China's tech innovations could change US grocery retailing

Dive Brief:

E-commerce innovations in China could offer a window into the future for U.S. grocery retailers, Bloomberg writes. More than a year prior to Amazon’s acquisition of Whole Foods, Chinese e-commerce giant Alibaba launched Hema, a “technologically advanced blend of online grocery shopping, dining and bricks and mortar.” Alibaba’s competitor in the Chinese market, JD.com Inc., has also launched a high-end brand called 7Fresh.
As both concepts experiment with grab-and-go technology, unmanned stores, robotic restaurants and other technology innovations, they are pressuring traditional grocers in China, according to Bloomberg.
Walmart has joined JD.com to invest $500 million in Dada-JD Daojia, a Chinese online delivery company. JD Daojia delivers goods from local supermarkets and other partners via a location-based smartphone app and has about 20 million monthly active users.

Dive Insight:

When it comes to technology and the future of grocery shopping, Chinese rivals Alibaba and JD.com may very well illustrate where the U.S. — and the rest of the world — is heading. In China, 10.3% of grocery sales occurred online in 2017, according to Bernstein data cited by Bloomberg — the most of any country by 2 percentage points, followed by the UK (8.3%) and France (5.6%). The U.S. ranks fourth, with 4.7%. In technology terms, that is a very big lead for China, and it grants Alibaba and JD.com valuable insights into what is resonating with its growing ranks of e-commerce customers.

Because of this, Bloomberg opines that the U.S. and Europe are wise to “pay attention” to Alibaba and JD.com. U.S. players, in particular, can get a glimpse into what is worthy of further investment as they jockey for position. Walmart should be in a good position to do so as it steps up its investment in Dada-JD Daojia, which it first partnered with in 2016. Walmart recently opened its own high-tech supermarket in China, where purchases are facilitated via JD Daojia’s platform, allowing the retailer to marry its online and offline presence. If successful, Walmart will likely translate some of those insights into the U.S. market, where demand is rising for a “brick and order” technology.

This could make things interesting in the U.S. Amazon's technology prowess gives it an advantage as it ramps up its digital grocery business. However, while the company may have a technology differentiator in its fledgling Go concept, not even Amazon has embraced the high-tech experiments, such as facial recognition, that Alibaba and JD.com have. At Hema’s robotic restaurant, for example, customers can choose their entrée from the grocery aisle, get their meat cooked on a special conveyor belt, then watch as robots transport the meal from the kitchen to their table.

These types of technology advancements are expected to scale relatively quickly in China ,which could put added pressure on U.S. retailers to catch up. Alibaba plans to have 100 Hema stores opened by March 2019, while JD.com plans “hundreds” of 7Fresh locations throughout the next few years.

It remains to be seen if some of these same technology advancements would resonate in the U.S. market. The disparity in e-commerce adoption between the U.S. and China indicates these innovations won't be seen anytime soon, but given the accelerating pace of demand, they should at least be on grocers' radars.