Will unmanned stores take off in China?

A worker installs an air conditioner at a BingoBox unmanned store, one of a dozen under trial operation in China. Photo: Handout

Over the past month, various stories about the eye-catching rollout of Tao Cafe in Hangzhou, an unmanned store created and operated by e-commerce giant Alibaba, have been doing rounds in China, putting spotlight on unmanned shops in the country's circle of venture investment.

Besides Alibaba, an array of Chinese startups have also marched into the race to build cashier-free shops, with BingoBox and F5 Future Store taking the pole position to receive investments of more than 130 million yuan from several well-known venture capitalists.

Convenience is a notable characteristic of unmanned shops. For most cashier-free stores in China, entrance is unlocked by the use of mobile phone apps, with shoppers being able to leave after scanning products for payment. Meanwhile, unmanned stores provide more profits than fully staffed ones considering the fact that labor costs can be largely cut due to self-service shopping process.

Analysts said that the widespread use of mobile payment tools, the real name registration for social media users and the application of technologies like facial recognition would make the rapid rollout of unmanned stores across China a reality, as demand for automated shopping is growing in the populous country.

However, how far the idea of unmanned store will go in China remains to be seen especially after Jack Ma, executive chairman of Alibaba, denied at a recent Internet merchants conference speculations that his company will popularize the business model of Tao Cafe across China. Alibaba's goal of launching the unmanned store is to remind other Chinese retailers that they can do better with the help of smart technologies, Ma said at the conference.

After Tao Cafe made its debut in Hangzhou, some Internet users left their comments saying "the popularization of the unmanned store will lead to a loss of job opportunities."

On the prospects of investment return, some venture capitalists are not sanguine about the future of unmanned shops.

Mao Shengbo, a co-partner of Shanghai-based Panda Capital, said that the unmanned store does not meet the requirement of venture capitalists who normally prefer to invest in projects that will have a huge market scale in a short time.

On the current stage, unmanned store is more like vending machine given that the former will take a long time to realize purely automated shopping. Currently, there are a few assistants at Tao Cafe to make sure that customers understand the shopping process.

Experts said that the development of smart technologies that can be applied to unmanned stores remains at a nascent stage and that the operators of unmanned shops should deliberate on problems including target customers, development orientation, pricing strategy and location selection.

"Not every shop can be operated without staff. Compared with supermarkets, it is easier for small shops to become staff-free stores," Chen Haiquan, a professor at the School of Management of Jinan University, said.

In July, a BingoBox unmanned store in Shanghai was forced to suspend operation after a heatwave melted snacks, reducing user experience. The Shanghai store resumed operation after additional air-conditioners were installed.

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