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Asia300

JD.com charges ahead into physical stores

China's No. 2 e-tailer planning hundreds of cashier-free supermarkets

A cashier-free X supermarket in Yantai, Shandong Province. (Photo by Daisuke Harashima)

DALIAN, China -- JD.com is leveraging the logistics network it built up through e-commerce to enlarge its real-world presence, aiming to open 500 automated supermarkets across China this year.

Such internet services giants as Tencent Holdings and Alibaba Group Holding have been strengthening efforts in physical stores of late. JD.com, too, will now go all-out by greatly expanding its offline retail network.

One of its first X supermarkets opened in Yantai, Shandong Province, near the end of 2017. The roughly 80-sq.-meter facility feels like a convenience store and offers around 500 items, including snacks, fruits and household goods.

The only workers stock the shelves, and there are no checkout registers. Shoppers must preregister online and submit to facial recognition when entering. Electronic labels show prices linked to online prices. Sensors read chip tags on the selected items when the shopper stops near the exit, which opens after the payment goes through.

Big-data analysis helps get popular items restocked quickly, according to a company official. More locations opened in Dalian and Tianjin this year, and plans are to raise the store count to 500 by year-end. The company will work to turn the business profitable through such efforts as curbing labor costs.

An automated cart follows a shopper around at a 7Fresh high-end supermarket of JD.com. (Photo by Daisuke Harashima)

JD.com has also launched the 7Fresh upscale supermarket chain, opening the first in Beijing this January. A wheeled robot follows the shopper around and scans items placed into a basket on top. In the fruit section, monitors display such information as where the produce came from and how much sugar it contains. JD.com aims to expand the chain to 1,000 stores nationwide over the next three to five years.

JD.com has developed its own logistics network including 13 centers and 500 warehouses across China through e-commerce. It has employed drones and unstaffed warehouses to raise efficiency. This strength will now make possible streamlined procurement and distribution to open hundreds of stores quickly.

With e-commerce accounting for 15% of the retail market in China, operators of physical stores have languished in recent years. But big online players are putting new energy into the old channel. Alibaba Executive Chairman Jack Ma Yun has shared a "new retail" vision that marries online and offline stores.

Three big challenges facing physical stores are said to be prices, which tend to be higher because of such costs as labor; merchandise selection, which tends to be limited; and the hassle of checkout.

Alibaba and Tencent have been actively investing their ample cash in retailing. Deals since 2017 have had Alibaba sinking nearly $3 billion each into department store operator Intime Retail (Group) and supermarket operator Sun Art Retail Group. And in January, French company Carrefour announced a potential investment by Tencent in Carrefour China.

JD.com has enjoyed sharp sales growth in recent years, but heavy investments have been squeezing earnings. Tencent has owned a stake in JD.com since 2014. Creating synergies with retail businesses that Tencent buys into will be key to JD.com's future growth as it works to catch up with Alibaba.

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