People have suddenly become the biggest burden in the business world. In 2017, Shanghai experienced its hottest summer in 66 years. At that time, Shanghai's first unmanned convenience store, BingoBox, was located on Changyang Road. Despite air conditioning, the 39.7°C heat still melted the frosting and chocolate on donuts. In that scorching July, among those visiting BingoBox, urban management officers might have accounted for half, along with consumers. Due to residents' reports of suspected illegal construction, on the first day after reopening following an air conditioning failure, this unmanned convenience store was visited by urban management for investigation. The start of China's unmanned retail was just that awkward. Capital with grand visions said, "Don't mind these details!" That year, they almost daily transferred money to entrepreneurs, investing in at least 200 unmanned convenience stores and 25,000 unmanned shelves, burning 5.7 billion yuan. For a time, "workers" were anxious and sleepless. They found that people had indeed become the biggest burden in the business world. Isn't that nonsense? Everyone dreams of earning over 10,000 yuan a month, but for companies, that's a cost. Take the article "I Sell Coffee at Luckin" as an example: a part-time coffee worker earns 20 yuan per hour, and after working 40 hours and obtaining a barista certificate, the wage rises to 30 yuan per hour. Next door, Starbucks' part-time hourly wage is only 19 yuan. With over 16,000 frontline employees, Luckin Coffee's quarterly loss of 681 million yuan is not without reason. Perhaps for this reason, Luckin Coffee also announced its entry into unmanned retail on January 8. On that day, its CEO, Qian Zhiya, also unveiled an unmanned coffee machine and an unmanned vending machine. According to Huajing Intelligence Network, the unmanned retail market size is expected to reach 65.7 billion yuan in 2020. This figure is only slightly more than Luckin Coffee's market value, but you have to admit it counts as a new story. I just wonder, when the donuts in BingoBox were melting that year, where was Qian Zhiya sitting while drinking coffee? Scene from Luckin Coffee's unmanned retail strategy launch event, image from the internet -01- 2017↔2019: Unmanned Retail in the Box In June 2017, in the Shenzhou Youche office building, Qian Zhiya was probably still discussing new entrepreneurial projects with Lu Zhengyao. But at this time, Chen Zilin, who was in the fresh food business, had already launched the first unmanned convenience store, BingoBox, in Shanghai. He also announced that capital institutions such as GGV had invested over 100 million yuan in the company. Even in July, with air conditioning failures and urban management visits, Chen Zilin remained a hot topic among capital and media. His old friends in the fresh food industry complained that it was not easy to schedule a meal with him then. When you step into the wind, you can't figure out what's coming ahead, so how can you have time to look back at the people and things behind? That was BingoBox's hottest period. At the time, a company salesperson received over 350 missed calls in a day. In two months, the company received 6,729 customers from 93% of the country's counties and cities, all wanting to bring the box to their own territory. Meanwhile, an unmanned retail brand called Guoxiaomei in Chengdu announced its angel round. In the investor list, besides well-known capital institutions like IDG and FreeS, there were also Meng Xing from Diaoye Niurou and Luo Xi from Redian Chang. Xingbianli entered the public eye a few months later. But with the backing of capital giants like Sequoia and China Renaissance, the brand quickly entered the top 50 quasi-unicorns. Star internet giants followed. Alibaba incubated Tao Coffee, SF Express launched the unmanned shelf Feng e Zu Shi, JD Daojia came with an unmanned supermarket, and Ele.me launched e Dian Bianli. The entire business world saw a scene where there was no future without unmanned retail. This forced traditional companies to accelerate their layouts. Wahaha TAKE GO claimed 100,000 machines in 3 years and 1 million in 10 years; Yili also proposed plans to set up unmanned convenience micro-stores in over 2,000 communities. Even Easyhome launched EATBOX in two Beijing stores. At that time, companies received several calls a day, roughly wanting to place unmanned shelves in their offices. Some people also complained online that a company's pantry was crowded with shelves from five different brands. Amazon's unmanned convenience store entry scene, image from bangqu.com The most attention still went to Chen Zilin and his BingoBox. At