Despite that we have been talking about big data for so long, never have we seen a truly smart grocery store in the sight. Can you imagine entering a store specially designed for you and your community, with precisely the cinnamon flavor biscuit you love, and exactly the Spanish red wine that your parents prefer? That’s what I am going to share with you today——Tmall community store in China.
How it works
Alibaba, China’s biggest online retailer, aims to transform the operating model of thousands of local grocery stores. Armed with big data analysis and precise marketing, the local grocery stores will be specifically rebuilt upon storeowners’ conditions and local consumers’ preferences. For instance, Alibaba will decide upon product categories and quantities based on storeowners’ age and investment, store area and consumers’ portrait. Furthermore, the intelligent distribution system will track down sales and inventory of every products, make analysis and automatically adjust stock plan. More interestingly, you could even guess from the dog food from the store that your neighbor is a dog lover, or your neighbors are more in favor of Colgate toothpaste other than that of Crest! Wouldn’t that be fun!
How well it works
Junwei Store, a local grocery store in Hangzhou, China, has been operated by a couple for years.After first trial and renovation, things are completely different. As we can see from the picture below, the store used to coduct inventory management and accounting manually, with 6000 SKU, but nowadays with data-driven intelligent system, the store can withstand larger capacity of sales volume with fewer labor force.Statistics show that there is a sales increase of 45% and increase of 26% in consumer flow.
Fig 1: Old look of Junwei Store
Fig 2: New look of Junwei Store
Future outlook
In the long run, the whole-new Tmall community store will know more about you and your family member, and even prepare the Decathlon tent for your trip on next Monday( Who knows how it knows it!). Tmall community stores will also consider integrating whole business chain, including suppliers and superior distributor, so as to make data analysis more precise and stock supply more intelligent and efficient. All those big data analysis and whole-link analytical system are just gonna add more color and life to the convenient store in your community!
So in terms of new operating model for physical grocery store or convenient store in the future, do you have any other expectation? How can we make our shopping life more convenient and tailored to individual? What might be the new opportunity for e-commerce in terms of conjunction with local stores?
Hey Yu, thanks for sharing this interesting story! The digital transformation indeed has redefined the ways of people’s daily life. Besides one of the pros that make the shopping experiences much smoothly. I would like to raise a caution regarding privacy.
As you have mentioned, this process is realised upon analysing customers’ shopping patterns in which the huge amount of data is collected during every touch point during the shopping process. How to store these personal data sets appropriately and safely is critical for this type of groceries and Alibaba to think about. Personally, I do not want to share myself too much to the public, even to my kind and friendly neighbours. It is the case why I feel unsecured while looking through your post. Of course, my feeling only stands my attitude, and I believe that others embrace different degrees of the sense of security, either higher or lower than mine, but all of them looking forward to a convenient and secure shopping.
In general, I am quite curious about the new concept and would like to follow the story: how this type of groceries will be implemented on a large scale and what are people’s reactions in particular concerning the privacy issue.
Interesting post, I had never heard of Tmall before. Although I do think that using data will allow grocery stores to develop significantly in their product offering and cut down on inventory costs, I think the biggest move for the grocery industry stores is increased automation, and less personnel due to the relatively low profit margins in the industry. Taking the problems of the Ahold-Delhaize merger as an example, the differences in personnel costs paid by grocery store seems to be crucial to the competitive advantage it has. Where Ahold (Albert Heijn) has mostly teenagers who work for minimum wage, Delhaize has mostly elderly personnel protected by labor unions, making Ahold more profitable than Delhaize. Although it’s likely that grocery stores competing in each country will likely have similar personnel costs, I think automated checkout will continue to grow in grocery stores, cutting personnel costs significantly, and thereby increasing margins. I can imagine though that automated checkout isn’t as profitable in smaller community grocery stores, which Tmall focuses on, due to the lower volume of customers, which makes personalised shopping a better strategy.
Hi Roell! Thank you for sharing your insights and sorry for such a delayed reply! Yes, Tmall, the subsidiary of China’s biggest C2C website, Taobao, did open a unmanned grocery supermarket in China, the thrilling attempt, if succeeded, will surely save huge labor cost and win more competitive advantage than rivals. But the technique behind the scene, such as RFID and surveillance,still need to be further improved under running trial. Additionally, the costly technological investment initially might be hard to burden for some grocery owner. But just as you said, considering the labor costs, etc in such a fierce competition, automation can help beat rivals in the long haul if the sales volume reaches a certain threshold.