Cash is no longer king. In fact, in China it’s all but dead. The way consumers shop is breaking new digital ground and it means not a dollar ever physically changes hands. [This article featured in the Higher View Business Magazine]
Trade expert Lisa Goodhand warns that Australian businesses wanting a slice of the lucrative Chinese market must move fast to embrace a cashless society or risk being left behind.
Picture this: Hassle free shopping like never before. Scan your mobile phone as you enter the store. Buy whatever you want. Then leave.
Payment is made automatically from your account and a receipt sent to your phone.
No queues. No waiting. No cashiers. It’s a shopper’s dream.
But the big winner here is business. A cashless sale is an enormous boost to the bottom line. No wages to be paid, no payroll tax, no sick leave and no expenses that come with employing staff, terminating staff, creating rosters and so much more.
Sound like a pipe dream? It’s not.This is the face of the new China. A nation leading the charge in digital technology to create a truly cashless society, where money is an app on your phone not a bunch of notes and coins in your pocket.
The push to cashless living is being spurred by consumers and business alike. It’s a win for all – giving customers convenience and a faster way to shop and for business, a huge reduction in expenses and headaches that come with managing staff.
While in Australia, we are still slowly adjusting to the concept of making payments using our phone app, digital savvy China is moving at warp-speed toward digital-only consumerism.
E-stores are popping up across China with remarkable speed. In 2016, Amazon Go showcased with its tantalising promise of “Just Walk Out Technology.”
Shoppers were told they could use their Amazon Go app to enter the store, take the products they wanted, then leave. Their Amazon account would be charged shortly after.
For consumers the concept was shopping heaven.
But Amazon was just the start of what is sure to become a stampede to cashless sales. In 2017, Tao Café, Bingo Box and F5 Future store have all opened their doors offering convenience-hungry customers the ultimate cashless, cashier-less shopping experience.
The e-store is not a totally new concept to Australians, of course. Amazon is on the verge of bringing “a retail offering” to the Australian market, seducing shoppers with the promise of “low prices, vast selection and fast delivery.”
The pace of change in business over the past few years has been bewildering and many Australian businesses have already heavily lost market share after failing to forecast the eCommerce revolution. The arrival of Amazon will only provide another blow.
Survival is dependent on keeping pace with change. Maybe Australia should be looking harder at China to help keep abreast of market trends.
China is now by far the most advanced nation in the world when it comes to eCommerce space.
It has the largest eCommerce market in the world with sales in 2017 expected to surpass a breath-taking $1.1trillion.
Perhaps even more surprising, the majority of these sale will be transacted on mobile phones.
Despite its success, the eCommerce industry is far from resting on its laurels. There is an enormous push by eCommerce firms in China to become even more innovative as online sales become more competitive which means margins are become slimmer.
It might seem an about-face for eStores to move into to bricks-and-mortar space to sell their goods, but with Fast Moving Consumer Goods having now become one of the biggest selling items online, it makes sense.
The key to success however is in providing shoppers with the same convenience and hassle-free shopping that attracted them to online shopping in the first place. And that means dispensing with queues, waiting times and scrounging for cash.
These eStore hybrids are appearing across China with lightning speed. The big names are Amazon Go, Bianlifeng, Xiao E Mei Dian and Tao Café.
While each vary slightly in what they offer and the technology they use, all focus on eliminating the need for staff and give customers the freedom to come and go as they please with little interference or cashier interaction.
These stores rely on mobile phone technology and online payment systems such as the popular Alipay or WeChat Wallet.
Alipay is an online payment platform owned by eCommerce giant Jack Ma’s Alibaba. It is one of the world’s largest online mobile payment platforms and in China in 2016 had an impressive 54% market share of eCommerce.
But WeChat is chasing its heels. WeChat developed their WeChat wallet and entered the Chinese market intent on disrupting Alipay’s domination.
Wechat Wallet is an extension of the WeChat micro blogging mobile phone app, that has become hugely popular in China. It has an estimated 938 million active users.
The WeChat app makes it convenient for customers to pay all types of bills using QR Code technology.
These forms of payments have become so popular that even street vendors are now accepting them as a form of payment and unlike in Australia there is no minimum $10 spend.
You do, however need to be a subscriber and connect your local credit card or bank account as they rely on you having funds in your virtual wallet.
It’s a huge convenience for the locals, however this technology does present issues for visitors to China who do not have WeChat or Alipay.
As a regular visitor myself, I am already experiencing the challenge of this technology. Catching a taxi requires an app and online payment system. And if you don’t have it, good luck trying to get anywhere in a hurry.
There’s a delicious irony in the fact that China – the country where paper money first originated – is the leading the charge towards a totally cashless society.
The Chinese never really became credit card obsessed in the same way Western consumers did. While Australians were thrilled with their fantastic plastic, the Chinese were already using mobile phones to make payments instead.
This crucial difference in preferred method of payment has created problems for Australian businesses and exporters trading with China.
