BingoBox, an unmanned convenience store and a GGV portfolio company

What are “Unmanned” and “Shared”? – Field Notes from China’s Retail Revolution

This is Part I of a 4-part series on the GGV team and portfolio companies’ recent trip to China.

By Zara Zhang, Robin Li, and Celia Chen

Recently, two buzzwords in China’s tech and retail circles are 无人 (unmanned) and 共享 (shared). From unmanned convenience stores to shared KTV boxes, China has seen a slew of home-grown businesses that are selling goods and services in innovative ways.

“US retailers and e-tailers can benefit from tracking the development of their Chinese counterparts, many of which are demonstrating creative integration of technology and commerce,” said Hans Tung, managing partner at GGV Capital.

This past week, we brought team members from several of GGV’s US retail- and consumer-related portfolio companies (including executives at Ibotta, Lively, Yamibuy, and Reebonz) on a trip to China to visit a dozen or so shops that exemplify “New Retail,” a field that GGV is actively investing in.

“I cannot recall a time as an entrepreneur when I’ve learned so much in such a short period of time,” said Bryan Leach, founder and CEO of GGV portfolio company Ibotta, who went on the trip.

If there is one word that could capture what we experienced on this trip, it would be “futuristic.” Here are notes, photos, and videos on four shops we visited that provide a primer on “unmanned” and “shared,” two of the hottest categories in New Retail right now.

 

1.BingoBox (缤果盒子), a GGV portfolio company

What it is: An unmanned convenience store

How it works: Enter with QR code, pay with mobile app; tracks items with AI and machine learning

How many there are: 158 across China

Where you can find it: Mostly within gated residential communities

BingoBox, an unmanned convenience store and a GGV portfolio company
BingoBox, an unmanned convenience store and a GGV portfolio company

BingoBox is a convenience store that has been compared to Amazon Go. It is small, lightweight, box-like shop where you can purchase pretty much everything that you may find at a 7/11. But unlike traditional convenience stores, no human staff is required inside.

To enter a BingoBox, you must scan a QR code to register on its website. To check out, you place the items on a counter, scan a QR code, and pay with WeChat Pay or Alipay. As you head out, a sensor at the door can automatically detect any unpaid items. The door will only unlock once all items have been paid.

Watch this video to see how BingoBox works (or click here to watch on YouTube):

 

“BingoBox can survive in ‘deserts,’ where no other business can survive,” said its founder and CEO, Chen Zilin, at GGV’s Evolving Lifestyle conference in Beijing in October. “These places include low-traffic areas like within gated residential communities.”

Since August 2016, the company has launched 158 BingoBoxes across 24 Chinese cities. The average box makes RMB1000-2000 ($150-300) in revenue per day, higher than the RMB800 ($120) it takes to break even. Shrinkage has been extremely low.

In traditional convenience stores, there is significant cost caused by having a staff member at the cashier at all hours, because most of the time they might be idle. A 4-person team on BingoBox’s backend can watch 40 stores at the same time.

BingoBox currently uses radio-frequency identification (RFID) technology to track items with a tag that contains electronically stored information. Last month, it announced a new technology called “FAN AI” that will replace RFID labels with image-recognition technology, further reducing the cost of operation. Thanks to its machine learning capabilities, the new checkout counter will be able to detect items with an accuracy rate of over 99%.

BingoBox sticker for tracking items
The tag attached to each item that allows them to be tracked when they are removed from the shelf.

GGV led BingoBox’s series A financing in July.

“China’s retail experiments will take off faster than elsewhere,” said GGV’s China-based Managing Partner Eric Xu, who led the investment. “Unmanned stores will replace more and more of the country’s mom-and-pop shops over the next three years, as labor and rental costs surge.”

 

2.Citybox (魔盒), a GGV portfolio company

What it is: A smart vending machine

How it works: Scan QR code to open; take items and just leave (payment automatically completed)

How many there are: Signed with 2,000 locations across China

Where you can find it: Mostly within offices

Citybox is a smart vending machine with a seamless, cashless check-out experience powered by mobile payment. Users must scan a QR code to unlock the box; after taking the items they would like to purchase, they can simply close the door and leave. The cost will be automatically deducted from their Alipay or WeChat Pay accounts. “The best payment method is forgetting to pay,” a team member told us.

Citybox, a smart vending machine and a GGV portfolio company
Left: Just like in BingoBox, each product in Citybox has a sticker that contains its information. Right: Mobile receipt automatically shows up after the box is closed.

Watch this video to see Citybox in action (or click here to watch on YouTube):

 

Citybox has signed with 2,000 locations throughout China as of August, and plans to roll out 50,000 boxes by mid-2018. All boxes are open 24/7, and sell everything from drinks and snacks to fresh fruits and prepared meals at prices comparable to those found in supermarkets. Citybox has a partnership with Sesame Credit (a credit score service provided by Alibaba’s Ant Financial) such that honest shopping helps improve customers’ credit scores. Shrinkage is close to zero.

