A visit to HEMA Supermarket- New Retail in China

On January 5, many of our AGLA team members returned back to Hangzhou after enjoying their holidays in their respective home countries. In fact, the AGLA Class rung into the New Year with a Big Data and New Retail experience in the first week of 2018. On Day 1 during classroom training, we heard from Chief Data Scientist of Alibaba Cloud, Dr. Wanli Min, who spoke about the exciting things happening with Big Data and Artificial Intelligence. On Day 2, we travelled to Shanghai to Hema’s HQ to tour the office and experience one of our New Retail Supermarkets.

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Hand-picking our lobster for lunch (Quintus, Jeff, Alex, Diego & Babette)

Learning about Data Technology

Alibaba today has evolved from being simply an e-commerce company to a “Data Technology” company. China is undergoing a transformation fueled by big data and we are using this information to determine how we can make insightful impacts to the various industries. For example, the E-commerce landscape in China accounts for only 15% of the retail landscape, which suggests that there is a greater opportunity for retailers to further grow.

With over 500 million active users on Tmall’s App and brands from over 63 countries, a lot of computation power is needed. In results, we require extensive knowledge graphs to not only determine a way to customize a user’s shopping experience, but it can help us to provide relevant suggestions based on their historical shopping experience.

Furthermore, we dove into New Retail for the second half of our journey. New Retail is one of Alibaba’s Five New Strategy and represents a new model of online and offline commerce.

The New Retail strategy aims to address the need for anticipating consumer behavior. The Chinese consumers are constantly on their smart phones and they want to have instant, full access purchasing during any hour of the day. As a result, the lines between online and offline are often blurred.

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AGLA Class 2 visiting Hema Supermarket in Shanghai

Visiting Hema supermarket in Shanghai

To address the evolution of our consumers, Alibaba made its first move by investing into China’s largest offline electronics retailer Suning a few years back. This was the first test ground on which the company was able to innovate with Omni channel models. Hema recently made headlines as it is one of Alibaba’s solution in creating a better customer experience and address the changing needs of the younger generation while serving the rest of the shoppers in China.

To get the full experience, we drove to Shanghai in the morning of Day 2 and visited one of 13 Hema supermarkets. When entering the store, it is clear that they allow for an interactive experience such as the large fresh seafood section where customers can hand-pick their lobsters. Behind that you pass by fresh food sections offering ready-made sushi and various food offerings to be taken as grab and go items. In fact, they even have a draft beer station! The whole time we were at Hema, there were many people having food despite it being in the afternoon. It is only when you get to the end of the store that you start to see traditional supermarket shelving and freezers with food which consumers can shop and bring home.

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AGLA Class 2 dining at Hema supermarket

During our time there, there were two things that differs Hema from the usual supermarkets. Hanging from the ceiling are belts which have bags sliding back and forth and disappearing into the back of the store. In addition, we saw staff holding large green bags and putting items from the shelves into the bags prior to it being lifted up to the belts on the ceiling. The bags disappearing to the back is in fact where the fulfillment center is located. Customers can order from the Hema APP and get their groceries delivered within 30 minutes.

The second thing that quickly stood out were the electronic labels of all items. These are awesome as they are a purely digitalized experience where the pricing and tagging of items are all done from the Computers at the office. In contrast to traditional methods, staff would have to change price tags overnight. Instead, they can now be updated in seconds through live update.

What we learned and observed

China’s cities currently experience three major trends. First, people are getting richer and expect better experiences and services. They don’t like crowded spaces and value the convenience of having consumption readily available. Second, young people live and thrive in the mobile word. They spend more and more time online and don’t enjoy spending time in physical stores. And lastly, a lot of people – especially young people – tend to live by themselves. Family sizes are thus getting smaller, meaning that there is a larger need for smaller sized unit availability and packaging.

For Hema, to address these three main trends, they are sourcing from farms locally in Shanghai while shipping seafood from around the world to fulfill the demand. They are also looking to make the experience convenient and simple. They have options from Hema Daily Fresh, Hema’s private label, Hema Taste, a collaboration with chefs to provide quick ready meals for consumer’s enjoyment, to Hema Plus, an option for bulk items that can be purchase such as napkins or cereal.

In summary, data analytics plays a crucial part in Hema’s ecosystem as they can help to control the flow of orders (when it is not rush hour, orders can be combined when delivery is needed) and it can help to allow live data of stock on the shelves.

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Alexander Yan is a member of AGLA Class 2, a Canadian from Vancouver, BC, Canada, he is currently serving a role on the Tmall Partners team at Tmall Global helping to connect Global merchants and brands with Tmall Partners. When not at work, you can find Alex finding new culinary gems in various parts of China.

Quintus Dienst is a member of AGLA Class 2 and also serves as Alibaba’s tallest employee. He currently lives in Hangzhou and Munich and is a passionate coffee addict. When he is not working as Business Development Manager at Alibaba Cloud, you can find him exploring beautiful Hangzhou with his wife Angela.

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