---
title: "Why Is Unmanned Retail Cooling Down?"
description: "Premature unmanned retail is experiencing growing pains. With rising labor costs, the popularity of mobile payments, and the rapid development and integration of frontier technologies such as AI, big data, and IoT, the new retail self-service industry is booming. Unmanned retail, as a representative, has shown huge potential, attracting traditional giants and startups alike, but it is also accelerating industry reshuffling. At the recent Third China Unmanned Retail Conference and 2019 Shanghai International Unattended Retail Exhibition, hundreds of traditional retailers, unmanned retail companies, and smart vending technology hardware and software service providers showcased new technologies and trends in retail intelligence transformation."
author: "乐琰 陈慧"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-09-04"
categories: "Retail Formats"
language: "en"
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original_source: "https://mp.weixin.qq.com/s/1d-xAcurLeZwGyjCFhq1IQ"
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citation: "乐琰 陈慧. “Why Is Unmanned Retail Cooling Down?.” New Distribution, 2019-09-04. https://xinjignxiao.com/en/articles/why-is-unmanned-retail-cooling-down-93a01109/"
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---

# Why Is Unmanned Retail Cooling Down?

> Premature unmanned retail is experiencing growing pains. With rising labor costs, the popularity of mobile payments, and the rapid development and integration of frontier technologies such as AI, big data, and IoT, the new retail self-service industry is booming. Unmanned retail, as a representative, has shown huge potential, attracting traditional giants and startups alike, but it is also accelerating industry reshuffling. At the recent Third China Unmanned Retail Conference and 2019 Shanghai International Unattended Retail Exhibition, hundreds of traditional retailers, unmanned retail companies, and smart vending technology hardware and software service providers showcased new technologies and trends in retail intelligence transformation.

