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Unmanned Convenience Shelves May Not Live Up to the Hype
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Unmanned Convenience Shelves May Not Live Up to the Hype

China's Investors Have Created A Rat Race In New Retail - But Is It Another Bubble?

Cui Sunya
Phoenix Weekly, 2017
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Editorial Rating

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Recommendation

Amazon has garnered a lot of press with its “unmanned supermarket.” In China, many companies are experimenting with “unmanned retail.” Companies have opened unmanned convenience stores, smart vending machines and unmanned shelves. In 2017, unmanned smart shelves in particular became the breakout trend. In contrast to smart vending machines – which have more sophisticated inventory control and payment options – unmanned shelves are simply open shelves and refrigerators. A QR code on the shelf will lead you to a products page where you pick the items you want and pay using WeChat Wallet. Then you simply grab what you want. Because they are easy to set up, they were popping up everywhere in China. Start-ups set up shelves and refrigerators inside offices and on the street, stacking them with snacks and drinks you would usually find at the convenience store down the street. These stores offer more variety than traditional snack-focused vending machines and more convenience than a trip to the local supermarket – which of course makes them popular. But with so many players in the market and so much hype, it’s hard to get a real grasp of the business landscape. Phoenix Weekly columnist Cui Sunya has compiled advice from a collection of start-up founders and investors to shed some light on the less glamorous side of the business. getAbstract recommends this eye-opening read to investors, entrepreneurs and anyone who’s being following the careful rollout of Amazon Go.

Summary

“Unmanned smart shelves” are an emerging retail trend. The industry, which had a small handful of players in 2015, had more than 50 competing companies by the end of 2017, backed by more than ¥2 billion ($315.64 million) in total. Cheetah Mobile entered the market in 2017, boasting 5,000 locations just a month after opening. Alibaba Group joined the industry as well.

The allure of this new business is undeniable, as it allows companies to serve merchandise at the point of need at a fraction of the costs of running employee-operated stores. But the unmanned store business may go the way of the offline-to-online (O2O), group-buying and sharing economy industries– all bubbles that have gone bust. The smart-shelf business is likely to follow suit for six reasons:

  1. Low threshold to entry – Entering the smart-shelf business is simple. Get some shelves and products and negotiate sales channels, and boom, you’re in. Margins are slim, and to stay ahead, you must attract backing funds, secure key store locations and offer exclusivity.
  2. Merchandise is standardized and lacks differentiation – Despite many...

About the Author

Cui Sunya is an op-ed columnist at Phoenix Weekly  and covers all things business, finance and tech.

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