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What US Grocers Could Learn From Alibaba’s Connected Supermarket Experience

What US Grocers Could Learn From Alibaba’s Connected Supermarket Experience

June 21, 2021 at 06:37PM
by PYMNTS

When it comes to integrating eCommerce into the brick-and-mortar grocery experience, China may be pulling ahead. While the United States is getting a new digitally-enabled Amazon grocery store every few months, reports from China show the high tech supermarket chain skyrocketing to prominence. Digitally native grocer Alibaba is growing the footprint of its supermarket chain Freshippo (called Hema in China), which features a range of technology-enhanced features and highly tailored store modes.

These supermarkets serve as combined in-store shopping sites and mobile app order fulfillment centers. Wired reports that the chain finished 2020 with almost 250 locations, and that number is only going up. The chain brings in groceries from suppliers around the globe, enabled by Alibaba’s “powerful logistics system,” the company explains, and stores also feature fulfillment centers for online orders, delivered within 30 minutes to stores within a radius of 3 kilometers (a little under 2 miles). Plus, the Freshippo app offers shoppers in-depth information about product sourcing and provides the option to have the item cooked at the supermarket’s in-store, robot-staffed restaurant.

According to one June 2020 report, the chain was only the sixth biggest grocery chain in the country, but this does not account for the supermarket’s rapid growth — Freshippo first opened its doors in 2016, while its immediate forerunner has been around since 1991, and its immediate successor since 1994.

The supermarket chain is part of Alibaba’s “New Retail” vision. As the company’s founder and then-chairman Jack Ma told shareholders in a letter in 2016, “Pure e-commerce will be reduced to a traditional business and replaced by the concept of New Retail — the integration of online, offline, logistics and data across a single value chain.”

Under the Freshippo banner, Alibaba also offers a lower-priced grocery as well as a ready-to-eat, grab-and-go meal store. Plus, in 2017, the company opened its first membership-only store to compete with the American membership stores, Costco and Walmart’s Sam’s Club, in Shanghai, and the company plans to open 10 more such locations across regions throughout 2021.

“When China’s physical retail industry is facing pressure, more opportunities also appear,” said Cai Ronghong, head of these membership stores, told Global Times. “In recent years, Chinese consumers have been surrounded by online offerings, leaving some medium- to high-end consumers dissatisfied with the cheap and efficient shopping mode … They want to gain a sense of worth and a sense of ceremony during shopping.”

While across United States retailers, nearly everything that Freshippo offers is available, the Chinese chain is unique in the one-stop-shop approach. American customers can order groceries online, most often either from digitally native eGrocers with no physical stores or from brick-and-mortar stores that fulfill orders from their stores, which were not designed around eCommerce. Additionally, few U.S. grocery stores have integrated restaurant dining into the in-store experience (and vice versa), overlooking the opportunity to seize on the trend towards a connected “Eat” ecosystem, one in which consumers increasingly come to view their food spending as one category encompassing both food at home and food away from home. By integrating these previously distinct experiences, Freshippo may indeed be pointing the way toward the “New Retail.”

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