Nowadays it is actually boring to say traditional retail is on a downward spiral, as everyone knows it. But if we talk about retail innovation in progress in examples, then we might sound exhilarating.
Case 1. Wumart:
-ESL(Electronic Shelf Label)
In April, 2017, Wumart, a leading Chinese retail company, has implemented ESL (electronic shelf label) to replace all paper tags in its 48 supermarkets across the east region of China. It is actually a gradual process as it tested this idea with a local company Hanshow back in 2014. This is no small investment for Wumart because each ELS costs about RMB100 (USD14.5). According to Wumart, every supermarket is about 6,000 square meters and installed more than 20,000 electronic labels, which would amount to approximate RMB96 million in total for 48 of them. This explains why very scanty supermarkets in China are adopting ESL. The technology applied online&offline real-time pricing synchronization management to ensure price transparency & efficiency while reducing manual labor costs.
But the downside is the storm of offline store closures has been sweeping the country. It is just getting harder and harder to attract crowds into the supermarket. Younger generations in China prefer online grocery shopping, or simply do not cook and heavily rely on online ordering for a take-out meal. If the supermarket model in China is dying, will the money spent on ESL be equivalent to throw money into the water?
Sometimes innovation is also about kissing the cheek of a startup. So Wumart made an alliance with a local startup “Dmall”. Dmall is an online grocery app delivering the goods to customer door within 2 hours by leveraging the partnership with different supermarkets. It is said Wumart is opening its CRM, ERP, IT, logistic system to Dmall, in order to achieve seamless integration of online and offline experience for its customers. For instance, now if a customer visits a Wumart supermarket offline, he can just pay through Dmall app to skip the queuing line at the checkout counter. Dmall claims to have over 18 million registered users in Beijing city alone (The population size of Beijing is about 30 million) and already boosted Wumart’s sale growth by 30%.
But the reality is critics said Dmall is acting more like a bluffing startup, constantly boasting about its USD100 million Pre-A fundraising without working on a sustainable business model. In fact currently, Wumart is probably the only supermarket partnership Dmall has maintained. Though some other supermarkets did try to work on a pilot project with Dmall, they eventually called it off. They were disappointed with overall sales performance; even though there was an uplift during the initial phase, it was only because of the effect of a big discount giveaway Dmall offered to its users.
Case 2: ChowTaiSeng:
ChowTaiSeng, China’s prestigious jewelry brand, is launching its smart store experiment with the help from Alibaba. Inside the store, it erects a 2 meters high big LED screen called “magic mirror”. It is said that by using facial recognition technology, the screen can identify the face of VIP customers, display their purchase history, and most importantly, allow them virtual fitting all the jewelry products, buy online by tapping the mirror if they prefer.
For a long time, many brands would like to understand how their online customers differ from offline customers. So the magic mirror here is supposedly connecting the dots. Nevertheless, some experts are skeptical of this move. ChowTaiSeng is now pivoting to a franchise model，though it has over 2000 physical stores under its name national wide. In 2016, only 39% of its revenue came from the direct sale which, btw, is dwindling year by year, and about 7.83% out of 39% attributed to e-commerce. Jewelry products are expensive and require much longer time for purchase decision. Offline visits are often inevitable. So once your customers walk into the store, what is the point of motivating them back to virtual fitting and online shopping, especially there is often no crowds in a jewelry store, excepting adding a little technology fun in the store?
Though we noticed the latest trend in magic mirror technology, i.e. a startup called “Memomi” is implementing interactive virtual fitting room in Neiman Marcus, which enables the mirror image to be photographed or recorded in 360-degree views so that it can be sent to friends via email or social media, it is perhaps more relevant for product categories like apparel or cosmetics.
Yes we know traditional retailers are truly troubled and need digital transformation; otherwise, they would not be able to survive the retail bloodbath. We firmly believe new technology should be the backbone here to help. However, the last thing we want to see is desperate times taking desperate “innovation”, which would not necessarily lead to a fruitful outcome in the long run.
Author: Cecilia Wu