When you look east, it’s not the technology that should inspire you, instead, think the people powering it.
The biggest reason for Jake and I to take this trip, beyond a joyous boondoggle, is pretty much every retailer we speak with is looking east for inspiration. And each time, the focus is often on the technology. As per usual, I’m coming away from it focusing on the people first.
That’s not to say technology isn’t important here, because the rapid adoption of it is a big piece of the puzzle. The ubiquity of smartphones and the amount of screen time is kinda frightening. It’s been put that Chinese companies (specifically the likes of Tencent, Alibaba, Baidu and ByteDance) think about themselves in the business of capturing consumer attention, not an e-commerce platform, payment company, game developer, search engine or social media business. Their role is to get people looking at their devices to be spending money. End of.
And to do that, they create a ton of great products and experiences using technology, yes. One glance in Shanghai and you’ll see this isn’t a mobile first city, it’s a mobile only city.
But so much of that tech is enabled by China’s other great asset, labour. And yes, while the cost of labour here has been rapidly increasing as the economy grows, it’s still pretty damn cheap.
One of the first businesses on our list to check out when we came here was Hema Fresh, Alibaba’s grocery store of the future. Literally every western retailer is looking at this because it’s a) owned by Alibaba and b) Hema have twisted the distribution model, doing home delivery from the store in the neighbourhood, rather than a distribution centre somewhere to customers in the vicinity of that store. So far so good.
I will never knock a big company taking time out to go look at how others do it differently so Jake and I went for a visit, and apart from the half dead fish in the tanks, it’s a pretty nice store with a load of good quality fresh produce as prices I imagine are very much suited to the middle class….think Whole Foods, Pusateris or Waitrose depending on your place of residence. Then you notice more than half the people in the store wearing light blue t-shirts, mostly picking items off the shelves before placing them into canvas carrier bags and hanging them on a elevated conveyor that takes them to the back of the store.
Smart right? Well we got thinking about this and went around counting the staff vs. customers. 50 staff, 30 of them doing picking of orders in a store that had maybe a similar number of customers at that time during the late weekday afternoon which brings me to the people point. Customers pay about $1 for delivery to their home which is so cheap that many who live in the buildings immediately next to and behind the store on Songshan Road will pay to get their groceries brought up to them. Our question, is will this continue when the cost of those store pickers and couriers inevitably increases or will the likes of the 9–9–6 work life mean that this convenience is super valuable?
While it would be cool to do this in Canada, and you might argue InstaCart is an example of it already happening, what would it cost with a $15 / hour minimum wage and is it worth it to the average customer who is likely not doing this hours of the average Chinese worker? Likewise, in places like Shanghai or even Hangzhou with high density populations living in a tight radius to the store, it’s easy to capture volume, in the US and Canada with greater suburban populations, can this be an economical reality?
This challenge isn’t limited to Hema, the following day we stumbled upon an impromptu distribution centre ‘sorting’ packages that were littered across the sidewalk for many of the first mile / last mile courier services you see all over the cities here. I’d love to see the likes of TaskRabbit, Deliveroo, Purolator, Uber etc. doing this at King & Parliament in Toronto. Again, it’s the labour factor that’s critical to making these propositions successful in Shanghai.
We asked about the use of drones here and found that due to national security reasons, the police don’t take to kindly to them and are known to shoot the odd one out of the air from time to time. Then there’s the roving bots the likes of Amazon have been trialling but I’m not sure sidewalks in China could possibly handle them and the volume that would be required. In the relentless pursuit of consumerism, it will be interesting how the consumer expectation of items being delivered cheaply and in as little as 30 minutes will be maintained.
Meanwhile, back home, is this life of consumption something we aspire for as the potential of the circular economy, less single use packaging and desire to accumulate fewer possessions start to kick into the decision making off the mass market? Will we lead the way with what the sustainable retail model looks like or will China pivot first?