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How Amazon and Whole Foods Can Learn from China - Field Notes from China’s Retail Revolution

November 6, 2017

This is Part II of a 4-part series on the GGV team and portfolio companies’ recent trip to China. Read Part I (about unmanned and shared stores) here.

By Robin Li, and Celia Chen

As Amazon expands into the grocery business with the acquisition of Whole Foods, it might be able to learn a lesson from China, where the way people shop for groceries has already been fundamentally transformed by technology.

Recently Alibaba and Yonghui (one of the largest traditional supermarket chains in China) both opened futuristic offline supermarket chains that reimagine how grocery shopping is done.

“US retailers and e-tailers can benefit from tracking the development of their Chinese counterparts, many of which are demonstrating creative integration of technology and commerce,” said Hans Tung, managing partner at GGV Capital.

GGV recently led a China trip for retail- and consumer-related portfolio executives in the US (including executives at IbottaLivelyYamibuy, and Reebonz) to visit a dozen or so shops that exemplify “New Retail,” a field in which GGV is actively investing.

Here are notes, photos, and videos from our trip that provide a peek into Hema and Super Species, two offline supermarkets that have been making lots of news in China lately.

1.   Hema (盒马鲜生)

What it is: Alibaba’s offline grocery store

How it works: Supermarket + fulfilment center (30-minute grocery delivery within 3-kilometer radius) + food court; pay via Hema app only

How many there are: 20 across China

Where you can find it: Beijing, Shanghai, Hangzhou, Guiyang, Shenzhen, Ningbo

Hema – Alibaba’s offline grocery supermarket – is the reason that Jack Ma might be ahead of Jeff Bezos in grocery ambitions.

Named after the Chinese word for “hippo,” Hema is a supermarket, a fulfillment center, and a food court. Hema delivers groceries inside a 3-kilometer radius within 30 minutes. In the store, you can see employees hustling around assembling orders, which are placed on a conveyor belt that goes straight into the delivery vehicles.

Watch this video to see Hema delivery in action:

Besides a wide range of attractively displayed grocery products (many are organic) that reminded us of Whole Foods, Hema also features various dining stations serving freshly prepared seafood, hot pot, soup, and dim sum, among other items.

There are now 20 Hema stores across China. Alibaba, a GGV portfolio company, is planning to add many more. Many think that the convenience of having a Hema nearby might drive up the prices of surrounding real estate.

Hema, Alibaba's offline supermarket and grocery fulfillment center

Right: Long beans, durians, farm eggs and salad greens on sale at Hema. Customers can retrieve further product information by scanning the bar code of each item inside the Hema app. The app records purchase histories and can make personal recommendations accordingly.

Seafood cooked on the spot at Hema, Alibaba's supermarket

At the seafood station, you can pick a lobster and have it cooked on the spot. This is a very popular option among Chinese customers, who increasingly value the freshness and trustworthiness of their food.

Hema calls itself a “Membership Store” – only users of the Hema app can shop there. It does not accept any payment method other than through the Hema app, which is connected to Alipay. This applies to both the supermarket and the food courts. In the store, you can see posters everywhere displaying the free Wifi network (so that people can download the app in the store).

At first we had difficulty downloading the app, and asked the cashier if we could pay with cash. Her face became grim: “It will be quite complicated. We really don’t recommend it.” We had to bring all our items to a special counter at a far end of the store. The staff there was clearly not prepared to take cash, and took out a money bag.

Thankfully, my App Store finally loaded and we were able to pay via the Hema app. Everyone sighed in relief.

A digital receipt popped up on my screen instantly after the purchase:

Receipt from Hema, Alibaba's offline supermarket

2. Super Species (超级物种)

What it is: Yonghui’s new supermarket that integrates shopping and dining

How it works: Choose your food to be cooked on the spot; mobile payment; 30-minute delivery within 3-mile radius

How many there are: 8 across China

Where you can find it: Beijing, Nanjing, Shenzhen, Xiamen, Fujian

Owned by Yonghui (one of China's largest supermarket chains), Super Species is another supermarket that integrates shopping and dining experiences. This store in Beijing just opened last month.

Just like Hema, Super Species features various stations, each serving a different type of food, including Boston lobster, salmon, beef, fruits, and bread, among others (Click herefor a video on what the inside of a Super Species store looks like). Food can be purchased, cooked, and consumed on the spot. Customers pay with their smartphones through Alipay, WeChat Pay, or the Yonghui app. The average order value is RMB100 ($15) on weekdays and RMB250 ($40) on weekends.

Super Species, Yonghui's supermarket

Right: Smoking and cash are both not accepted here.

Food at Super Species, Yonghui's supermarket

We ordered steak at the beef station (which was cooked to order on the spot) as well as rice, karaage, and tempura from the Japanese food station.

Steak at Super Species

Super Species also promises a 30-minute delivery time within 3 kilometers.

Here are some reactions from our portfolio CEOs on the trip:

  • Bryan Leach, Founder and CEO of Ibotta:

I cannot recall a time as an entrepreneur when I've learned so much in such a short period of time. Thanks to GGV's hospitality, I was also able to connect with many of the leaders in GGV's Chinese portfolio companies, and this materially advanced my thinking about how we go to market in the US, not to mention our international strategy. Having this kind of access to GGV's network provided my company with significant competitive advantages that are hard to find in Silicon Valley. The experience clearly illustrated why GGV's cross-border perspective helps it to consistently secure outsized investment returns and why the best companies look to work with Hans, Robin, and the others at GGV.  

  • Michelle Cordeiro Grant, Founder and CEO of Lively:

This trip to China opened my eyes to the tremendous opportunity we have as a global community to learn from one another. Learning from a country that drives 11x the amount of mobile payments than the US demonstrates how far we still have to go in creating efficiency, speed and autonomy in the transaction and executional portion of retail. By doing so we can put so much more effort, focus and manpower on what really matters - consumer experience, community and brand. Data and technology will be the fuel for building the new world of retail.

  • Alex Zhou, Founder and CEO of Yamibuy:

I know competition in China is brutal, so Chinese startups need to provide better service, better customer experience and new business models. But after our visit to startups office, I realized Chinese startups have brutal competition on the talent level as well. Companies need to establish a good company culture/value to keep their employees and attract new talent.

  • Samuel Lim, Co-founder and CEO of Reebonz:

The biggest takeaway was to see all these unique and exciting technology companies founded in China that have an ambition to grow global right from the very start.