The sight of shopping bags being whipped above your head on conveyor belts is the first clue that Freshippo isn’t your average supermarket.
Pickers in pale blue polo shirts scour shelves, scanning barcodes with smartphones to locate the precise brand of apples, sesame oil or spice mix that match online orders. Once found, items are dropped into a bag, hooked onto the automated conveyor system and whisked up and off to the back of the shop, where delivery bikes await.
There are now more than 200 Freshippo supermarkets like this up and running in China, all serving as both ultra-high-tech supermarkets and state-of-the-art fulfillment centres (within a three kilometre radius, all online orders arrive within 30 minutes of when a shopper clicks “buy”). They are all owned and operated by e-commerce behemoth Alibaba as part of its plan to take the lead on what it calls “New Retail”. And as supermarkets in the west emerge from the effects of the pandemic, Freshippo may well provide a blueprint for how they’ll reimagine their own stores too.
For people who would rather shop in-store, there are all the items you might expect on your weekly shop – counters packed with fresh produce, samples of new products handed out on trays by smiling members of staff, and a selection of meat, fish and seafood – but plenty you wouldn’t. Pick up a lobster, scan the barcode, and the supermarket app instantly provides a rundown on where it came from, when it was sourced and even a digital certificate proving it was organically farmed. That same app will ask if you’d like to have it cooked at the in-store restaurant, where robots deliver dishes, and tablets fixed at the end of each table allow customers to browse films or TV shows as they wait. Or, if shoppers prefer to cook at home, it might recommend a bottle of white wine in aisle 5 that pairs perfectly with seafood. When they’re ready to leave, customers can pay for it all on their way out using facial recognition.
The concept of New Retail was coined by Alibaba co-founder Jack Ma a little over five years ago. Though Alibaba controls some 80 per cent of China’s $3.5 trillion e-commerce market, it still wanted to master bricks and mortar – and acquire a bigger share of grocery sales. “Books are easy, computers are easy, but perishable goods are not so simple,” says Jeffrey Towson, research head at Asia Tech Strategy. “It was the last sector to master.” And Alibaba wanted to be the one to do it.
The first Freshippo store opened in Shanghai in 2016. By 2018, Alibaba had 64 stores in 14 cities. And by the end of 2020, there were 246. Only two years after opening that first store, online sales of groceries in China had risen to 32.5 per cent – in no small part thanks to this rapid rollout, with each Freshippo store processing “tens of thousands” of orders per day, says Guo Xulin, chief of staff at Alibaba’s Freshippo Business Group, and “over 60 per cent of Freshippo sales coming from online”.
“Our vision for the future of retail was never digital versus physical, but to build the future infrastructure of commerce, one that seamlessly integrates online and offline,” he adds.
The company hasn’t just tested this concept with supermarkets. There are now high-tech convenience stores, breakfast pick-up stations and even shopping malls, says Xulin. But it’s arguably in the grocery sector that Alibaba has had the most transformative effect. Which is why many of its competitors are now following suit.
By the end of 2021, rival retailer JD plans to have 49 of its own SEVEN FRESH supermarkets operating in China. JD has tweaked the name it gives the strategy – it calls it “Unbounded Retail” – but that’s where the differences end.
All SEVEN FRESH stores are equipped with blockchain technology, which enables products to be traced through the supply chain. “If customers scan a QR code on some of the products including Chagan lake fish, imported milk and turbot, they can see all information from breeding to transportation,” says head of SEVEN FRESH Helson Zheng. That information also pops up on digital “Magic Mirrors” poised over the produce.
In some branches, there are robotic shopping carts that follow customers using a tracking wristband and automatically scan items as they’re loaded into the basket. JD’s existing data strategy is also to deliver push notifications or SMS messages on the smartphones of its more than 400 million ecommerce customers as they wander around the store. They might be offered a discount on the brand of toilet roll they bulk buy online, or get a suggestion to top-up on those razors they ordered a month ago.
And, as with Freshippo, all SEVEN FRESH stores double up as fulfillment centres. Doing so has allowed JD to overcome a big sticking point when it comes to the profitability of selling groceries online – the resource required to pick items, pack them into bags and transport them to customers. By combining both online and in-store inventory under one roof, and speeding things up with digital technologies that track items and process online orders, it has “reduced cost and increased efficiency”. Each employee can fulfil more than 120 orders per day, says Zheng, and the speed at which shelves are replenished has improved by 30 per cent, too.
As part of its own plans to expand, in December JD also teamed up with traditional supermarket chain Jiawanjia, in Hebei province, equipping the offline store with all its own digital technologies. It sees this as the fastest way to grow, rather than owning and operating all of its own stores, says Zheng. “This empowerment model is one of the most important expansion methods for SEVEN FRESH going forward,” he says.
Both Alibaba and JD say that the pandemic has proved a major boost for business. At Freshippo stores that have been up and running for more than a year there was “high double-digit” growth, says Xulin. “When Covid-19 first emerged, many communities were closed and consumers had no way to go brick-and-mortar stores for their regular fresh food shopping,” adds Zheng. “During this period, SEVEN FRESH’s performance significantly increased.”
And this is only a taste of what might be to come, Towson says. “Eventually, consumers won’t even know the difference between online and offline. You'll walk down the supermarket aisle, chatting to the AI assistant on your phone as it’s suggesting items. You’ll pick up the sneakers you ordered online earlier that day. You’ll stream a movie on the same platform as they cook your food in store. It'll all be one experience. This is just the first iteration and it’s pretty compelling.
“These stores are evolving rapidly,” he adds, “and the number-one goal is to transform the customer service experience such that all other supermarkets now appear obsolete.”
All this could be food for thought for UK supermarkets looking ahead to life beyond the pandemic. Lockdown more than doubled online grocery orders during 2020 and that growth looks set to continue. Which leaves traditional grocers with strategic decisions to make. How can they fulfil online orders while staying profitable? And how can they make better use of their sprawling bricks and mortar estates? It seems China and its unique brand of high tech supermarkets might have the answers.
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This article was originally published by WIRED UK
