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China’s Guangzhou Tengshi secures further funding to expand automated convenience stores

The company plans to increase its outlets to as many as 500 next year in its home base in Guangzhou, but will still employ people in each store

PUBLISHED : Tuesday, 12 December, 2017, 12:08pm
UPDATED : Wednesday, 13 December, 2017, 12:28am

Chinese automated convenience stores operator Guangzhou Tengshi Information Technology has completed its third round of funding, from four investors, including two Chinese venture capital firms, as it looks to invest in store expansion and technology.

Founder and chief executive Luo Jiecheng said that Zhejiang Youchuang Venture Capital and Lanshan Venture Capital (Beijing) Consulting were part of the financing that brought in “over 10 million” yuan (US$1.5 million). The other two investors included a food manufacturing company and an individual investor.

The new capital will help Guangzhou Tengshi expand the number of its stores, which operate under the brand name “Magic House”, in the southern city of Guangzhou to between 300 and 500 next year, with each shop 60 square metres in size. It currently operates six stores in the city’s Tianhe district.

Unstaffed and automated convenience stores have mushroomed in China in recent months as retailers look to improve slim profit margins by reducing staff costs.

Top e-commerce companies Alibaba Group Holding and JD.com have moved into the business, while Bingobox runs completely unstaffed convenience shops of about 10 square metres in size in Shanghai, with products supplied by French supermarket chain Auchan.

Typically, customers use a mobile phone to scan a QR code to gain entry, and then pay for goods with mobile wallets.

BingoBox to expand its unstaffed store concept beyond mainland China

However Luo said he believed that Chinese consumers were not yet ready for a completely unmanned shopping experience, as people still required a level of human guidance. Hence all Guangzhou Tengshi stores would still be staffed by two people, contrasting the do-it-yourself approach of other competitors in the field, he said.

But the company will continue to develop artificial intelligence and other technologies. It currently uses AI in the areas of facial recognition and the management of big data related to customer shopping frequency and the types of product bought.

“Customers’ accounts are only debited three hours after a transaction, using the data we captured through facial recognition which will be matched with our internal data for that customer. The debit will happen after the customer, who must be a registered member, does not contest the transaction details that we send back to their mobile phones,” Luo said.

“We will use the newly raised capital to further deepen research on artificial intelligence, and to standardise the technologies we currently use in supply chain management and product sourcing,” he said.

Unmanned stores in China still working on a seamless shopper experience

Established in late 2016 with seven people, the company now has over 40 employees, half of whom are engaged in research and development. Luo added that currently all six stores are profitable. The firm has no plans to expand outside Guangzhou.

In two earlier funding rounds in April and September this year, Guangzhou Tengshi secured a combined 3.6 million yuan from two investors.

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