Alibaba Opens Unstaffed‘Smart Store’

E-commerce giant Ali- baba showcased its latest attempt to venture offline by launching an experimental unstaffed convenience store.

Alibaba was not the first to have this idea. It appears that， at least in this area， Chinas e-commerce leader has been struggling to keep up with its main global rival： Amazon. The American e-commerce company opened an unstaffed store in the US at the end of 2016， and Alibaba is just now getting around to opening their own.

Unstaffed Convenience Store in Hangzhou

Patrons can enter Alibabas futuristic Tao Cafe by scanning a QR code at the entrance. They can then pick up their favorite items — from cushions to notebooks to cookies — and automatically pay at the checkout gate.

The whole process is built using computer vision， biometric recognition and sensing technologies to track customers and their purchases. Up to 50 people can shop at a time in the 200-square-meter store， which opened in the eastern city of Hangzhou， where Alibaba Group Holding Ltd. is based.

The stores development team has tested various scenarios to prevent shoppers from generating an incorrect purchase bill， such as when two customers take items close to each other， or when a shopper wearing sunglasses has his or her face partially obscured from the sensors.

So far， the frequency rate of the sensors mistaking shoppers has been 0.02%， while the rate of incorrectly recognizing goods has been 0.1%， employees from Alibabas former financial arm Ant Financial Group said.

Alibaba is not simply developing a unmanned convenience store， but a“smart store” that automatically tailors the types of items on display as a shopper approaches a shelf， based on the his or her status， said Zeng Xiaodong， senior technical advisor at Ant Financial.

For example， when a customer walks into the store sweating after a game of basketball， the shelves will automatically offer them different types of energy drinks or adhesive bandages to choose from.

Amazon Sparked Market Interest

The project comes as the concept of staffless convenience stores has been making headlines recently， both at home and abroad. E-commerce giant Amazon sparked market interest when it revealed the concept of Amazon Go stores， and Japanese-owned convenience store brands Lawson and 7-Eleven have rolled out similar tests. In China， French supermarket operator Auchan launched its first unmanned convenience BingoBox store in Shanghai in May， and Chinese snack maker Wahaha launched five such stores in Hangzhou in June.

Chinas first 24-hour unstaffed convenience store—Bingo Box—is reportedly performing well since it was launched last August.

Bingo Box was set up near the parking lot of the Oushang Supermarket in Shanghais Yangpu district. It has no staff and customers must scan a QR code on the door to get in. The door locks once the shopper enters， meaning the next customer has to scan the code to get in too.

A label on each product allows cus- tomers to scan the price of each item at the electronic check-out area. Once the shopper has paid， he or she can leave the store.

You can also walk around the store without buying anything. Scanning the QR code on the wall at the entrance will open the locked door. If someone tries to leave without paying， an alarm is triggered at the door.

While not large， the store has a nice selection of goods. Another highlight is that the items are cheaper compared to other convenience stores. However， it may not win the hearts of consumers who are unaccustomed to making mobile payments.

The unmanned convenience store costs less to build and operate. For now， such stores are mainly located in highend residential areas that are closed or semi-closed. Currently， two Bingo Box unmanned convenience stores are operating in Shanghai.

The operators say all eight trial stores have received tens of thousands of customers， 80% of whom come back time and time again. They say there have been no cases of theft or vandalism.

Bingo Box added that the first round of financing worth more than 100 million yuan （14.7 million US dollars）， is now complete， and they plan to establish a further 5000 unstaffed convenience stores over the coming year.

Products sold in Bingo Box are lower priced than conventional shops， but are a little higher than large supermarkets. The operator says the 15-square meter unstaffed stores can sell as many goods as a 40 square meter staffed store， and the operating cost is just 15 percent of a regular businesses.

Customers access and pay for the goods in the stores by scanning a QR code after real-name registration through their smart phones. To ensure security， once a customer enters the store， the door will close behind them.

Some critics say its possible for others to enter improperly， without scanning， by closely following a legitimate customer as they enter. The company says they plan to introduce an artificial intelligence system to solve the‘tailgating problem.

Currently， BingoBox stores come in two sizes， medium and large， with areas of 12.48 square meters and 15.6 meters respectively， selling food， drinks， dairy products and general necessities. Customers can pay through the App， using Alipay and WeChat.

New Stores Attracted Funding

The revolutionary new stores have also attracted funding. A Chinese operator of unmanned convenience stores， F5 Future Store， secured 30 million yuan （$4.4 million） in its latest fundraising round， and Groupe Auchan SAs BingoBox has raised more than 100 million yuan.

However， in-store theft and technological bugs present obstacles to this emerging business model.

Supermarket chain China Resources Vanguard ran an unmanned pop-up store in the eastern city of Hangzhou， Zhejiang province， for a day in June 2016. It ended up losing 3，000 yuan in goods to shoplifters， the governmentbacked newspaper Beijing Business reported.

Unstaffed stores are even becoming a bit old school， considering the fact that a Swedish company just opened an automated， self-driving mobile store in Shanghai and that another app-controlled convenience store in Shanghai， BingoBox， has already been temporarily shut down for “technical maintenance.”

Even so， according to ECNS， there was a long line of people waiting to enter Alibabas new store on its opening day. Undoubtedly， they were attracted not only by the possibility of a futuristic shopping experience， but also by the fact that the products available were 20-30% cheaper than those at a typical convenience store.

Part of the appeal of this business model is that companies get to significantly cut back on the costs of maintaining a fully-staffed store. Cur- rently， there are a few assistants at the Hangzhou location， there to make sure that customers understand the shopping process， but ideally， such help will be unnecessary once these stores become commonplace. Humans will no longer be needed.

In order to enter the store， customers must have Alibabas Taobao app downloaded on their phone. Each door has a gate， which resembles those found on subways， where shoppers scan their personal QR code upon entry.

Up to 50 customers at a time can peruse the 200-square-meter space， and may purchase a variety of fast food beverages and snacks. After selecting their desired products， shoppers simply exit the store via passages equipped with facial recognition scanners. Once their faces are confirmed each patron is then charged automatically for their purchases via their phones Alipay app.

The system developer of the technology used in the store is Ant Finance， a tech company owned by Alibaba. And it seems that they have done a pretty good job. Watch below as a team of technicians demonstrate that it would be no simple task to steal from the store：

The rapid advancement of these automated shops heralds dark times ahead for traditional retailers. Alibaba is just one part of the technological revolution occurring in China， in which businesses either evolve or fall into obscurity.