Vending Machines Flourish in China

Startups of unmanned retail locations have garnered billions from investors.

May 24, 2018

BEIJING – Startups with such names as Mr. Fresh and Xingbianli (Gorilla Convenience) have attracted investors from Sequoia, Walmart, Tencent Holdings and Alibaba Group Holding, which have poured in more than $1.7 billion for glorified vending machines, Bloomberg News reports. Inc. and Alibaba are focusing on unmanned retail stores, like Amazon Go, while others are catering to office buildings. Products include cooked food and fresh fruit, with purchases paid for by object and facial recognition and a smartphone app.

“It’s the way things are in the investment circle these days. People are all fighting to get a piece, to place a bet due to fear of missing out,” said Wang Hongtao, deputy secretary-general of the China Chain Store and Franchise Association. “[However], it’s quite challenging to win over the retail market just by relying on unmanned shelves.”

Investors poured $200 million into Mr. Fresh, a vending machine stepchild of online grocer Miss Fresh. Mr. Fresh is refining its business model with open shelves in office buildings. The most popular items include small boxes of U.S. cherries, peaches and lychee. “Technology is something we’re trying to improve on,” CEO Li Yang said. “It’s an entry point to retail, making it more convenient for consumers.”

“If you’re only selling non-perishable goods, you have no competitive advantage. Only fresh produce can be attractive, but that places a huge demand on fulfillment,” said Richard Peng, founder of Genesis Capital, which has invested in Mr. Fresh. Investors and startups like Mr. Fresh see value in refining the technology for unmanned retail or office kiosks. iResearch estimated that revenue from unmanned retail will rise twofold to $9.8 billion by the end of this decade.