Most Cityboxes can be found in enclosed offices and “high net-worth locations,” serving professionals in tech, law, and accounting firms (clients include Baidu, DBS Bank, Canon, and KPMG). Many companies pay for Citybox snacks as employee benefits. The appearance of the box as well as the items inside can be customized for each client.

The ultimate value proposition of Cityshop is not to sell goods per se, but to attract traffic so that it can monetize in other ways. It is already exploring strategies such as display ads and sponsored discounts.

Citybox was founded by Wang Qiang, a serial entrepreneur and seasoned executive in the grocery business. He is also the co-founder of Fruitday and the chairman of Cityshop (both are grocery chains that Citybox sources from).

GGV led Citybox’s angel round and participated in its series A financing.

“For enclosed venues including offices, smart vending machines like Citybox will ramp up quickly,” said GGV’s China-based Managing Partner Eric Xu, who led the investment. “The shopping experience in offices and even in households could be reshaped by smart vending machines eventually.

 

3.Lefit (乐刻)

What it is: An unmanned, shared gym

How it works: Scan QR code to enter; paying members only

How many there are: Over 130 across China

Where you can find it: Mostly within shopping malls and office buildings

You can think of Lefit as a “Bingobox for gyms.” At Lefit, there’s no receptionist waiting to greet you at the entrance. Gym-goers scan a QR code to enter. The 24-hour gym is open to members only; membership costs RMB 199 ($30) per month and gives you access to all Lefit locations (there are now over 130 across China). Members can also sign up for group classes – everything from dance to yoga – in advance with no extra cost. Personal trainers are also available.

Lefit was founded in 2015 in Hangzhou by Han Wei, a former executive at Alibaba. Thanks to its lightweight model, Lefit gyms can be tucked away in high-population-density areas, such as shopping malls and office buildings.

Lefit, an unmanned, shared gym in China
Lefit, an unmanned, shared gym in China

 

4.M-Bar (友唱)

What it is: Unmanned and shared mini-KTV box

How it works: Scan QR code to pay; sing in an enclosed booth; upload your singing afterwards

How many there are: Tens of thousands

Where you can find it: Inside shopping malls, usually on the basement floor

Recently many “Karaoke booths” have popped up in Chinese shopping malls, where shoppers can spend 15 minutes practicing singing in a private karaoke box to kill time. These are about the same size of phone booths and fit up to 2 people.

M-Bar is one of the most popular ones, and charges RMB 25 ($3.80) for 15 minutes of singing (many Chinese customers have complained that it is too expensive). Unlike traditional karaoke shops, singing in these booths is meant to be a solitary, not social, experience. You scan a QR code to begin a session, and hear the instrumental from headphones.

M-Bar: an unmanned and shared karaoke box

As you are singing, you can see how you performed on each note (just like in dance video games). At the end, you receive an overall score as well as your ranking among everyone who has performed this song before.

Once a song is finished, you can upload your singing to WeSing (全民K歌), a popular app owned by Tencent that allows users to record their own covers of songs and share them with friends.

You can even participate in a singing competition by recording your entry at an M-Bar:

M-Bar: Karaoke competition

Oh, and we also took advantage of the coconut vending machine that was right next door:

Coconut vending machine in China

 

Here are some reactions from our portfolio CEOs on the trip:

“I cannot recall a time as an entrepreneur when I’ve learned so much in such a short period of time. Thanks to GGV’s hospitality, I was also able to connect with many of the leaders in GGV’s Chinese portfolio companies, and this materially advanced my thinking about we go to market in the US, not to mention our international strategy. Having this kind of access to GGV’s network provided my company with significant competitive advantages that are hard to find in Silicon Valley. The experience clearly illustrated why GGV’s cross-border perspective helps it to consistently secure outsized investment returns and why the best companies look to work with Hans, Robin, and the others at GGV.”

– Bryan Leach, Founder and CEO of Ibotta

“This trip to China opened my eyes to the tremendous opportunity we have as a global community to learn from one another. Learning from a country that drives 11x the amount of mobile payments than the US demonstrates how far we still have to go in creating efficiency, speed and autonomy in the transaction and executional portion of retail. By doing so we can put so much more effort, focus and manpower on what really matters – consumer experience, community and brand. Data and technology will be the fuel for building the new world of retail.”

–  Michelle Cordeiro Grant, Founder and CEO of Lively

“I know competition in China is brutal, so Chinese startups need to provide better service, better customer experience and new business models. But after our visit to startups office, I realized Chinese startups have brutal competition on the talent level as well. Companies need to establish a good company culture/value to keep their employees and attract new talent.”

– Alex Zhou, Founder and CEO of Yamibuy

“The biggest take away was to see all these unique and exciting technology companies founded in China that have an ambition to grow global right from the very start.”

– Samuel Lim, Co-founder and CEO of Reebonz

Sign up for 996, a weekly email newsletter on China’s tech industry curated by GGV Capital, at 996.ggvc.com.

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