Offline retail store Hema seeing success

Every retailer is trying to figure out the right equation of offering a profitable online platform and creating an engaging in-store shopping experience. Perhaps the answer is to look to Asia, specifically Alibaba’s Hema concept, or what the quickly growing company calls its offline retail store.

So how exactly does an offline retail store work? For starters, everything in the store is done digitally. Consumers scan their items using a barcode on their mobile applications. You can pick your own meat, produce and seafood (from a live seafood tank), and then scan and pay through the app. There’s even an in-store restaurant where —you got it — you order and pay through the app. 

The barcodes can also be used for product information including recipe ideas. And because Hema knows what you’re ordering, the company can use that data to help with personalization and delivery for future orders—customers that live within three kilometers receive free 30-minute delivery (more on that in a bit).

So far Alibaba has 60 stores in 14 cities in China, and more than 11 million members on its app. Most stores are on track to be profitable or are profitable in 1.5 years, according to Jing Wang, business intelligence manger with the Alibaba Group. Wang spoke at Groceryshop earlier this week in Las Vegas.

Related:7 things we learned at Groceryshop

“We use data-driven merchandising,” Wang said, which means that waste can be cut down and the freshest product is available to customers. It’s a process Wang called one-day farm-to-table. So the produce, for example, comes from the farmers and is tracked along the way through barcodes, so customers know when it got to the store. That data isn’t just used on the customer-facing front, however, as the retailer uses it to track the amount of specific product purchased to ensure that it is ordering only as much is needed so there is no leftover product that would have to be thrown away due to freshness.

The stores are also used as fulfillment centers for delivery orders and in a really high-tech way. A conveyor belt and robotic system is used to pick product from the in-store sections while staying out of the store shoppers’ ways. Each order is divided up into different sections for the different store sections — i.e., bakery would be collected in a blue bag while produce is in a green bag. Once all sections of an order have been picked, they are brought together and assembled into one order and packaged for delivery.

Sixty percent of Hema’s sales are done from the online channel, Wang said. She said many customers initially come into the physical store, but once they shop a couple of times they tend to convert to online shoppers.

Alibaba is using the Hema model to retrofit traditional stores in China, and when that transition is done, stores see a 10% uplift in sales within three months. The company is hoping to do 400 of these store transitions by the end of the year.