NRF: What’s the next step for omnichannel grocery?
At a Sunday morning presentation at the NRF Big Show 2019, Yi Hou, VP of Alibaba and CEO of Freshippo (known as Hema in China), said omnichannel in the U.S. has too many silos dividing digital strategies. He argued that online and offline selling isn’t integrated enough for the next level of “new retail.”
The term was a reference to a statement made in 2017 by Jack Ma, executive chairman of Alibaba. In a shareholder letter, Mr. Ma wrote, “E-commerce is rapidly evolving into ‘New Retail.’ When we focus on meeting the individual needs of each customer, the boundaries between offline and online business disappear.”
Mr. Hou said this new approach is best represented in China by Freshippo, which has quickly grown to more than 100 digitally-operated stores.
Like AmazonGo, Freshippo relies heavily on the shopper’s mobile phone to connect online and offline. At the store, shoppers open their apps and scan items to see their ingredients, origin and, in some cases, ratings and reviews. With access to past purchases and browsing history, the app provides personalized suggestions as well. Supported by facial recognition, Alipay enables pay through the phone.
A big difference from AmazonGo is that each Freshippo acts like a full distribution center. Pickers roam the aisles filling online orders. Bags are carried on conveyor belts along each store’s ceiling to the packing room for final delivery. The in-store warehouse supports delivery in less than 30 minutes within a 1.9 mile radius.
Mr. Hou said that the convenience of online buying and speedy delivery leads to 60 percent of Freshippo’s revenues coming from online sales. In some stores, online is as high as 75 percent.
But Mr. Hou said stores remain essential because shoppers visiting Freshippo locations “gain more confidence” to shop online. An emphasis on fresh foods (including a special range of items with one-day shelf-life), discovery (40 percent of products are imported) and diverse food court options support the in-store experience.
At a keynote session afterwards, Rodney McMullen, CEO of Kroger, which is testing some data-driven stores driven by Microsoft’s cloud platform Azure, estimated that the grocery industry is likely in the “second inning” as far as evolving e-commerce into “an experience that really makes the customers’ lives easier.”
Asked about the future of retail, Mr. McMullen said shoppers will want a variety of solutions. He said, “We don’t think it will be physical. We don’t think it will be digital. It will be ‘I have this problem and I want to solve it.’ Is the easiest way to buy it online? Is the easiest way to have someone deliver it? Is the easiest way to pick it up? Or do I want to shop the old-fashioned way?”
DISCUSSION QUESTONS: Would a concept such as the Freshippo (Hema) grocery concept from Alibaba work in the U.S.? Where do you see U.S. grocery stores falling short in delivering on omnichannel expectations?