# **Premature unmanned retail is experiencing growing pains.**
With labor costs rising year by year, the popularity of mobile payments, and the rapid development and integration of frontier technologies such as artificial intelligence, big data, and the Internet of Things, the new retail self-service industry is booming. Unmanned retail, as a representative, has exploded with huge potential. Traditional giants and emerging startups have rushed in, but at the same time, the industry is accelerating its reshuffle.
At the recent Third China Unmanned Retail Conference and 2019 Shanghai International Unattended Retail Exhibition, hundreds of traditional retailers, unmanned retail companies, and smart vending technology hardware and software service providers jointly appeared, showcasing new technologies and trends in retail intelligence transformation.
According to data from Qianzhan Industry Research Institute, in recent years, the number of self-service vending machines in China has maintained a high growth rate of over 30%, reaching 310,000 units by 2018.
**Unmanned retail cools down**
"Supporting Alipay, WeChat, and face-scanning payment, a purchase can be completed in as fast as 10 seconds. We provide overall intelligent unmanned retail solutions, including related hardware and software..." A Yicai reporter heard multiple unmanned vending machine manufacturers touting their products at the Third China Unmanned Retail Conference. **The exhibition was lively, but the unmanned retail industry is turning from hot to cold.**
Once, from Bingo Box to Function Space, from RT-Mart to Tianhong, from unmanned stores to unattended shelves and small vending cabinets, "unmanned retail" was considered the hottest keyword in the new retail field in the second half of 2017.
According to iResearch data, by the end of 2018, there were more than 200 unmanned supermarkets and over 30,000 unmanned retail shelves in China. The transaction scale of the unmanned retail market (including vending machines) is estimated to approach 30 billion yuan, and is expected to exceed 65 billion by 2020, with a three-year compound growth rate of about 50%.
But starting from 2018, a number of unmanned retail companies have fallen. At the beginning of 2018, after receiving 100 million yuan in angel financing and 380 million yuan in Series A1 financing, Bing便利 (Bianli) was suddenly exposed to large-scale layoffs, shaking the industry.
In February of that year, the unmanned shelf project "GOGO小超" was reported to have stopped operations due to excessive expansion and placement strategy problems, only four months after opening. In July, Changsha's Fuli Gou unattended smart store moved less than a year after opening. At the beginning of 2019, unmanned shelf company Guo Xiaomei also announced the abandonment of its unmanned shelf business.
The unmanned retail sector, having shed its frenzy, has entered an adjustment period.
**"In my view, unmanned retail definitely has a future. But unfortunately, unmanned retail is now a 'premature baby.' Many of us doing unmanned retail today are actually promoting how to reduce the labor costs of convenience stores. More importantly, how can we truly satisfy consumers? Whether it's today's unmanned convenience stores or unmanned shelves, I find that they haven't found the real pain points."** Zhang Sheng, director and vice president of Lawson (China) Investment Co., Ltd., told Yicai reporters.
During interviews, reporters learned that a large number of unmanned stores or unattended shelves have highly homogenized products. **In the retail industry itself, such low barriers and homogenized operations reduce the core competitiveness of operators.**
**Unmanned stores must sell high-turnover goods, especially food and beverages, but these products indeed have high overlap across stores. It is very difficult to compete on product categories.** The product categories of unmanned stores or unattended shelves determine that the average transaction value will not be high, with per capita consumption only a few yuan to a dozen yuan, and daily turnover only a few hundred yuan.
Due to **the lack of front-of-house staff to supervise, the shrinkage rate is very high**. Some operators pointed out that if the gross margin of standard products is 20%, then with a daily turnover of 100 yuan, if 10 yuan of goods are lost each day, the business basically makes no money.
The next issue related to shrinkage is expansion. If shrinkage is too high, the more expansion, the greater the loss. However, expansion is necessary, especially for operators that have received hundreds of millions of yuan in capital; without scale, subsequent platform-based business models cannot be developed.
Jing Wei, executive vice president of Suning Technology Group, believes that unmanned stores are not simply about showcasing technology, but should focus on the combination of technology and commercial application. Only through fundamental reform and innovation can one stand out in the unmanned retail competition where opportunities and challenges coexist.
**Industry concentration increases**
**New technologies and new gameplay in new retail are continuously iterating and upgrading. For operators, competition in logistics, supply chain, and refined operations is becoming increasingly fierce, and subsequent operations are not easy.**
At the unmanned retail conference, a Yicai reporter saw the booth of the food company Want Want Group, which entered the unmanned retail field at the end of 2017, focusing on vending machines. To date, it has deployed more than 4,500 machines nationwide and set up 34 branch service points, planning to expand the number of unmanned vending machines to 10,000 by the end of this year.
Chen Yiliang, head of the vending machine operation center of Want Want Group, told Yicai reporters that the company's current vending machines are mainly deployed in schools, hospitals, railway stations, and other transportation hubs. Technologically, they have reached strategic cooperation with WeChat and Alipay, and are equipped with a free backend system for intelligent management and cloud monitoring platform construction, allowing consumers to purchase conveniently even without a mobile phone.
In terms of products, they only sell food and beverages under the Want Want brand, to capture the high-frequency demand for drinking water on vending machines. "Want Want's unmanned retail business is currently profitable. The company made this decision with a greater focus on accumulating consumer data through vending machines to provide reference for product development and market strategy," the person in charge said.
