JD’s funky supermarket, can it beat out Alibaba’s Hema?

Back in June 2017, Amazon purchased the high-end grocery chain Whole Foods at a price tag of almost USD 14 billion, the biggest acquisition so far in Amazon history. Alibaba heard this news and decided it had to work on a similar shopping spree. So, in November, it pumped USD 2.9 billion,  into China’s top hypermarket operator SunArt Group, its biggest investment deal in 2017. Aha, Tencent and JD no longer could sit still, damn it, they got to buy something as well. Soon in December, Tencent chipped in 5% stakes in another leading supermarket chain Yonghui in which JD is already an investor. 

 

So one day, we woke up and suddenly noticed the astrological alignment for e-commerce giants doing supermarket business. 

  • In 2018 Amazon is dropping major hints that it is ready to dominate the fresh grocery business
  • Alibaba already opened 22 Hema supermarkets in 2017, and now is on an expansionary path of 2,000 stores in the next five years
  • JD’s first offline supermarket officially debut in Beijing at the end of 2017, called “7Fresh”

 

But if we look at the relatively low online FMCG penetration rate in the US and China, perhaps their conspiracy kind of strategies should not surprise us at all. Because it is one tough yet highly lucrative territory for them to crack into. 

 

 

A while ago, we just wrote about Alibaba’s aggressiveness in the supermarket sector in the form of Hema (see link). Now JD’s 4000 square meters flagship store offers the same services as Alibaba’s Hema. You want:

 

-discount seafood?

-foodcourt?

-personalized shopping recommendation?

-big data analytics?

Yes, all checked. JD’s 7Fresh does it all!

How about matching Hema’s fulfillment center ability: 30 minutes delivery inside 3-kilometer radius?

JD snorted, “oh come on we JD can perform much better than Alibaba; we are famous for our logistics; therefore 30 minutes delivery covering 5-kilometer!”

 

In addition, JD’s 7Fresh even tried to add extra digital perks inside instore, for instance:

 

Big LED screen to display the place origin of the fruit product (versus Hema’s using app to scan QR code to obtain product information)

It is said JD, Walmart, IBM are collaborating on the blockchain technology to develop a standards-based method of collecting data about the origin, safety, and authenticity of food in real time.

 

Smart shopping carts which would not only follow the shoppers around, eliminating the need for pushing but also have the capability to guide the shoppers to their desired display isles.

However, 7Fresh was overly crowded during the opening and smart shopping cart could not be a much of use. After all how could you use smart shopping cart under such congested environment?

 

Automated check-out device: including Wechat pay, facial recognition payment, of course definitely excluding Alipay

But most customers visiting 7Fresh still prefer manual check out. What can you say? The old school still seems to prevail.

 

It is said the location of JD’s 7Fresh store, including the future ones, would be strategically chosen to be in the proximity of Alibaba’s Hema. It is so clear that Alibaba and JD are preparing their supermarket fight head-on. Though Alibaba’s Hema made one step ahead, it does not mean that JD is in any inferior positioning. In fact, JD has more experience in launching offline stores than Alibaba,  especially in the consumer electronics category in second-tier cities in China. Aside from the supermarket sector, Alibaba and JD are also ferociously competing on the front of transforming mum and pop shops or simply building unmanned convenience stores etc. The battle in the supermarket only adds fuel to the fire for the two as no bigger winner can be picked at this stage for this “NEW RETAIL OFFLINE RACE”.

 

Author: Cecilia Wu