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China tapped by Japanese retailer as lab for automated stores

Aeon experiments with cutting-edge tech as more shops go staff-free

A vending robot developed by Aeon and DeepBlue Technology. Customers grab their items and complete purchases with the touch of palm. (Photo by Shohei Kono)

SHANGHAI -- Japan's Aeon opened a new research center in Shanghai with a local startup, aiming to reshape the future of retail by harnessing leading Chinese technologies like artificial intelligence and electronic payments.

The retailer demonstrated some new advancements at the facility. One robot greeted attendees with "ni hao!" -- hello in Chinese -- as it moved around the floor. Placing one's palm over the robot's sensor opens a compartment with refreshments and sweets inside. Customers whose palm prints are registered with cashless settlement services like Alibaba Group Holding's Alipay will automatically complete payment as they grab their snack.

Refrigerators outfitted with sensors also open via palm print, and cameras confirm which product is being taken. Payment is automatically completed and all the customer has to do is close the door to finish shopping.

The technology was developed by Aeon's Shanghai-based partner DeepBlue Technology, which specializes in such cutting-edge technologies as AI, unmanned stores and robots for retail. The startup's TakeGo checkout system, which uses facial-recognition technology to automatically bill shoppers, is moving toward commercialization at Chinese retailers and elsewhere. The company has even received funding from China's e-commerce leader Alibaba.

The research center will be operated by AeonDelight DeepBlue Technology, a joint venture between the retailer's facility-management subsidiary and DeepBlue. It will first introduce a security system and cleaning robots to an Aeon shopping center opening in Jiangsu Province next spring, then bring the technology to roughly 80 locations in China, with plans to sell to other retailers as well.

Aeon's Chinese operating income, equivalent to sales, rose 8% in the fiscal year ended February to 262 billion yen ($2.4 billion), but the retailer still suffered an operating loss of 1.5 billion yen. Improving the profitability of Chinese operations is imperative for Aeon, since the country is central to its overseas strategy, but there is another goal as well. China has become a major laboratory for Aeon's digital strategy, a priority for the company.

Aeon's new refrigerator is opened with a palm print and uses cameras to automatically complete payments. (Photo by Shohei Kono)

The world's second-biggest economy is a global leader in developing automated stores that use technologies like AI, and Aeon aims to gather know-how from its Chinese operations and apply it to businesses in Southeast Asia and elsewhere.

The retail group is especially keen on China's electronic-settlement technology. Mobile-payment services like Alipay and Tencent Holdings' WeChat Pay are exploding in Southeast Asia. Experimental shops with automated services or no staff at all are popping up throughout China as companies incorporate new information technologies into physical stores, with smartphone payments at the center.

Yet Japan's retail industry has been slow to pick up electronic payments and other digital technologies. In the past, Japanese retailers cultivated new markets by exporting their customer service and product development expertise, but companies like Aeon are now importing ideas and technology from China.

"We want to enter new markets based on experience gained from China, our major proving grounds," said Motoyuki Shikata, president of the joint venture.

Aeon has grown into Japan's largest distributor through a series of mergers and acquisitions. But such trends as the rise of online retailing have rapidly transformed how consumers shop as companies like encroach on the company's general merchandise stores and other mainstay businesses.

The company will invest 500 billion yen in information technology and logistics by fiscal 2020 to automate distribution and develop services connecting physical stores with online sales. It may also use technology developed in Japan eventually.

"Traditional methods no longer apply as the retail environment undergoes significant change," said Aeon President and CEO Motoya Okada at a recent shareholders meeting.

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