Alibaba's cash-free policy at Hema meets consumer resistance

August 11, 2017 10:17
Some customers were upset when they found out they could not just pay with cash but must download an app to order and pay online inside Alibaba’s Hema stores. Photo: Shoplink

E-payment continues to gain traction in China and Alibaba’s Alipay has been one of the most aggressive promoters of the cash-free trend.

But recently, its Hema Xiansheng stores have drawn complaints from customers who prefer to use cash.

Located in large shopping malls in first-tier Chinese cities, the grocery chain aims to blend online and offline retail under one roof.

While Hema stores let customers order things like seafood and have it cooked on the spot, consumers can also place online orders and have them delivered to their doorsteps.

But one thing is definitely different from traditional brick and mortar shops at Hema: you do everything online.

That means you cannot just grab your stuff and pay at the cashier. Customers have to download an app first, and they can only pay online no cash, no credit cards.

Some customers, upset about not being able to use cash, have filed complaints.

Interestingly, the authorities have decided to side with the complainants.

The People’s Bank of China said rejecting cash payment in renminbi is illegal.

The central bank stressed that the renminbi is the fiat currency of People’s Republic of China, and as such, merchants should accept cash payment of the sovereign currency of the nation, although it's okay to reject credit card and other methods of payment.

While control of the currency to some extent represents the country's sovereignty, it also implies that the authorities are not yet totally ready for a cash-free society.

In response to the consumer complaints and the central bank's remarks, Hema Stores clarified that their shops have special counters to assist customers who do not want to use e-payment.

Customers can give cash to staff at these counters, who will then order or purchase on customers’ behalf using the store app and Alipay accounts.

But imagine the hassle for customers who do not conform with Alibaba’s cash-free norm.

Meanwhile, the PBoC has required all third-party payment institutions to channel transactions via a newly established central clearing platform, Nets Union Clearing Corp.

The move is seen as part of the central bank’s efforts to defend its power of issuing currency and its ability to monitor transactions and collect related data.

This article appeared in the Hong Kong Economic Journal on Aug. 10

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist