A global battleground between the world’s giant tech companies is forming and some of the fronts may be surprising. Not least, that of the humble corner shop, or convenience store. In the ‘West’ Amazon have made the first move from online retail giant into the ‘bricks and mortar’ groceries sector through their pilot ‘Amazon Go’ store in Seattle.
For now only one is operational but reports suggest as many as another six may open their doors in Seattle and Los Angeles before the end of the year. The pilot store uses the latest technology in the world to automate the shopping and check out process.
Computer vision, deep learning algorithms and sensor fusion are involved in optimising the shopping experience without the need for human cashiers. Supply chain and inventory are also tied into the tech for a smooth top-to-bottom optimisation process.
However, while Amazon have made a start, it is further east in China that the tech revolution is already starting to shape the corner shop and supermarket of the future in a more noticeable way. It’s also a very different model. While Amazon and Walmart approach looks like it will be one in which they focus on their own stores, the Chinese tech giants are instead selling a tech-based franchise model to existing retail operations.
In the past year Alibaba has given a tech make-over to around 1 million small, corner shop-style grocery stores across China. They offer a ‘retail as a service’ package that includes a tech-focused refit and minimum orders of around $1500 from Alibaba’s ‘Tmall’ wholesaler platform. The cost for a small convenience store to become a ‘Tmall’ franchise is minimal and involves a renovation and membership fee adding up to less than the equivalent of $10,000.
Around 100 supermarkets are also already in the programme. Payments processing is also provided through the affiliate Alipay app. No share in the business or revenues is involved.
The result is a shinier little shop running on AI-backed apps and heat sensors to track foot traffic. Owners are reportedly very happy with a minimum outlay that feedback suggests very quickly increases the turnover of franchised locations by 30%.
The model is reminiscent of the business model of Amazon’s Kindle. The technology is provided at a knock-down price on the presumption profits will then be generated by ongoing cash flows from customers locked into the ecosystem.
In the case of Amazon’s Kindle, this is users then buying e-books through Amazon. In the Alibaba model (Chinese rivals Tencent and JD.com are adopting a similar approach), ongoing cash flow is secured by franchise owners then buying all their stock through the Tmall platform.
And think of the data! With a million + retailers already tied into to Alibaba’s technology ‘operating system’ and wholesaler model, the company has huge volumes of retail data already flowing into its servers. This big data will be analysed using deep learning AI algorithms, leading to optimisations and efficiencies for both franchise owners and Alibaba.
The fully-fitted, at great expense, approach Amazon is taking may look fancier and employ the more advanced technology. However, the ‘lean’ approach being taken in the East means that Alibaba, Tencent and others will far more quickly build huge ‘smart retail’ empires generating huge amounts of data.
With the tech giants of the East acting rapidly and at scale, Amazon, Walmart and the other tech giants of the West may be in danger of being left behind in this race. A million little corner shops all around China are becoming the petri-dishes of the future of bricks and mortar retail.