Online and Offline Worlds Merge in China

From mobile payment apps to facial recognition, Chinese retailers are pushing innovation.

June 17, 2019

LONDON–Matthew Brennan, managing director, China Channel, shared several case studies offering insight into the Chinese convenience retail market at the NACS Convenience Summit Europe, held June 5–6 in London, in a session dubbed “The New Retail.”

The market is changing quickly, and the boundaries between offline shopping and online shopping are disappearing. “There’s a lot of experimentation,” Brennan said.

Two huge conglomerates dominate the digital landscape in China: Alibaba Group, the e-commerce giant, and Tencent, the online games, social media and payments giant. “They’ve got their fingers in all different pies,” Brennan said. “They’re everywhere,” including holding investments in traditional brick-and-mortar retailers.

In explaining what “New Retail” looks like in China, Brennan quoted the chief technology officer of Hema Supermarkets: “The essence behind new retail is to apply the idea and technology of the internet to restructure people, products, and place in an all-around way—from the place of origin to the hands of consumers.”

Hema’s goal is to drive offline customers to shop online. Only about 40% of its sales are in-store, while 60% are online—people who’ve been to the store and order at home. The main target is to get to 85% of customers shopping online.

The company’s Freshippo store is a food offer plus experience center plus fulfillment center. Brennan called it “a poster child for what new retail means.” In-store, consumers place their orders, scan their purchases and pay for them via the Hema phone app. “They’re using the store as almost like user acquisition for their app to drive online traffic, to drive online sales,” Brennan said. “Really, they don’t want you in the store,” he said.

McDonald’s is a case study in digitalizing the customer experience in China. Customers can order via their phones and pay with the WeChat Pay app.

“About 40 minutes after I’ve bought my Coke,” Brennan said, “they send me a customer service survey. If I do complete that I get a [QR code] coupon. I can store it directly in my WeChat app or share it with my friend.”

A new wave moving fast in China is facial recognition technology. KFC customers can place a food order at a kiosk and pay using facial recognition technology.

Fast home delivery is now the industry standard in cities. Live within 3 kilometers (1.9 miles) of a store or restaurant, and customers can expect to receive their order in 30 minutes guaranteed.

QR codes are widely used in China—and credit cards and cash aren’t. At unmanned stores such as luckin coffee and BingoBox, customers use their smartphones to scan QR codes, verify their purchases and pay via apps. At Walmart China, shoppers scan item QR codes with their phones, pay and then show a clerk their QR code receipt. “Abuse of the system is very low,” Brennan said. 

Brennan left attendees with a glimpse of the future in which retailers have dashboards full of data on consumer behaviors as they shop in brick-and-mortar stores—discerning their age, gender, mood, time they appeared in the store and the last time they visited. Live in-store heat maps and cameras hidden in shelving follow shoppers as they browse, recording which items catch their interest. “We’ve had this for years and years for online. Now we’re having it for offline,” Brennan said.

The NACS Convenience Summit Europe is a three-day international event that features thought leadership from European and global speakers, expert-guided retail tours and opportunities to build strategic relationships with leading retailers around the globe. Mark your calendars for the 2020 NACS Convenience Summit Europe in Berlin, Germany, June 2–4.