Food industry analyst Zhu Danpeng said that food companies entering the unmanned vending field is based on the increasing ineffectiveness of traditional channels. Under traditional channels, even with heavy promotional efforts and costs, it is difficult to drive sales. **New retail, including unmanned retail, is a future trend that will gradually replace 80% to 90% of the functions of traditional channels.**
From a forward-looking perspective, food companies can achieve traffic, fans, sales, and profits to a certain extent, but the companies themselves must have strength, brand, and a rich product line; otherwise, they cannot meet their own development needs.
Lawson also released a new multifunctional vending machine in Shanghai in April, integrating "vending machine + shelf + refrigerated cabinet" in one. Suning is also another major player actively investing in unmanned retail. Jing Wei pointed out that compared with other unmanned stores on the market, Suning's smart unmanned store has made multiple technological innovations.
"From 2000 to 2013, unmanned vending machines began to appear across the country, but they were not yet intelligent, and the rent for venues was not high. After 2013, capital markets began to enter, unmanned vending machine brands flourished, venue fees and rents began to rise sharply, and the number of existing machines continued to increase. From 2015 to 2016, after the concept of new retail emerged, FMCG companies invested a large amount of advertising fees in unmanned vending machine channels. 2019 is a turning point for unmanned vending machines, requiring more caution and rationality."
Chen Yiliang believes that with this wave of reshuffling in the unmanned retail industry, investment will become increasingly rational and cautious. The entry of traditional retail giants and even related large enterprises will make industry concentration higher and higher.
**Opportunities for vending machines**
The unmanned retail market currently mainly includes three forms. Among them, the self-service vending machine market started early and is relatively mature, with higher feasibility for intelligent technology transformation and application. Open shelves and unmanned convenience stores mainly began to explode in 2017 and are both in the early stages of development.
Compared with unmanned convenience stores, which have area requirements, higher shrinkage, and higher management and operation requirements, **unmanned smart cabinets have low cost, low shrinkage, small footprint, low negotiation costs with property management, and fast payback, and are unanimously favored by retailers and brand owners.**
According to data from the China Chain Store & Franchise Association, the number of unmanned cabinets in China should be 2.7 million to meet consumer demand, but the current number is still far from that.
Zhu Danpeng believes that the first stage of unmanned retail was the model of startup companies plus investment institutions in the past two years. When resources and hardware were not yet mature, experiencing cooling and reshuffling was inevitable.
In the second stage, after upgrades and revisions in channels, management, and other aspects, and after combining with big data technology, it has become an ecosystem with its own traffic. To meet the preferences and needs of new-generation consumers, companies will inevitably be interested in using unmanned retail formats to enhance their product brand, sales, and traffic. At this point, the industry side will meet this demand.
The rise of the unmanned retail market directly benefits the self-service terminal industry and related industrial chains.
In June this year, Hishen Technology, an AI company focusing on unmanned retail terminal platform business, announced the completion of a 40 million yuan Series A financing round, led by Zhejiang United Fund, with Lanjun Venture Capital following. The company's core technology is product image recognition. It has provided product recognition algorithm services to companies such as JD.com and Xiaohongshu. Since the beginning of 2018, it has been developing the G-BOX AI retail cabinet based on computer vision recognition technology, with deep cooperation with the well-known manufacturer Hisense Group, and is at the industry-leading level in multiple indicators such as recognition accuracy and speed.
After the unmanned shelf craze in 2017, unmanned retail once fell into difficulties and was generally not favored by investors. However, smart retail cabinets, as a new traffic entrance that reaches users at short distances and can connect online applications at the lowest cost, have become a key layout focus for giants such as Alibaba and Tencent.
In the upstream of the industry, New Beiyang, one of the main domestic manufacturers of intelligent unmanned vending machines, occupied one of the core booths at this unmanned retail conference. New Beiyang, which produced logistics express cabinets in its early years, has been focusing on three strategic areas since 2015: new retail, finance, and logistics. In December last year, the company also announced plans to raise 937 million yuan to develop smart retail.
Guosheng Securities analysis suggests that although the unmanned retail industry is experiencing a bubble burst period, against the backdrop of China's aging population trend and rising labor costs, the new retail business is expected to become an important medium- and long-term growth point, and the company is still expected to benefit under the general trend. New Beiyang's new retail business promotion in the first half of the year did not meet expectations, but the company is optimistic about future opportunities for continued expansion into downstream applications, maintaining a "Buy" rating.
In addition, retail channel provider Eternity is also increasing investment in new retail, represented by unmanned retail. The industry believes that the first half of intelligent unmanned retail is a "point war" of enclosure, while the key to the second half lies in refined operations based on one's own needs and positioning.
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## Citation metadata

- Publisher: New Distribution
- Author: 乐琰 陈慧
- Published: 2019-09-04
- Canonical: https://xinjignxiao.com/en/articles/why-is-unmanned-retail-cooling-down-93a01109/
- Original source: https://mp.weixin.qq.com/s/1d-xAcurLeZwGyjCFhq1IQ

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