Virtual Supermarket Shopping Takes off in China

 

An ingenious use of technological innovation and savvy trend-spotting is radically transforming the way people do their grocery shopping in China. Busy urban dwellers with time-poor lifestyles can now do their grocery shopping as they pass through Shanghai’s subway system and have their weekly shopping delivered to their home.

The country has experienced breakneck economic growth in the past 15 years, heading towards becoming the world’s largest economy. Much of this growth and new wealth has come from the transformation of China into the world’s manufacturing and exporting hub. But this also leaves an urban population of very busy people who need time-saving solutions to improve their quality of life.

China’s premier Wen Jiabao has now pledged to aid the world economy during the current economic crisis by boosting domestic Chinese consumption. And this new focus on consumption will open up opportunities for entrepreneurs.

“I believe China’s economy can achieve longer-term, better-quality growth. This will be our new contribution to strong, sustainable global growth,” he told the Wall Street Journal.

And a big part of the boost in domestic consumption will come from modern retailers and supermarkets. Supermarkets were almost non-existent in China before the 1990s. The country sold food in a mix of small shops, open-air markets and through wholesale networks. It was a complex system overlaid with government bodies, marketing boards, brokers, wholesalers, distributors and government-licensed and government-run shops and vendors.

But this has radically changed as the country has moved to a modern retail system. Chinese cities now boast modern supermarkets, convenience stores, hypermarkets and warehouse clubs. There was just one modern supermarket in the country in 1990; by 2003, there were 60,000 (Chinese Chain Store and Franchise Association).

The supermarket model offers many benefits to anyone looking to sell products in the Chinese marketplace. Supermarkets are very competitive with each other and are always looking for new angles and new products to get the edge and win over new consumers. If they offer new tastes and variety, the chances are high they will attract more customers.

Supermarkets tend to offer a greater variety of food products than traditional markets. They are also cleaner, the quality control is better and more standardised, there is no need to haggle over prices and measurements and units for products are clearly labelled and controlled.

But supermarkets can also be criticized for monopolizing distribution networks, hurting small farmers by driving down prices and destroying independent retailers unable to compete with the economies of scale supermarkets can bring to bear.

In Shanghai - a city that has long been a retail pioneer in China- the Yihaodian online grocery company (http://www.yihaodian.com/product/index.do?merchant=1) is radically altering how people buy food by using “virtual supermarkets” in subway stations.

It is a convergence of several technological innovations to make something even better.

Shoppers download an app – or application – on to their mobile phones. This allows them to interact with large LED screens (http://en.wikipedia.org/wiki/LED_display) in subway stations which display images of products – from soap to noodle soup to nuts – just like in a catalogue. The shopper scrolls through the products and finds what they want to buy. Beside the images are barcodes. The shopper scans the product barcode with the phone and Yihaodian then delivers the products straight to their home within hours.

It is a very convenient service for busy workers trying to juggle the many demands of daily life.

The Yihaodian system is based on a similar technology pioneered in South Korea.

Yihaodian is riding a wave of growth for the company because of its innovative approach. It has seen sales rise by 28 percent each month and it hopes to make Euro 325 million (US $443 million) in 2011, four times its 2010 revenues. Proof of the value of investing in innovation.

Yihaodian is also showing how clever it is to offer a new way of doing things. It is pioneering a new business model while also recognising the reality of people’s busy lives in modern urban environments. Lily Yu, director of the company’s wireless application department, says it is about something bigger than just profits. “Changing people’s lifestyles is what we are striving for,” she told Monocle magazine.

Yu, founder of the Wireless Application Department at Yihaodian, joined the company in 2010 and leads the team to develop and introduce this technology and new way of buying products.

The only question remaining is this: how long before all retail will follow Yu’s lead?

By David South, Development Challenges, South-South Solutions

Published: November 2011

Development Challenges, South-South Solutions was launched as an e-newsletter in 2006 by UNDP's South-South Cooperation Unit (now the United Nations Office for South-South Cooperation) based in New York, USA. It led on profiling the rise of the global South as an economic powerhouse and was one of the first regular publications to champion the global South's innovators, entrepreneurs, and pioneers. It tracked the key trends that are now so profoundly reshaping how development is seen and done. This includes the rapid take-up of mobile phones and information technology in the global South (as profiled in the first issue of magazine Southern Innovator), the move to becoming a majority urban world, a growing global innovator culture, and the plethora of solutions being developed in the global South to tackle its problems and improve living conditions and boost human development. The success of the e-newsletter led to the launch of the magazine Southern Innovator.  

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