In the past, many Australian companies had issues with receiving Chinese credit cards because they were renminbi, or Chinese currency.
Now, a new problem has emerged. Visiting Chinese shoppers that come to our shores want to use Alipay or WeChat.
The message for Australian businesses is clear. Get on board or lose sales. Financial trading platforms are opening up and Australian stores and eCommerce sites should jump at the opportunity to ensure they can offer methods of payment their Chinese customers prefer.
Exporters too are encouraged to establish an online payment gateway to help bring their business in line with the Chinese way of trading. The sooner the better.
For Australian businesses to thrive in China, or in some cases to survive, keeping up with the latest digital payment platforms is crucial.
Even big business understands it must adapt if it is going to win a share of the lucrative Chinese market.
Amazon Go unveiled its automated “grab and go” grocery store concept in China in 2016. It’s a market in which Amazon has been eager to gain a foot-hold.
Unfortunately, technical difficulties have prevented it from fully launching for now.
However, the concept is hugely appealing to customers. Amazon says its Just Walk Out Technology relies on “computer vision, deep learning and sensor fusion.”
In plain English, this means you register with Amazon and scan your phone when you enter the store. Sensors will then detect when products are taken from or returned to the shelves and then keeps track of them in a virtual shopping cart. When you walk out of the store, payment is activated and a receipt sent.
Too easy. For customers, it makes shopping a breeze.
Bianlifeng also offers the convenience of hassle-free shopping for small goods but customers have a number of different options to obtain their goods.
Firstly, they can pre-purchase goods online and have them delivered. Or they can pre-purchase and then go to a store, collect their purchases and simply present their voucher for scanning.
Finally, they also have the option of using a free bicycle service. Registered members can scan to find out where the nearest bike is, scan to unlock it and then use it to ride to the store.
The bicycle service may work specifically for the Chinese market without translating well elsewhere, however it shows that finding an edge on your competitors is driving retailers to think outside the box.
And the market is constantly expanding. Not long after showcasing the Amazon Go “grab and go” concept, Bingo Box emerged.
Developed by a local company in Zhongshan, Bingo Box has been very successful with ambitious franchise targets, expecting to roll out 5,000 units across China by the end of 2017.
Bingo Box uses the popular mobile phone payment app WeChat, which customers scan to enter the store. Once inside, they select a range of goods, scan them and then leave the store.
In store items mostly include package foods and some fresh produce. It seems when buying staples such as food, or items they are familiar with customers want to make their purchases and leave quickly with as little interaction with staff as possible.
It’s a franchise owner’s dream as well. The Bingo Box marketing pitch is that only four employees are needed to run 40 stores. Their function is mainly to restock the shops but even stock-taking is fast, thanks to new technology.
The employee simply runs a scanner over the shelves which “reads” stock numbers for them. The scanner produces a report which lists the required stock, which then must be manually replaced. It’s the only real manpower required.
Even so, it’s a very low maintenance business solution and alleviates the headache of recruiting staff to service customers.
It’s also super convenient for time-poor Chinese citizens and being mobile, means they can literally pop up anywhere.
The challenge for Bingo Box is that it is still in the process of developing technology so that their customers won’t need to scan their products.
The ultimate goal is to allow buyers to select their items and walk out the door. It seems, even scanning a product is considered too time-consuming and too much of a chore for the average shopper.
This style of business though, will resonate with the Chinese SME community. In a society where more is considered better, the prospect of being able to scale up a business portfolio quickly will have huge appeal and is certain to generate excitement among business owners.
As well, these low cost start-ups with minimal monthly overheads, also mean business people at all levels can get in on the game.
Naturally, a cashless society creates more transparency about personal wealth by creating an electronic trail of an individual’s spending.
The Chinese Government monitors its citizens closely but even this does not appear to be a deterrent to moving to a cashless society.
It seems, many business owners believe the better the technology the better the chance of success.
The Tao Café is upping the ante by offering its customers convenience plus the added bonus of greater security. Its core business is essentially a café, offering customers casual dining options and some grocery items.
Customers must have an Alipay account and must have undergone a credit check when registering before be permitted to enter.
Their technology is more advanced than some others with facial recognition and two security gates on checking out.
It offers greater scam protection, which is a legitimate concern. Again by offering their customers something extra, in the form of security, the Tao Cafe no doubt hopes it will help carve out a bigger market share.
So why are the Chinese obsessed with a cashless future anyhow and why are they pushing to get it working so quickly?
Perhaps it’s because like the rest of us they’re time poor or they just don’t like queues. Maybe getting cash into their wallets is just another chore that they’d rather not do or they might be sick of being scammed with fake notes.
The potential reasons are endless but perhaps it has a lot less to do with practicalities and more to do with a state of mind.
It could just be that the Chinese people love the idea of having complete freedom when they shop. It’s an exhilarating feeling in a country where freedom is a commodity that has for so many years been hard to come by.