Customers are experiencing “virtual consumption” in a self-service store at an exhibition in Hangzhou in 2017.

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In addition to BingoBox, Taocafe, the self-service café of e-commerce giant Alibaba also opened doors in Hangzhou, providing shopping experiences using automatic recognition and checkout without lining up. In an age of mobile internet, the disruption caused by e-commerce has raised concerns in offline retail. Self-service retail has become increasingly attractive to investors.

Behind the new retail business is a collection of technologies related to the internet of things, including autonomous perception, target-tracking and analysis, intention recognition and transactions, said Zhao Peng, manager of new retailing business department in Tmall, the e-commerce platform under Alibaba. At Taocafe, a customer enters by scanning a QR code and before leaving the café, they will pass through a payment door, which will automatically deduct the amount from their account.

The first BingoBox was opened in August last year. The company plans to open 5,000 more in 2017. BingoBox is currently focused on convenience and emergency goods, including instant foods like cookies, dairy products, drinks and other convient goods. When the supply chain is mature, goods with frequent and rigid demand, including fresh foods, will be added, said Chen Zilin, the CEO of BingoBox. All these decisions will be made based on the preferences of the customers, and the commodity channel will be consistently optimized, he said. Meanwhile, cooperation with resource channels of global retailers will allow the stores to deliver the goods at a lower cost than normal convenient stores, Chen added.

In the all-digital retail experience, the stores will get a clearer image of their customer, for example, which shelves capture customers’s attention and which products sell the best at what times, Zhao said. By combining big data with other technologies, sellers will be more reasonable and precise in managing the goods and the shelves, which will ultimately make customers feel that the store understands them more, he added.

The advantages of self-service retail are becoming more apparent in light of the rising labor costs in China’s retail sector. Chen said that self-service retail will be able to solve the problems of high rent as well as labor and operation costs. A BingoBox store of 15 square meters will be able to sell as many goods as a traditional store of 40 square meters does, he said. Four employees will be needed to manage 40 BingoBox stores, responsible for matters including technological maintenance, replenishment, arranging the shelves and cleaning. Therefore, it greatly reduces labor costs, Chen said.

The technological problems of self-service retail are the focus of the debate within the sector. The problem of credit guarantee is also a focal issue. BingoBox adopted an identity verification system, Chen said. Systems of comprehensive monitoring and facial recognition are also used in the stores to record and guard against criminal behavior, Chen said. Payment for goods is automatically detected and the customer service department of the company is notified in the event that customers fail to pay, he added.

The potential for self-service retail might not be that enormous if the market does not expand, said Xia Xiaohua, an associate professor from the School of Economics at Remin University of China. Currently, self-service retail only accounts some of the current market share, Xia said. It does not create a new market and that is the hidden risk of self-service retail, he said. Starting a new market while analyzing the consumption data will provide long-term vitality to the self-service stores, Xia added.