the first brand strategy launch event, the venue was packed with capital institutions, government officials, and even competitors who came with real names. Chen Zilin said he was nervous when going on stage. The nervousness was likely due to a lack of confidence. At the meeting, Chen Zilin said BingoBox had only opened 158 stores. This was far from the previously boasted goal of opening 5,000 stores within the year. Later, Chen Zilin received another $80 million from capital parties including Fosun Group. He changed his tune, saying that 5,000 stores remained the goal, but not within the year, but within one year. To achieve the small goal of 5,000 points in one year, Chen Zilin began to promote through a city agent model. At that time, BingoBox had about 50 agents nationwide, collecting nearly 40 million yuan in agency fees. But in June 2018, when the one-year period expired, Chen Zilin had only landed 500 boxes. In the latter half of that year, Guangdong TV's Public Channel reported that a franchisee invested 700,000 yuan in three boxes, but they were not launched. After several inquiries, BingoBox's Dongguan city agent headquarters closed. This was not an isolated case. AI Finance and Economics later reported that similar situations occurred with at least 70 franchisees. Consumers didn't buy, goods in the boxes had slow turnover, high loss rates, and high operation and maintenance costs—BingoBox, which had accumulated six or seven hundred million yuan in financing, had a ceiling of 500. The AI Finance and Economics report also mentioned that BingoBox's suppliers in East China had not received orders since January 2019. Previously, they produced boxes within 20 square meters for BingoBox at a price of 98,000 yuan per unit. The suppliers speculated that Chen Zilin had run out of money. Since the last financing in January 2018, BingoBox had been burning cash for a year. This speculation was indirectly confirmed in July last year. At that time, due to owing a partner 20,000 yuan in final payment, Chen Zilin stood as the defendant's representative in the Mentougou People's Court. From then on, outsiders felt that BingoBox was half-buried in the ground. -02- 96% of Unmanned Retail Brands Died BingoBox is just a microcosm of the unmanned retail industry. From this case, the outside world also began to understand that this is an extremely capital-intensive industry. By 2018, over 96% of companies in the industry had gone bankrupt, including the internet-famous GOGO Xiaochao and Aishiduo. Later, even JD's unmanned store, which had strong capital backing, saw the return of store managers and cash registers. Once viewing people as the biggest burden in the business world, it has now returned to the era of people. On the unmanned retail track, there seem to be several fences that are hard to cross. 1. The first to be questioned were technical issues
In December 2017, JD's first global shopping cross-border experience store landed in Chongqing Fortune Shopping Center. Next to the experience store, JD×Unmanned Supermarket attracted many consumers to check in.
But entering this supermarket was troublesome: first, you had to bind user information through a mini-program, then undergo facial recognition at the entrance. In our test, the facial recognition delay was severe, and the entry experience was not smooth. After consumers selected goods, the store's RFID system would calculate and settle based on the labels on the product packaging. The labels were relatively firmly attached, but some were found to have fallen off. Labels determine settlement. In Beijing's EATBOX, settlement anomalies had occurred before. Technology relying on a few bottles of glue is clearly a hidden danger. Even without RFID, settlement technology remains a major issue. Uboss, the big brother in unmanned retail—the unmanned vending cabinet—often receives complaints about paying but not receiving goods. JD's unmanned supermarket facial recognition, image from Weibo @Chongqing Tan Cheng Ji 2. High theft and loss rates Blue Whale TMT once exposed data: an unmanned shelf had a monthly rent of 500 yuan, daily transaction volume of only 10 yuan, but a theft and loss rate of 50%. According to Weibo messages, a man in Foshan, Guangdong, entered an unmanned supermarket more than 10 times in 4 days, stealing nearly 800 items worth about 3,500 yuan. Such incidents also frequently occur with office unmanned shelves. Previously, a company employee revealed that a colleague played pranks on the unmanned shelf, squeezing every bag of puffed food, making them unsellable. Human nature is often fully exposed when no one is around. Additionally, there are mice. An employee of an internet company in Shenzhen once said that snacks on the shelf were eaten by mice, and after 4 days of feedback, no one came to handle it. The brand of this unmanned shelf was Guoxiaomei, and the reason for the delay was attributed to high restocking costs. 