At the recent Third FMCG + Internet Conference, New Distribution released the 'China FMCG B2B Competitiveness White Paper', in which Retail Link ranked first in comprehensive competitiveness among 124 B2B platforms in 22 major Chinese cities. During this year's Tmall Double 11 Global Shopping Festival, Alibaba Retail Link achieved impressive results with 600,000 small retail stores participating and a 177-fold increase in transaction value. Behind this, what exactly has Alibaba Retail Link done to become the preferred choice for brand owners, distributors, and small store owners?

Yesterday, at the 'Looking at China' high-end economic forum co-hosted by Peking University's Guanghua School of Management and the Ali Research Institute, Lin Xiaohai, Vice President of Alibaba Group and General Manager of the Retail Link Business Unit, explained to reporters what Retail Link is currently doing and which industry pain points it addresses:

Retail Link has been doing two things: building a smart distribution network with brand owners and distributors to achieve channel digitalization; and enabling a million small stores to embrace the DT era for upgrading and transformation.

Brand Owner Pain Point: Deep distribution brands face high costs, while shallow distribution brands have insufficient coverage density

Hans-Peter Edelbluth, General Manager of Perfetti Van Melle China, told reporters that Perfetti Van Melle is one of the world's largest candy manufacturers, having entered the Chinese market 20 years ago. It currently operates four brands in China: 'Alpenliebe', 'Big Babol', 'Mentos', and 'Fruittella', covering approximately 620,000 physical stores. Although 99% of Chinese consumers are aware of brands like Alpenliebe and Mentos under Perfetti Van Melle, only about 25% actually purchase them. Insufficient store coverage is the biggest pain point for internationally renowned brands like Perfetti Van Melle.

Lin Xiaohai stated: 'For medium-to-shallow distribution brands like Perfetti Van Melle, they do not have an in-depth distribution network nationwide, nor do they have an in-depth warehousing and distribution system or a large number of salespeople. They typically have around 100-300 distributors. Retail Link can help them achieve channel下沉 (channel sinking) by building regional warehouses and forward warehouses, covering more regions and more small stores in China.'

Not only for such medium-to-shallow brands, but also for deep distribution brands like Master Kong, which has nearly 2,000 distributors nationwide, Retail Link will provide a digital trading platform to help brands complete the digitalization and informatization of transactions, thereby reducing logistics costs, improving warehouse turnover rates, and enhancing terminal marketing capabilities.

Previously, Perfetti Van Melle had conducted a preliminary marketing trial with Retail Link. Consumers who entered the Alipay password red packet phrase 'Mentos Cool Summer' could receive a 5-yuan red packet and use it at small stores served by Retail Link. This small attempt brought considerable foot traffic to the stores and showed brand owners more possibilities.

Lin Xiaohai said that by co-building a distribution network and digitally transforming the sales chain, brand owners can operate small stores like fans. They can receive timely feedback on how much stock each store has taken, which products are suitable for store promotions, and even store opinions, thereby establishing connections with stores and reaching end consumers faster.

Distributor Pain Point: High operating costs, thin profits, and insufficient customer integration and control.

Mr. Lü Guangjun, General Manager of Tianjin Meiyida International Trade, started operating beverages and alcohol a decade ago. After initial success and gradual growth, his business saw some decline before cooperating with Alibaba. High operating costs, thin profits, and insufficient customer integration and control were his biggest concerns.

Lin Xiaohai believes: 'Any deep distribution brand in China has more than a thousand or even two thousand distributors nationwide. They have low warehousing and distribution costs, high delivery efficiency, and the deepest distribution. These are their advantages. Alibaba Retail Link has proposed a complete set of solutions for distributors' pain points:'

Step 1: Retail Link hopes distributors will share their entire system. For example, Master Kong's distributors originally only sold offline within their county or district. Retail Link puts their product information on the APP, and through their salespeople, installs the Retail Link APP on the 1,000 stores they cover. Then, through their warehousing and distribution, Master Kong products are delivered to each store.

'What we do is provide a digital trading platform, help them get orders, and dispatch orders to themselves for them to fulfill. In this process, we complete transaction informatization and digitalization, while also improving efficiency.'

Step 2: Retail Link will select some distributors with strong warehousing and distribution capabilities and strong coverage from among the vast number of deep distribution distributors as partners. Retail Link will make them enterprise partners in their local counties and districts. They will act as our salespeople, helping us cover these stores, install the APP, cultivate store usage habits, and even provide after-sales service.

Step 3: We hope to integrate their warehouses and distribution into the entire Retail Link system, making them Retail Link forward warehouses responsible for last-mile delivery.

At this point, some medium-to-shallow brands can use Retail Link's self-built city warehouses and regional warehouses, leveraging the APP traffic generated from cooperation with deep distribution brands to bring in sales of these medium-to-shallow distribution brands. Then, through the Cainiao system, we distribute products from forward warehouses and regional warehouses to the nearest forward warehouse to the store, which might be a distributor of a deep distribution brand, where orders are consolidated for last-mile delivery.

'Our dream is to use the capabilities and low costs of these brand distributors to serve the entire FMCG industry,' Lin Xiaohai told reporters.

