During the past year, the Asian eCommerce giant Alibaba has set its objective on developing the “new retail”. It is the company’s strategy of transforming grocery shopping, creating a truly omnichannel experience for customers. An experience that is able to amalgamate the best of both online and offline worlds. In this article we take a tour through one of its stores to better understand what omnichannel means for FMCG industry.
Both globally and at a regional level, FMCG industry is one of the final frontiers for eCommerce since still the vast majority of sales are done offline. This is mainly because consumers like to be able to personally choose, touch and smell their own products. Also, because delivery of heavy, bulky products is usually very expensive and delivery windows may present a risk for products that perish. However, having to make this purchases themselves is not on the list of what consumers like to do most, either. That is why Hema, Alibaba’s supermarker focused on generating an experience that does not exist elsewhere around the world and that addresses the main barriers that online and offline sales have.
An example of on/offline fusion
Ever since its launch in 2015, the objective of Alibaba founder Jack Ma was not to avoid the creation of physical stores but rather to find the way to gather the reasons why shoppers decide to buy in each channel to create an experience that has it all.
To be able to enjoy shopping at Hema, customers need to have the Hema app on their smartphones. The app is directly connected with the Aliplay or Taobao account so it is linked with their personal data. It also registers every transaction with the objective of improving future experiences with personalized recommendations, an important trend in online shopping. Each SKU in store has a code that when scanned shows the complete info of the product, from price to nutritional facts if applicable.
3 types of shopping experiences
The store created by Jack Ma offers consumers the possibility to buy online, instore or a mix of both. For the offline option, customers enter the store, make their selection and take their purchase home after checking out quickly via a self-checkout using the app. That’s why lines are never too long. Online shopping is offered via app and 30-minute delivery is available. And then customers can choose to mix both types of experiences. That is, they go to the store, choose the products they want to buy and finalize their purchase via the app. Then a Hema associate will deliver groceries to their homes within half an hour. Delivery services are available for customers within a 3 km radius from the store. That is why Hema stores are strategically located in highly populated cities with purchasing power.
In order to fulfill deliveries quickly, Hema stores also work as distribution centers and their associates are in charge of preparing each purchase. After selecting the products along the store in a reusable container that is digitally labeled with all the delivery info, the container is placed in a conveyor that runs along the roof of the store all the way to the delivery center. The app is also in charge of creating the most efficient delivery routes to be able to comply with the 30-minute window.
Enjoy eating while you buy
To enhance even more shopping experience, Hema dedicated a good portion of their store layout to additional services so that customers can, for example, choose products they wish to eat so that a Hema associate cooks it for them while consumers finish their purchase.
Hema stands out for the freshness of everything that is sold instore. For example, in seafood, a category that is greatly appreciated among the Asian community, when scanning the code, you can even see when it was caught!
An aggressive expansion plan
As for today, Hema has 60 stores and an opening plan for the next years. They have already served more than 10 million consumers and their objective is to reach 2000 stores throughout the Chinese territory. Their conversion rate is around 35% and purchase frequency 4.5 times a month. Hema’s growth potential is highly promising!
The key for Hema’s success lies on their ability to bring together in one shopping experience the reasons why shoppers choose to buy online (like convenience, no lines, time saving) and offline (like being able to touch products). Stores are beautifully designed and provide shoppers with convenience and great assortment at the same time. It is definitely the future of retailing!