3. High restocking costs In 2018, Guoxiaomei claimed to restock every 3 days at a cost of 30 yuan per restock. Beijing News calculated based on this and found that each Guoxiaomei shelf had an average monthly loss of 279.56 yuan. At that time, Guoxiaomei had announced 100,000 shelves nationwide. By early 2019, a Guoxiaomei BD said the restocking frequency had changed from the promised once every 2 days to once every 2 weeks, with reduced restocking quantities. Guoxiaomei did not rule out labor cost factors, but more importantly, there was no money to purchase goods. The more you buy, the more you lose. Why is unmanned retail like this? Low gross margins! 4. Low gross margins on product SKUs In 24-hour convenience stores like 7-11 and Lawson, selling daily snacks actually yields little gross profit. Their profitable categories come from fast food and fresh food. Data shows that Lawson's fresh food gross margin exceeds 40%. And a white-collar fresh food convenience store called Tiantian Yijia had a maximum gross margin of up to 70%. When you walk into a convenience store and buy some oden, buns, and soy milk, the cashier's smile is more genuine. At the end of 2017, Xingbianli began offering hot food items such as boxed meals, sushi, and rice balls, which would be placed in Xingbianli's smart convenience stores and some office unmanned shelves. This scenario actually hit a pain point. White-collar workers who don't want to go downstairs and squeeze into elevators can directly choose from the unmanned shelves. However, hot food scenarios generally have peak periods. Ensuring hot food is delivered to each office at the right time during noon requires a large number of delivery personnel, but these people are usually idle—under peak-valley demand, costs increase. Xingbianli began offering hot food items, image from the internet -03- Lessons from Unmanned Coffee Unmanned retail, in order to save on labor costs, ends up increasing costs everywhere. How does Luckin Coffee plan to address these issues? Qian Zhiya said that machines are light assets, not restricted by business licenses, and are more flexible, with costs that can be reduced through sales scale. Burning money for scale, scale for cost—the old trick of Qian-style economics. However, she also mentioned that day that one unmanned coffee machine comes from Switzerland's Schaerer, with a cost price of over 100,000 yuan. Compared to BingoBox's 98,000 yuan, how much scale can this unmanned coffee machine achieve to gain upstream bargaining power? We don't know. Time back to July 2016, Chongqing Xinhua International. The world's first internet-connected fresh coffee machine under the illy brand had people queuing up to experience it every day. But the good times didn't last long. Due to unstable machine performance and low repurchase rates, the revenue from the equipment couldn't even cover operation and maintenance costs. After several iterations, this unmanned coffee machine began testing in multiple hotels in Chongqing. Data at the time showed that a machine at the Westin Chongqing Hotel could generate monthly revenue exceeding 8,000-10,000 yuan, and multiple hotels in Chuanghui Shouzuo had single machines with monthly revenue exceeding 10,000 yuan. But to this day, Tianyancha shows that this unmanned coffee machine has only been deployed 100 units in Chongqing, Sichuan, and Beijing. I don't know if this is the scale Qian Zhiya imagines.
This is bound to be another money-burning story. How much to burn? Qian Zhiya might think at least 400 million in the early stage, and the unit must be US dollars.
Luckin Coffee also submitted a Form F-1 to the SEC, stating plans to issue 12 million additional ADSs and also issue $400 million in convertible senior notes.
People are beginning to speculate: Will Luckin Coffee's unmanned story be as vivid as its delivery coffee, light food, Xiaolu Tea, and unlimited scenarios? Whether the story is good depends on whether the capital beside the pillow falls asleep. At least for now, capital can't sleep. Centurium Capital, the lead investor in Luckin Coffee's Series A and B rounds, took the opportunity to sell some shares. Luckin Coffee's US stock price also fell 5.16% in after-hours trading. Capital seems less enthusiastic about unmanned retail than in 2017. Source: New Business Reference (ID: xinshangye2016) If you like this article, click [Watching] and share it with friends.