As an alternative to Amazon Go and with a less complicated set-up than BingoBox, a Swedish-Chinese company claims to have found the sweet spot in staffless retail systems.
Having grown through startup incubation hub Y Combinator in Silicon Valley with their global bicycle café business Wheelys, the founders of MobyMart have found early success with their automated store format in partnership with a Shanghai fruit retailer.
“We currently have two stores operational which are no longer prototypes, with one in Hefei and one outside Shanghai,” says Per Cromwell, who co-founded MobyMart with Tomas Mazetti, Lina Mazetti and Bo Wu.
The company also has a prototype store with automated driverless vehicle capabilities, but because of legislation around the technology, Cromwell says it is still uncertain when this add-on could be applied in practice.
“Currently, we’re building stores which can be easily deployed in different locations, but they are not driving around,” he clarifies.
“It’s highly sensitive. If there are some issues with self-driving cars, then the whole rollout of self-driving cars can be postponed for years.”
Now up to ‘Version 5’ in the platform’s development, the team at MobyMart is busy enough with the static stores that can also be mounted on trailers or trucks to change location.
The first to open commercially was in a corner-store format, introduced in the city of Hefei thanks to the company’s tie-up with Hefei University, where Wheelys produces its bicycles.
“We created a mobile vending platform for coffee which then turned out another version with a mobile platform for vending everything, and that’s Moby,” says Cromwell.
After seeing initial success in Hefei, Cromwell says the plan was then to trial the technology with different types of retail and the first cab off the rank was fruit shop Taoyuanming.
“We found a very visionary fruit retailer in the suburbs of Shanghai, and basically they had physical stores but they wanted to have unmanned stores,” says Cromwell.
“We saw that we didn’t actually need to make too many adjustments to our existing system because basically what we had to do was pre-pack all the fruit — we needed to have fixed units and not have people buying by weight.”
Cromwell adds it is easier to get permission to sell the fruit as well if it’s pre-packed.
“If it had been somehow handled and sliced, like in fruit salads, it would have become much more complicated,” he says, adding there are around 50 stock keeping units (SKUs) in the store.
“So we just pre-packed all the different kinds of foods and added all the barcodes for scanning and the fixed prices of the products, and when we opened it up to the public it was an instant success.”
The MobyMart co-founder highlights the owner of Taoyuanming is so pleased with the results, he plans to open two more automated stores in early 2019.
“And if these perform well, I think he’ll go for a more aggressive expansion with staffless stores,” says Cromwell.
Offering a solution to smaller players
China is a very tough retail market to enter, with a high degree of digital sophistication amongst consumers, coupled with market scale and data advantages for large conglomerates such as Alibaba and Tencent. In this context, Produce Business UK asks Cromwell how MobyMart can grow a larger niche.
“What we’re doing, as far as I know, no one else is doing,” he responds.
“We’re going to operate our own stores, but we’re also going to provide a platform for other small retailers.”
He emphasises other companies in the space such as BingoBox — a group backed byQiming Venture Partners, Source Code Capital and Ventech China — operate their own stores with their own brands.
“But if you are for instance a fruit store outside Shanghai and you want to expand from a few stores to 10 stores in your neighbourhood, then you can’t really start buying BingoBoxes because it’s quite complicated and expensive technology,” he says.
“They’re quite expensive to buy and they have to be branded BingoBox.”
In contrast, he proposes a retail outlet can still use their own brand in a deal with his company, provided it has the slogan ‘Powered by Moby’ on the store.
“And we have a quite efficient technology that doesn’t rely for instance on the Amazon technology, which is extremely expensive,” he says.
But what is it about the technology that’s so cost effective?
“For instance, BingoBox invested heavily in RFID (radio frequency identification) technology. I guess they were calculating that this would be standard in all products,” says Cromwell.
“We were using our phone as scanning existing QR codes and then using a multisensory system where we have sensors in the shelves and we have cameras,” he says.
In its essence, this model relies on customers themselves scanning the product, while the cameras and sensors serve as a back-up.
“Together these systems will give us a very high probability of knowing what the customer has bought,” he says.
Although MobyMart uses facial recognition technology for consumers to enter the store, the “very simple technology” of scanning barcodes on your phone allows for opening “a lot of stores at a very low cost.”
“BingoBox need to add RFID sensors on all the products and there are limitations to how many products you can scan at the same time, and there are a lot of problems sorting these problems out,” Cromwell says.
“Amazon is also trying to do it completely seamless, which complicated the systems with the different sensors and cameras — it will exclude a lot of low-margin retailers because the system itself is so expensive.”
Keeping costs low with a staffless system
To call the automated stores ‘staffless’ is not entirely correct as someone still needs to change inventory and make sure everything is in order, but it certainly leads to fewer staff.
“With the example of the fruit store, instead of having one person waiting for the customers where you have one person locked to that store, he will be operating with the staffless system,” says Cromwell.
“It won’t be 100 percent staffless because you still need someone circulating the store and making sure everything’s fine and restocked, but one person in one day can operate eight to 10 stores depending on how spread out they are.
“So you have much more efficiency with the staff you do have.”
Cromwell says the cost of operation at MobyMart-powered stores will vary according to several factors.
“What you’re paying for is rent of the space you take up, which is usually quite low because it’s places like parking lots; not prime retail spaces,” he explains.
“Then there’s electricity and that very much depends on where you’re operating; if you’re operating in a very hot area, that cost of air conditioning will be very high, but basically you have a very low running cost for stores.”
Cromwell adds that artificial intelligence (AI) and big data also will help store operators know what products will be needed at what locations and at what time.
“If we have a request of some sort, that is something that will also solve the last mile problem,” he says.
“We will be able to sell the store for close to US$15,000 (£11,662) with the whole store and the system. That makes it possible to deploy them in all sorts of locations, which will be a very good accessible pick-up point for parcels that you order online.”
MobyMart has taken on several forms since the first prototype as “like a spaceship driving around,” with the fruit store as Moby Mart 4 and the fifth one as a “very modular small version.”
“I don’t think we will stop trying out different versions — we’re basically still in the heavy development stage of the different stores, but the technology will stay the same,” says Cromwell.
“It can be installed in brick-and-mortar stores, as well, but we think it’s more interesting to create these retail pods and stores as we think mass production is key for getting the price down so you can get a very quick return on investment,” he says.
The co-founder believes this in turn will lower the threshold for retailers that want to operate in the countryside, or areas where retail traditionally has not been profitable enough.
“In Europe, I think we will start in Sweden as it’s well known to us, but the problems are quite similar in all of Europe actually,” he says.
“Whether it’s the UK, Germany, France or Sweden, it’s harder and harder to find stores in the countryside — there’s a big need to establish the small corner store, and that’s probably where we’re going to go in the European market.”
And although China will be the big focus in 2019, Europe and North America are in MobyMart’s sights.
“In the U.S. market I can’t go into too much detail, but since we have a background on the West Coast — we went to Y Combinator with bicycle cafes a couple of years back — we have some of our previous early investors, both in Moby and Wheelys, in Silicon Valley,” he says.
“So we’re going to start on the West Coast. Most likely we’re going to start late Spring 2019.”
Another co-founder, Tomas Mazetti, clarifies MobyMart’s major investors are a Chinese fund called Morning Crest, as well as various Silicon Valley angel investors.