chains and indeed found the former to be 16% cheaper (note though that all three supermarkets offer home-delivery but Ochama would not be able to home-deliver half of the products on the list).
But this does not always seem to be the case. Dutch newspaper Algemeen Dagblad found that while an A brand peanut butter was 60 cents cheaper with Ochama, a Philips vacuum cleaner was €10 – €30 more expensive than in other web shops. Indeed, Ochama can be downright expensive for specific products. In the app I went to check out my favourite beer brand, Kasteel. A bottle of Kasteel Xtra beer, €1,55 and €1,65 at two other web shops, is sold by Ochama for double the price at 3,09. And one can of beer from the same brand is priced at €12,35. I assume the latter is an error since the price also appears for 4-packs of comparable products.
The Ochama X brand sometimes seems to be quite pricey too. A 250-gram scented candle will set you back €12,75. A comparable cancel from A brand Bolsius sells for €3,19.
Ochama does sometimes have buy-one-get-two offers, but those are also quite common with other supermarkets. Unlike with many supermarkets or drug stores though, buy-one-get-two promotions do not allow combining multiple products within the same brand/category (e.g. two different flavours of the same products); you need to buy two identical SKUs.
Many retail experts are sceptical about the Ochama concept and – as you must have noticed – I personally also have my doubts, especially after doing two test orders (see the second article). I do not really see what problem Ochama is trying to solve or consumer need they are fulfilling. Home delivery by a supermarket is more convenient. When choosing well, the delivery costs will also be lower than Ochama’s €4 (I normally have my Albert Heijn order delivered for €2,50 and when buying certain products in bulk I do not even pay any delivery costs). But most importantly, you can get fresh, chilled, and frozen goods delivered, a service Ochama does not offer.
Some people prefer pick-up because they do not have to stay home. I assume these are the same people that would use Albert Heijn pick-up instead of home delivery by that supermarket. But with currently one pick-up location in big cities like Amsterdam and Rotterdam, what are the chances of the Ochama store being conveniently located on your commuting route? And having to park, go into the store, wait 2 minutes for your order and having to repack everything does not seem like the most convenient pick-up service either. If I would use pick-up, I think I would prefer quickly picking up my crates at Albert Heijn, which would also offer me more than 8 times more choice in assortment.
Not in China
One retail expert that doubts the potential success of Ochama was quoted (link in Dutch) saying ‘It might be a success in Asia (..) I wonder if this will be a big success [in The Netherlands]’. The thing is, I do not think this business model exists in Asia, at least not in JD.com’s country of origin, China. China is way beyond this business model. In China, especially in larger cities, you can have your groceries and many non-food items delivered to your home within an hour!
If we look at JD.com’s different business models in China, we can identify the following:
- 7Fresh (七鲜): (link in Dutch) a supermarket following the same concept as Alibaba’s Hema (Freshippo) where you can shop in the store or order through an app and have it delivered to your home in 30-60 minutes.
- JD Daojia (link in Dutch), part of Da Da Group, offers marketplaces for third party retailers. You can pick a store, buy their food or non-food products, and have Da Da’s couriers deliver it to you within an hour.
- JD.com (link in Dutch): JD’s main website, mostly non-food. In the bigger cities many items can be delivered within half a day.
- JD Super (link in Dutch): an online supermarket, you order through the app and have it delivered the next day.
The only pick-up scenarios you’ll see in China are connected to community group buying initiatives (link in Dutch), where goods can be picked up with the next day at a store or group leader near your home. With so many convenient options, a concept like Ochama would actually be a step back for the Chinese.
My biggest surprise is that in this world of flash delivery couriers and small retailers struggling with digitization, JD.com did not roll out JD Daojia – which would solve problems of both consumers and retailers – but went for a concept that does not seem to solve any real problem.
‘Amazing omnichannel’ or O-chabuduo-ma?
The name Ochama derives from Amazing and Omnichannel. From my experience I would say that Ochama is neither Amazing nor Omnichannel. In my book, omnichannel means being able to buy things in multiple/all channels. But you cannot buy anything in the Ochama shops. You can only order through the app/website. My local supermarket, Albert Heijn, has a store where I can buy things. But I can also order in the app/website and have it delivered or pick it up. That’s multi/omnichannel.
If you strip it down, Ochama simply is an e-tailer with pick-up and delivery, but both with serious limitations. I tried really hard to be impressed by Ochama, but in its current incarnation there is too many flaws, too many teething problems, too large a gap between what it promises and what Ochama delivers. The whole implementation feels rushed, from the e-mail campaigns to the logistical partner that cannot provide cold chain.
Driven by the necessity of high speed-to-market, in China you often come across new retail concepts that are lacking, that just do not seem to be fully ready for launch yet. In China there is a word for this: chabuduo (差不多) (link in Dutch). It means ‘not lacking much’ as in ‘just good enough to be acceptable’. But I am afraid that chabuduo will not be good enough for a Dutch consumer. Here, you only have one chance to get it right and an O-chabuduo-ma will not do.
Our biggest fans
Fortunately, despite my criticism and the sector expert’s scepticism, there are some people that are very positive about Ochama. The first positive reviews and are appearing on Google, LinkedIn, and other sites. But often the praise is sung by people that seem to be somehow involved in the Ochama concept.
In the press launch event Ochama’s COO told us that JD.com is Ochama’s biggest fan. And unlike some other claims, that could well be true… In fact, I have a sneaking suspicion that Ochama’s biggest fans are indeed its own staff. Although for some I can’t be 100% sure since they are presenting themselves with hidden last names on LinkedIn as if they had something to hide…
To read the other articles in this series, click here.