After cooperating with Retail Link, Mr. Lü Guangjun told reporters: 'For distributors, I feel we have indeed gained many benefits.'

'If a small store owner needs to stock up, they first transfer money to the third-party Alipay. When the goods are delivered to the store and the owner confirms receipt, the payment is immediately credited, eliminating the previous problems of arrears and payment cycles. In addition, our delivery capacity far exceeds our previous delivery methods.'

'For example, from point A to point B, previously we only went from A to B, one or two stores. Now, after cooperating with Retail Link, from point A we have added A2, A3, and many more. From that point to another, we have added many customers, including new product launches, which have been promoted very well, much better than we previously imagined.'

Small Store Pain Point: High market environment pressure, with medium-sized supermarkets and foreign hypermarkets everywhere, price competition leads to reduced foot traffic and continuously declining profits.

Mr. Hu Dongdong, head of Jiyoujia Supermarket, told reporters: 'Small stores suffer from outdated business concepts, lack of professional store management guidance, and high market environment pressure. Around small stores are medium-sized supermarkets and foreign hypermarkets, and price competition leads to reduced foot traffic and continuously declining profits.'

'Another issue is cooperation with traditional local suppliers. Previously, we might have dealt with dozens or even hundreds of salespeople, and their daily visits were annoying. Moreover, when cooperating with local suppliers, product prices were relatively high, leading to a serious problem: inventory pressure for small stores. Once there is inventory pressure, it may affect sales of subsequent products.'

Lin Xiaohai told reporters: 'The service Retail Link provides to small store owners is first of all product services, which have several levels. First, the fast-moving consumer goods that small stores sell already have channels, and we also have them. Quality is more guaranteed, prices are more competitive, and service is better. This is the most basic service I provide, and through these FMCG products, I establish connections with small stores.'

The second step of product services is that small stores certainly hope for differentiated operations, so they need more differentiated products. As the brand expands, we will gradually accumulate some differentiated products exclusively represented by Retail Link. These products include Tmall brands coming down to offline, international brands entering China, and industrial product channels. These are Alibaba Retail Link's differentiated products that can be provided to small store owners to meet different consumer needs based on their sales scenarios.

'Currently, most small stores can sell ambient temperature products, but for low-temperature, frozen, and cooked food products, they usually lack supply chains and sources. Retail Link is currently cooperating with various cold chain service providers. Through cooperation with Retail Link, small stores can bring in a rich supply chain, thereby increasing customer stickiness,' Lin Xiaohai said. As customer stickiness increases, Retail Link's intelligent devices can also help small stores manage their stores and consumers. When products, transactions, and consumers are all digitalized, the operational efficiency of small stores improves. At the same time, this data can feed back to distributors to provide more suitable products for small stores, forming a closed loop of synergy and resonance.

Deng Wenli, owner of Jiaxing Haojie Supermarket, first purchased from Retail Link in early 2016. She said one of the benefits of Retail Link is that the minimum order quantity is low, giving small stores more opportunities to try new products. 'When I see new products on the market, I pick a few to try selling in the store. If the market response is good, I increase orders.'

Retail Link's differentiated products have also benefited Deng Wenli. She said: 'When communicating with peers, they say business is getting worse, but I feel it is getting better because my products are different from other stores, with imported beverages and snacks. What others don't have, I have here, so repeat customers naturally increase.'

Lin Xiaohai revealed that Retail Link will gradually accumulate a number of small retail stores with good service quality and high owner awareness as partners, and upgrade them into Tmall Small Stores through a brand authorization model. 'The greatest value of Tmall Small Stores is connecting online and offline traffic. In the future, consumers within one kilometer of a Tmall Small Store can open the mobile Taobao app and see the Tmall Small Store card, then place an order directly. The store owner can deliver the products the consumer needs within 30 minutes, thereby increasing revenue and profit.'

Professor Shen Qiaowei from Peking University's Guanghua School of Management believes: 'Retail Link has two layers of value. The first layer is the improvement in efficiency, such as brand owners being able to find broader channels and reach more consumers. For small stores, they can organize more sources of goods and better serve consumers. This efficiency improvement is probably only the first layer; more importantly, the second layer is the digital integration. Previously, each participant had their own data. Brand owners also did small surveys about what flavors consumers like, but they didn't know who actually purchased at the point of sale. Stores also have a series of consumer data, such as which products were purchased, but they don't know what potential needs the people living nearby have. This information is lacking. And these are precisely the value of Retail Link.'

In the future, the direction of new retail must focus on two points: one is the improvement of consumer experience. The other is the improvement of overall efficiency. Behind either point, digital support is needed, and this is precisely what the platform can uniquely provide.

Lin Xiaohai summarized to reporters: 'What does Retail Link do? Retail Link basically does two things:'

    1. Together with brand owners and distributors as partners, we build an intelligent distribution network. This is channel transformation, channel sharing, and channel efficiency improvement. This is the first thing we do, which we call co-building an intelligent distribution network.
    1. Help offline small store owners like Mr. Hu, enabling a million small stores to embrace the DT era, helping them upgrade and transform, and making their business better. These are the two things Retail Link wants to do.

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