Innovative Supermarket Business Models

There was a time when analysts thought that the accelerated growth of e-commerce might put an end to retail as we know it. Fast-forward to 2023, and there seems to a twist in the tale, with e-commerce powerhouses like Amazon and Alibaba making their foray into brick-and-mortar stores that are operating parallelly with their online operations.

This renewed focus to offer an omnichannel experience has become a common theme among established e-commerce companies that seek to provide a better customer experience with a presence in both online and offline channels. For investors, the traditional models of retail are no longer exciting and most of them have their focus on the burgeoning e-commerce industry where all the action is.

This blog is an attempt to articulate the two approaches by two e-commerce giants that have captured the imagination of both the customers and future entrepreneurs. We are talking about Hema Stores by Alibaba and Amazon’s AmazonGo. Both these ventures are seen as the future of shopping that captures the best of online and offline channels.

This blog is an attempt to better understand these two innovative FMCG models that have the potential to pave the way for many more exciting business models in the near future. Here we go:

Alibaba’s Hema Stores

No doubt Alibaba as a brand has set benchmarks in online retail, it plans to adhere to that same pattern with the launch of physical stores that seek to integrate online, offline, logistics, and data across a single value chain. These new stores are a collaboration between Alibaba and a Dutch retail chain named “Hema.” These stores use data and technology to provide a seamless and more efficient shopping experience for the customer.

• Mobile Based Shopping: It all starts with the download of a mobile app that links to a customer’s Taobao or Alipay account. Every SKU at a Hema store is integrated with mobile communication technology, where the customer after downloading the app can start shopping right away using their mobile as a tool. Every product on the shelf has a barcode and the customer is expected to scan it using their mobile to add it to their cart.
• E-Commerce Model: At Hema stores, customers are not just limited to in-store shopping, customers can even do their shopping from the comfort of their homes. They can order grocery or fresh produce using the mobile app. Once the customer places an order, there are “online pickers’’ in the store who go around and pick out the items. Each picker is equipped with a scanner and a delivery bag with a unique barcode. The order is delivered to the doorstep of the customer based on the details of the barcode on the delivery bag.
• Big Data Advantage: Shopping with the Hema mobile app is altogether a different experience. The retail chain is known for using the power of big data where every purchase and preference get logged and saved. This means customers are introduced to personalized product pages and delivery teams are provided with optimum delivery routes. Moreover, the unique bar code on delivery bags allows the customer to track an order from origin to destination.

Amazon’s AmazonGo

AmazonGo is a business model that gets closer to the perfect shopping experience for the customer. The company is popularizing the concept of “Just Walkout” with its AmazonGo chain of retail stores in the US. The company claims it is using the same technology used in deep learning, sensor fusion, computer vision, and driverless cars.

The “Just Walkout” technology automatically detects when products are taken or returned to the shelves and there is constant tracking of the virtual cart. After having finished with the shopping the customer is sent a receipt on their Amazon account.

As a customer, one is expected to download the AmazonGo App on their mobile from the App Store. The app only needs to be activated on entering the store and the mobile can be put away while you shop. The biggest advantage with this model is that the customer is completely saved from the hassle of waiting at check-out lines to pay the bill and the entire process of “automated shopping” happens in a matter of seconds.

All-in-all it is about providing a great shopping experience where Amazon has much to gain by completely doing away with a manual workforce for the checkout process. This helps the company to save on costs and puts it an advantage to offer products at much lower prices than its rivals.

Conclusion:

While it may be a good sign that e-commerce players are slowly inching towards replicating traditional retail models. But in reality, these business models are technology-intensive and have scope for eliminating many jobs in traditional retail, if they become popular in the future. However, many of the jobs that are getting eliminated offer no scope for growth and are associated with low levels of productivity. Hence, it would be prudent if humans are put at places within these companies where they can add value to the process rather than carrying out meaningless mechanical tasks.

Overall, today the onus is on traditional retail companies on how they want to grow and mitigate the challenge posed by the emerging business model brought out by their e-commerce rivals.