China possible ideal market for cashier-less technology: report

The number of machine-to-machine connections has skyrocketed in four years.

China could prove to be the ideal market for cashier-less retailing technology to take hold and grow as the number of machine-to-machine (M2M) technology is rapidly rising in the country, according to a report from Fitch Solutions.

M2M refers to technology that allows networked devices to exchange information and perform tasks without the manual assistance of humans. This has enabled retailers to roll out cashier-less services at traditional brick-and-mortar stores, Fitch noted.

Using computer vision, sensor fusion and deep learning, the store detects when products are taken off or returned to the smart shelves. Once shoppers are ready to leave, the items stored in a virtual cart would be detected as shoppers leave the store and then paid for using an existing e-wallet technology, the report explained.

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In China, the number of M2M connections has grown from 737.9 million in 2018 to 1.8 trillion in 2022. Over the medium term, the number of M2M connections will almost double from 1.8 trillion in 2022 to 3.5 trillion in 2026, with a compound annual growth rate (CAGR) of 20.6%.

“Particularly, as Chinese consumers are retaining the focus on essential spending as they have re-prioritised spending away from discretionary categories or moved down price points, we believe it would be players within the essential retail category such as mass grocery retailers that would stand to benefit,” the report stated.

Fitch noted that the economic realities of China's Covid-zero policy have already forced many households to re-prioritise their spending, while also trading down price points. Essential spending is also expected to outperform non-essential spending as Chinese consumers pivot spending focus on essentials.

In 2022, essential spending will grow by 6.7% y-o-y whilst non-essential spending will grow by 2.4% y-o-y.

“While we do not expect consumers to completely eliminate discretionary spending due to the weaker economic environment forecast for the Chinese economy over 2022, we do expect to see some shifts in spending patterns,” Fitch said.

As China continues to ease restrictions in key urban areas, Fitch advised e-commerce to consider taking advantage of both consumers who are avid users of e-commerce platforms as well as those who are eager to return to physical stores.

For instance, China-based e-commerce giant JD.Com opened The J Shop this month, a new flagship store, in the Chinese city of Chengdu.

“The store, which is a cooperation between JD and Chinese cosmetics retailer Perfect Diary, is the first of its kind in the country that incorporates both elements of traditional brick and mortar as well as e-commerce trends in China,” Fitch said.