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July 1, 2014

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Home » City specials » Hangzhou

Delivery firm tries to move to online sales

By Xu Wenwen | July 1, 2014, Tuesday | Print Edition

IMAGINE you are in a store without any actual products. There are only pictures, and in your pocket you have neither cash nor credit card. Yet you can make a purchase and the goods will be sent to you the day after purchase.

The business model is drawing kudos from some quarters but criticism from others, who say it differs little from online shopping.

Since May the country’s leading express company, SF Express, has opened more than 500 neighborhood service outlets in 70 cities nationwide. These stores, called Heike, allow customers to place orders online, try out products, and collect packages.

There are about 50 Heike stores in Shanghai and Hangzhou, while SF’s ambition is to open 4,000 stores in the country by the end of this year.

“SF currently has more than 40 million clients, all of whom are potential customers for the stores,” said Yang Xiaowei, manager of the public affairs department of SF Express.

SF Express has almost 240,000 employees in 7,800 service centers worldwide. Its revenue last year was 28 billion yuan (US$4.5 billion).

Opinions about Heike in recent months have become controversial. Some say it’s a new form of O2O (online to offline) shopping, while some say it is no different from online shopping except that the customer needs to be at the store.

Shanghai Daily toured some Heike stores in Hangzhou recently.

A typical one is 20 to 40 square meters in size, with just one to three items, lots of photos with QR codes on walls, and one or two touch-screen computers to access the inventory of goods.

This is how it works: A customer chooses an item on touch screens in the store or by scanning the QR code, then clicks the “purchase” button and gets the object delivered the next day at home or at the store.

Photos on the walls are just a tiny portion of all the available products. Most are found in the store computer that accesses several online shopping websites that cooperate with Heike. They include mbaobao.com (mainly selling bags), feifei.com (provides daily goods), and sfbest.com (SF’s brand that sells fresh foods).

SF considers this a double-win situation.

Heike charges advertisement fees and commissions from shopping websites, while the websites get extra business.

Also, “customers do not need to go to the original shopping websites to complain, or change items or get refunds. Heike can do all the work,” said Yang.

“We target people who are not sensitive to price, who pay more attention to service and product quality,” she said.

But the purchase experience for a Shanghai Daily reporter was not quite smooth: The store offers no wifi despite the QR codes everywhere. Also, prices on the photos are not the same as those on the websites. They may be higher or lower, and sometimes the online platforms are out of inventory.

“The photos were taken a month ago, and prices on websites prevail,” explained a saleswoman.

Why should people bother to come to a real store to make online transactions they can do at home?

“We provide a try-out service so a customer can try before buying,” said Wang Yingjiao, who is in charge of Heike’s Hangzhou area.

Yet in stores there are very few of any goods, compared with the almost limitless quantities on shopping websites.

Wang explains that SF is developing “Just In Time” inventory system,  which will allow customers in the near future to order things they are considering for a free try.

“The ideal situation of Heike is: Customers think about Heike once they need something,” said manager Yang. She said the store is adding other services, including ATM, laundry, home appliance repairs, air ticket bookings, utility bill payments, and some stores in Shanghai also provide certificate photo shooting.

“Heike now is in a trial run and what the store now looks like is not what it will like in the future,” Yang said. “Only when the number of Heike is big enough can the ideal be realized, and that has a long way to go.”

To kill the last kilometer

“The original intention of Heike is to kill the last kilometer,” said Yang, referring to a concept in logistics that expects customers to pick up and send packages at a certain spots so a delivery person does not need to go to every customer.

“To receive goods at a certain spot — for example, a Heike store, does not require a person’s detailed address and phone number, and therefore protects customers’ privacy; also, consumers can choose when to pick up their stuff,” Wang said.

Online shopping was a revolution, but what these magnets of e-commerce and logistics are doing is the reverse: going from online to offline.

It is not completely new. Alibaba.com and online retailer JD.com also have set up spots for people to drop and pick up packages.

And of course it’s not new at all for a company to combine e-commerce and logistics. Alibaba.com established Cainiao Logistics last year, and JD.com has been delivering everything by its own logistics JD Express since 2012.

What makes SF different is it is a logistics company trying to step into the e-commerce field, and it’s poised to make a big bet by investing a huge sum of money to run 4,000 stores.

SF officials won’t say how much they plan to invest and how soon they expect to make a profit.

Hangzhou


 

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