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June 13, 2017

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Game-changers seek to wow fickle consumers

CHINESE consumers, especially the young, are no longer content with the traditional concepts of shopping and dining out. They want something different, something engaging when they spend their money.

Retailers and restaurants, well aware of the trend, are exploring new ways to deliver the goods. Business models that break from the past are popping up all over.

A prime example of the “new retailing” is Hema Market, a fresh food supermarket concept that bills itself as a cashless “e-commerce experience store.” Bankrolled by e-commerce giant Alibaba, the company seeks to combine casual dining and retailing, targeting foodies seeking high-quality meals when they eat out and interesting menus when they eat at home.

Fresh seafood and vegetables take up about a third of the aisles in the expansive Hema stores, with the rest of the shopping space devoted to packaged foods, snacks and imported commodities. The store boasts a stock of more than 3,000 items at prices competitive with online vending.

Its online and offline operations are fully integrated with every offline outlet serve as a warehouse and dispatch center. It now operates eight stores in Shanghai and one each in Beijing and Ningbo.

Hema founder Hou Yi told a retail conference last month that his store is a “game changer.” All of its merchandise is available for delivery within 30 minutes in a three- to five kilometer radius from each shop, thanks to smartphone use and efficient online payment tools.

The seafood section alone is a shopping experience. It offers delicacies like blue lobsters, Dungeness crab and mantis shrimp. The ingredients can be cooked in an on-site kitchen — stir-fried, baked or steamed.

“Hema has a plenty of seafood to choose from,” said a Shanghai resident surnamed Wang who lives in the Jing’an District. “I had my dish cooked there, and I could also buy beer and snacks to enjoy right away. But the dining environment and the check-out process still need some improvement.”

More than half of the non-fresh food, like snacks, wine, cheese and ham, are imports. The company’s 10,000 square-meter store underneath the Shanghai Bay shopping complex in Pudong also offers some of the groceries offered by vendors from Alibaba’s B2C site Tmall.

Although Hema market aims to satisfy the cravings of gourmets, it also places emphasis on the fact that many food lovers don’t want to cook for themselves. It offers customers the option of having the ingredients they purchase cooked on site.

Nearly half of the shopping space is leased to third-party food and beverage vendors, including sushi bars, noodle shops, bakeries and cafes.

Hema customers can pay only by using the store’s proprietary smartphone payment system, which allows the retailer to collect user information and shopping habits.

The Produce Report said 80-90 percent of Hema customers are aged between 25 and 40, with high-education and income levels. The repeat purchase rate is about 50 percent, suggesting a loyal upmarket customer base.

The company is also promoting in-house brands, from bakery to ready-made meals, in cooperation with suppliers and food manufacturers.

New twists

Another new twist on the retailing front is exemplified by the Shanghai Shangshu-Yonghui Fresh Food Co.

It’s a joint venture between Shanghai-listed Yonghui Supermarket and state-owned Shanghai Vegetable Co that seeks to supply the freshest fruits and vegetables to community markets. On an initial investment of 100 million yuan (US$16.3 million), the venture is working with the Shanghai Commerce Commission to upgrade existing farmers’ markets in and around the city center.

By the end of May, it had transformed 17 such markets in Shanghai into hybrids of a fresh food market and Yonghui FMarts.

At a typical FMart outlet, about half of the business space is devoted to fresh fruits and vegetables, with the remainder dedicated to daily necessities.

The venture is leveraging Yonghui’s supply chain and sourcing capability, in contrast with traditional farmers’ markets where small vendors ship produce from wholesale markets and sell it directly to the nearby neighbourhoods.

More than half of the fresh food is directly sourced from vegetable farms and Yonghui’s suppliers.

It’s part of a municipal project to standardize farmers’ markets and maintain a stable supply of produce, especially during periods of low supply in off-harvest seasons. Plans call for about 300 standardized community vegetable markets to be created within five years.

Dining out is also undergoing a transformation in Shanghai.

Hong Kong-listed Xiabu Xiabu Catering Management Co is combining the traditional teahouse concept with the hotpot trend at one of its newly opened restaurants in the Raffles City Changning Shopping Center.

Xiabu Xiabu has been a fast-food hot pot restaurant chain in 30-plus cities in China for more than a decade. It entered the higher end of the market with a new brand called CouCou.

Last year it, the company reported average per capita consumer spending of about 47 yuan, while average spending at CouCou was as high as 150 yuan per person.

Extending the dining scene to include afternoon tea helps the company maximize profit in terms of both operating costs and rent.

Last year, China’s catering market was slowly recovering from a slowdown in China’s economy. According to the China Cuisine Association, the market in 2016 grew 10.8 percent from a year earlier to 3.6 trillion yuan.

Not every diner wants to sit down and spend two hours over a hotpot dinner. Some prefer to just stop in for a casual drink or take-away beverage in the afternoon.

My friend Sammi, who works at a nearby office building, said she sometimes visit the restaurant after lunch to grab a milk tea.

“It’s nice change of taste from other teahouses nearby,” she said.

Coucou said about 20 percent of its revenue now comes from tea drinks.


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