Community-Focused Retailer Missfresh Speeds up Efforts to Digitalize China’s Wet Markets

On a morning in June, when the taxi I took cruised through the scenic streets in the eastern coastal city of Qingdao and arrived at a busy crossroads in the heart of the city’s most historic district, a giant building came into view with its striking pinkness breaking through the milky fog created by moist winds from the East China Sea. The flagship Fresh Market in Qingdao, a 5,500-square-meter modern wet market set up by Chinese grocery delivery unicorn Missfresh and painted in the brand’s signature hot pink color, stood on the Anshan No.2 Road and attracted nearby residents with an endless array of goods and a seamless shopping experience.

I was lost in a giddy mixture of fresh produce, meat and seafood when an old lady bumped into me and tried to make conversation. She asked me why I wandered in the market with a camera hanging around my neck, speaking in Qingdao dialect which confused me at first. As a Qingdao native, she told me that she has been living in the old part of town for a lifetime. “This wet market is an important place in our neighborhood,” she said. “I always come here to shop for everything from celery to shrimps.”

When it comes to food, Chinese people value freshness, so it should be no surprise that almost every neighbourhood has a public market – the so-called wet markets – offering more fresh produce and daily necessities than average supermarkets. Common in many parts of the world, notably in Asia, wet markets are a source of affordable food for many.

Situated in the Shibei District, the cradle of Qingdao’s industry, commerce and folk culture, Missfresh’s flagship Fresh Market has grown out of a decades-old wet market named Anshan No.2 Road Agricultural Products Market. Last year, the community-focused retailer signed a deal with state-owned Qingdao Chengyun Holdings Group, the market’s previous owner and operator, and established a joint venture to upgrade the once unsightly market. After a two-months-long shutdown for renovations, the market resumed business on May 28 with its name changed to Fresh Market.

Ms. Chu has run a tailor’s shop there for more than 20 years. She praised the improvements in sanitation and floor plan after renovations. “It used to be messy and chaotic,” she said. “But now, the effective ventilation and neat layout have created a delightful and orderly environment.” Ms. Chu emphasized she felt confident about the future prospects.

Besides old shops, the market has also attracted new businesses, with the number of merchants jumping from 100 to 211 after renovations, offering approximately 10,000 stock-keeping units.

Ms. Zhu opened her meat stall last month, selling grilled sausages. As a newcomer and a tech laggard, she said that Missfresh’s staff had helped her promote her sausages through multiple digital channels including a WeChat mini-program, which was launched by the company earlier this year and allowed customers to place orders, obtain coupons and join a membership program via their smartphones. Vendors also created WeChat groups for customers, in which they hold lotteries and unveil latest promotions.

As part of Missfresh’s efforts to digitalize the traditional neighborhood market, the firm has partnered with several banks to introduce its own QR code for mobile payments, which is connected to WeChat Pay and Alipay but has waived processing fees the two platforms could have charged the merchants. The Fresh Market also provides smart electronic scales for vendors, allowing them to track transactions and give printed receipts to their customers.

AI-powered cameras have been installed at the entrance of the establishment, monitoring traffic and profiling customers. The data is displayed on a screen set up at a control room, helping operators to optimize the merchants’ mix and improve the shopping experience for customers.

According to consulting firm iResearch, Missfresh is the only company in China’s neighborhood retail industry that deeply empowers both supermarkets and fresh markets retail through AI technology and retail cloud services.

Founded in October 2014, Beijing-based Missfresh operates an e-commerce platform and focuses on delivering fresh food and FMCG – including fruits, vegetables, dairy products, meat, and beverages – to customers’ doorstep at the fastest possible speed. The Tencent and Goldman Sachs-backed startup invented a so-called “distributed mini warehouse” (DMW) model, or the “pre-warehouse” model in May 2015. The system integrates storage and distribution functions to solve the last-mile delivery problem and allows the company to source the majority of its items from the origin directly.

As of March 31, Missfresh established 631 warehouses across 16 cities in China, shortening the delivery time on each order to 39 minutes on average. As one of the leading players in the country’s grocery delivery arena, Missfresh had accumulated a total of more than 31 million transacting users as of March 2021. Its market share of the domestic on-demand DMW retail industry by gross merchandise value (GMV) reached 28%, ranked first in northern China, according to iResearch.

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In an attempt to diversify outside its grocery services and bolster its community-based retail model, Missfresh launched an intelligent fresh market business in the second half of 2020.

The company opened its first flagship Fresh Market in Qingdao, but has ambitions to expand its intelligent fresh market business nationwide. As of June, it has entered into contracts to operate 54 Fresh Markets in 14 cities and has started to operate 33 of them in 10 cities. iResearch has called it the “industry leader” in terms of enabling traditional wet markets to accelerate digital transformation.

Wang Lin, director of the Fresh Market project, said that her team wanted to build a 5-in-1 destination for residents in China’s lower-tier cities. “Each letter of the word ‘fresh’ has a unique meaning: F is food; R is the restaurant; E means entertainment; S stands for services; H means health,” Wang said. “Home to a wet market, restaurants, entertainment venues, healthcare facilities and other services providers, the Fresh Market plays the role of a social services center in a neighborhood.”