Unmanned Stores Embraced by Chinese: Are They the Future Shops ?

In July, the Chinese e-commerce giant Alibaba opened its first experimental unmanned store Tao Cafe in the company’s home-city Hangzhou. Shoppers just need to scan the Ali-Pay app to go in, grab stuff and walk out. Money is automatically deducted from the Ali-pay account.

Alibaba did not initiate the idea of unmanned stores. Amazon, the US online retail company, first envisioned this concept and opened a cashier-free store at the end of 2016. But the Chinese company takes a step further. Other than just opening up to its own stuff like Amazon, Tao Cafe welcomes all Ali-Pay users in the city.

Tao Cafe caught great attention on its opening day. The 200-square-meter store can accommodate 50 customers at a time, offering beverages, fast food and snacks. There was a long line of people waiting outside the store with excitement. Shoppers were attracted both by the futuristic shhopping experience and the fact that the products available were 20-30% cheaper than those in traditional convenience stores.

In order to get in the shop, customers must download Alibaba’s Taobao app on their phones. Each door has a gate, which resembles those found on subways, where shoppers scan their personal QR code upon entry. Customers don’t need to checkout after finishing selecting goods. Money is automatically deducted from the money account of the app after they walk out.

Tao Cafe is still in the testing process. But a start-up company already opened a 24-hour unmanned convenience store called Binguo Box in Shanghai in June. Customers need to scan a QR code from Alibaba, or WeChat app, a powerful competent of Alibaba, to get in the store. Sensors and cameras scattered throughout the area identify items in the shoppers’ carts and automatically charge the customer’s Alibaba, or WeChat Wallet, as they walk out the door.

Unmanned stores use a mixture of mobile phone technology, facial recognition software, and a smattering of personal accountability. Binguo Box claimed that during the ten-month period of pilot run in other cities, not one theft was discovered, as in-store cameras use facial recognition to check for unregistered users who shouldn’t be on the premises.

This business model is becoming popular among Chinese people. Part of the appeal is that companies get to significantly reduce the cost of labor, which makes the prices competitive. Currently, Tao Cafe only has several staff to help the customers understand the shopping process. Once these stores become commonplace, no staff are needed. Binguo Box has located ten stores in various cities. It said that only four staff members are needed to run around 40 stores. Binguo Box has raised 15 million US dollars in funding to expand its business.

Despite of the growing popularity, there have been complaints from customers, who say such stores are neither smart nor convenient, due to tech glitches they have encountered. Facial recognition system sometimes don’t work properly. The machine may recognize the wrong person. Even though the companies explain that it doesn’t affect the final payment, its doubtable if the artificial technology is advanced enough to be utilized into reality.

A theft recently was reported by a unmanned shop owner, who claimed that several people rip off the payment code attached to the product and walk away without payment. Some unmanned stores can not detect those unethical behavior.

And Bingbo Box has halted its operations in Shanghai twice since June because of the poor air-conditioning. Chocolates and ice creams melted under high temperature.

The popularity of unmanned stores in China has benefited from the prevalence of mobile payment technology. China has been a world leader in mobile and social payments while the US and Europe have been slow to adopt them. You can literally pay for everything, from your movie tickets to groceries, all by your phone. China’s banking institutions handled more than 25.7 billion mobile payments last year with a transaction volume of 157.55 trillion yuan (23 trillion U.S. dollars), according to a report by the People’s Bank of China, the central bank.

But is mobile payment as safe as cash or traditional card payment? The answer is not a definite yes. Because the seemingly innocuous barcode may be hiding malevolent software ready to latch itself onto your smartphone and drain your bank account.

In Guangdong province, about 90 million yuan (US$13 million) has reportedly been stolen via QR code scams, according to a recent report in the Southern Metropolis Daily.

QR codes were invented in 1994 by Denso Wave, a unit of Japan’s largest automotive parts maker, for the purpose of quick scanning when tracking vehicles during the assembly process. The codes soon spread to broader usage from the car factory to everything from consumer purchases to social media.

Unfortunately for the unsuspecting consumer and law enforcement agencies, QR codes are easily penetrated and manipulated, and cannot be verified as genuine by the human eye. These two factors have made the cybercriminals’ task that much easier.

There is a also a chance that people’s money account on the phone can be used for unauthorized purposes. Alipay, the biggest mobile payment provider in China , encourages authors to pay without using pins for single transactions under a certain amount, varying from 200 yuan to 2000 yuan($30-$300). If a owner loses his phone, others can easily open the app and make payments. And it’s very difficult to make complaints and get the money back. This service has been criticized by many people, but there is no sign that the company wants to cancel it.

There is also another big loophole with Alipay. It’s easy to change the owner’s Alipay pin. People just need to use the cellphone to receive a verification code, without even knowing the original pin. It means that when you allow others to have access to your phone, you are exposing your money account to danger.

What’s more, while people enjoy the convenience of cashless technology and unmanned stores, they might not notice that they are giving up part of their privacy. Potential customers must register with the company using their real identity before allowed into the shops. The shops use facial recognition to monitor the shopping process. It means that from the moment customers enter the store, their every move is recorded. The companies can get all the data like the time shoppers make purchases and the items they buy easily. Do you trust those small start-ups with those data? Or maybe those data can easily be hacked and all your information is exposed?

When it comes to privacy, we need to talk about the two tech giants, Alipay and Tenpay who dominate the e-payment market. Payments on messaging and e-commerce platforms like Tencent and Alibaba are set to increase China’s GDP by $236 billion by 2025. Alipay, and Tenpay together hold a commanding 90 percent of the market. Alipay had a market share of 54.5% by the end of 2016, while Tenpay came second with 37%. The more we rely on mobile payment, the more we trust our privacy with those two companies. Their mother company, Alibaba and Tencent can collect all the big data through their social media, online shops and various other platforms. The data is later combined and analyzed and will further help the companies target you.

Besides, China is a country that government imposes tight control on enterprises. The two companies will have to turn in all the collected data to Beijing if asked to. Thus users’ privacy will further be monitored and could even be violated by the government.

References:

Nir kshetri.. “Big data’s role in expanding access to financial services in China.” International Journal of Information Management (2016): 297-308

McTaggart, T. R. & Freese, D. W. (2010). Regulation of mobile payments. The Banking Law Journal, June, 127: 485–496, p. 486.

Li, Z. & An, Y. (2014). Legal issues of mobile payment in China—Principle of liability allocation. Journal of Yunnan University Law Edition, vol. 27, No. 4, 91–96 (in Chinese).

Hwang, Y., & Lee, K. C. (2012). Investigating the moderating role of uncertainty avoidance cultural values on multidimensional online trust. Information & Management, 49(3–4), 171–176.