Text by Qian Qian From 24-hour chain convenience stores to unmanned convenience stores, from O2O to self-service office unmanned shelves, consumer touchpoints in first-tier cities are everywhere. As long as they exist, you can buy satisfactory products anytime. However, the consumption environment in third-tier and below cities is not so ideal. The Pain of Small Shops: Hard to Stock, Slow to Sell "In the future, I'll buy tissues for my kids online. The ones from the shop at the door seem to break easily." A mother who just had her second child said in a friend group that the tissues she bought from the small shop downstairs seemed not to be genuine, but the appearance and price were the same, so she felt embarrassed to confront the owner who had been there for years. However, she is just one example. Consumption in small cities is upgrading, but what's around them can't keep up with their quality demands. Counterfeit goods that are hard to claim against, and dusty old packaging, can come into view at any time. Behind this lies the chaotic sourcing of retail small shops and the backlog of goods caused by inaccurate ordering. Wang Liang from the New Business Department of China Supply and Marketing Group pointed out that a large part of goods in rural small shops come from "itinerant merchants" who drive cars and provide goods at prices lower than normal channel prices. Counterfeit "Shi San Xiang" (Thirteen Spices) often appears as "Shi Er Xiang" (Twelve Spices) everywhere. Another retail industry observer pointed out that in the past, when brand products reached distributors, the data chain broke. This is a headless approach because without terminal data, it's impossible to truly solve brand operation efficiency. "Distributors used to have stock products; if they could use terminal data to guide ordering, their products would become incremental." It's clear that small shops and brand owners each have their difficulties, and they urgently need reliable supply chain platforms to "rescue" them. Thus, in 2-6 tier cities, counties, and towns, Alibaba Retail Link, JD New Pathway, Yi Ding Huo, Zhang He Tian Xia, Gong Xiao E Jia, RT-Mart e-Lufa, Zhong Shang Hui Min, etc., have entered the FMCG supply chain market with channel sinking. They hope to bring changes to 6.8 million mom-and-pop stores through digital means. The Challenge for New Platforms: Role Transformation "From brand owners, distributors, small shops to customers, the digitalization of all nodes must be connected," said a person in charge of Retail Link. In the past, brand owners only focused on production but didn't know the changes in consumer purchase decisions and needs. Retail Link hopes to create a precise channel for brand owners, "so that brand owners can see their business in the workbench, achieve digital channel management, digital new product launches, and operate their distributors, stores, and even consumers." In this way, small retail shops are no longer just sales and distribution channels but the main battlefield for brand marketing. Other similar FMCG B2B platforms have similar ideas. The strategy of "enabling full-chain digitalization for small retail shops and using data-driven methods to reconstruct people, goods, and venues" is clear, but for those small shops with low digitalization, accepting new things is not simple. Ebang Power visited five mom-and-pop retail stores in Northeast China, and the situation of using online ordering platforms was somewhat unexpected. Among the surveyed stores, only one said they would use online channels for stocking, while the rest continued with their original stocking partners. It's worth noting that the only merchant using online platforms was not due to an awakening of digital awareness but because of online discounts. "These ordering platforms like Retail Link, Zhang Gui Bao, and e-Lufa, if there are discounts, I'll order; if not, I'll wait and call for delivery," a small shop owner in Henan said bluntly. He wouldn't stick to Zhang Gui Bao for timely delivery or e-Lufa for richer products; these advantages are not as good as "a box of water being one or two yuan cheaper," and the original distributor "acts quickly" and cooperates happily. This mindset means platforms find it hard to get truly complete data. Whoever wants to guide small shop operations through data and improve efficiency needs to aggressively expand territory. Both Alibaba Retail Link and JD New Pathway have "brand pilots" in their expansion. Retail Link announced the transformation of mom-and-pop stores, authorizing the Tmall Small Store brand, providing full services from ordering to store decoration, and introducing online bestsellers offline to help adjust product structure; New Pathway used JD Convenience Stores for a dimensionality reduction attack, starting from rural areas, helping small shops transform supply chains and warehousing in addition to brand, storefront, and products. In August last year, when the first Tmall Small Store began operations, Alibaba stated it expected to exceed 10,000 by the end of the fiscal year. At that time, Retail Link had 600,000 users, and Alibaba planned to reach 1 million small shops within one fiscal year. On the other hand, New Pathway also didn't show weakness, announcing plans to open one million convenience stores, with 500,000 in rural areas. However, after making wishes, the industry is eager to see the latest data. The Game of Participants: Subtle Compatibility Besides the old thinking of merchants, an informed industry insider also revealed the pain of distributors. The above-mentioned person believes that from the terminal business perspective, internet ordering platforms have two effects on small shops: (1) control product quality; (2) adjust the product structure of small retail shops. When platform data is large enough, the platform can analyze and guide small shops to stock different products, achieving "thousand stores with thousand faces" to capture nearby users, but this can only be achieved in an extremely ideal state. "Beverages and chips are high-margin products; seasonings, grains, and oils barely make money. Platforms now focus on the former, leaving the hard work to distributors," said the person. The relationship between platforms, distributors, and small shops is becoming more subtle. "For brand owners, platforms provide a new distribution method. If brands hold the bottom line, the two can coexist peacefully, but distributors are in an awkward position." However, platforms have given a clear attitude towards distributors' concerns. "We never think that removing intermediaries represents the internet. Both new retail and traditional retail cannot do without distributors," Tu Xiaoyu, General Manager of Retail Link Marketing Center, has repeatedly emphasized "compatibility." "Unlike other wholesale distribution platforms, Retail Link will not subvert any link in the chain but will be responsible for data connection and efficiency improvement on the original distribution system. Distributors can upgrade to service operators under the new retail system." A person in the enterprise service industry disagreed: "The essence of B2B is to remove intermediate links to improve the efficiency of the entire chain. From this point, how long the harmony between distributors and such platforms can last is unknown." Unique "New": Digital Upgrade Some e-commerce industry insiders believe that compared to B2B platforms that purely pursue removing intermediate links, platforms from e-commerce giants like Retail Link and New Pathway have two special advantages: (1) Online-verified bestsellers have a higher success rate when introduced offline; (2) The platform's own traffic has the opportunity to drive offline traffic. However, some also say that the target groups of these platforms may not need to adjust product structure because their main products are already very simple. Bao Yuezhong, a columnist for Ebang and founder of the New FMCG and New Retail Innovation Practice Studio, introduced: "For a 30-50 square meter small retail store, typical data is 50%-60% cigarettes and 20%-30% water and drinks. The larger the area, the richer the categories, and the lower the proportion of both. For example, in a 100 square meter convenience store, cigarette sales account for 25-30%, while water and drinks account for about 12-15%." Cigarettes are monopoly products, so beverages become the main competition. But a person close to the industry revealed that for the beverage category, platforms like Retail Link do not have an advantage. "The original supply chain for beverages is very complete, and the distributor system is hard to shake. The brands on these platforms seem rich, but a large part cooperates with distributors, making it difficult to form price advantages." Undoubtedly, in the FMCG industry, supply chain capability is indeed a high threshold, so some platforms with advantages have begun to try launching their own terminals. HNA Supply and Marketing Daji, which already has 160,000 convenience stores and Zhang He Tian Xia, launched Ku Pu unmanned convenience stores, mainly selling various leisure retail, beverages, and fresh food; Gong Xiao E Jia under China Supply and Marketing Group also launched unmanned shelves "MINI CO-OP," planning to pilot internally and then deploy to stores within the entire supply and marketing system, adjusting in-store products and completing digital upgrades; Xing Bian Li recognized that terminal competition is ultimately supply chain competition, and by building its own technology platform, fresh food production base, small-batch flexible sorting capability, and logistics system, it fully mastered the entire supply chain capability. In addition, many convenience store service companies have emerged, such as Shan Dian Gou, which helps traditional supermarkets complete digital layout, and Bin Guo He Zi, which is preparing to open unmanned retail technology capabilities. A founder of a SaaS service company said that the concept of new retail has different meanings in different development stages of industries. For example, "new" in e-commerce can be multi-channel synergy or the emergence of innovative models; "new" for offline stores is connecting with online, sharing membership and inventory; and for relatively traditional small shops, their "new" might be completing digital upgrades. According to Kantar Consulting's "2016 China FMCG Internet B2B Market Report," in 2016, among 6.8 million convenience small shops in China, only 1.1 million used B2B e-commerce platforms for ordering, accounting for less than 17%. In the FMCG industry, more than 57% of FMCG companies have traditional channels accounting for over 60% of sales. Now, platforms and service providers have begun to act. How long it will take to truly complete the huge digital space, let's wait and see. Source: Ebang Power -END-