---
title: "From the Current Problems of Alibaba 1688 Retail Link Project: What Pain Points Should Internet + Distributors Solve?"
description: "The article argues that Alibaba's 1688 Retail Link project is currently failing due to a mismatch between the platform model and the realities of FMCG distribution. It suggests that internet-based distributors should focus on three value points: reducing channel costs, improving store sales and profits, and monetizing store traffic online."
author: "张陈勇"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2016-04-15"
language: "en"
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# From the Current Problems of Alibaba 1688 Retail Link Project: What Pain Points Should Internet + Distributors Solve?

> The article argues that Alibaba's 1688 Retail Link project is currently failing due to a mismatch between the platform model and the realities of FMCG distribution. It suggests that internet-based distributors should focus on three value points: reducing channel costs, improving store sales and profits, and monetizing store traffic online.

文/紫藤院张陈勇
**1. Why is Alibaba 1688 Retail Link project destined to fail at this stage?**
**Information on Alibaba Retail Link's recruitment of city partners:**
**1. A non-refundable annual fee of 6,000 yuan is required, a deposit of 5,000 yuan is frozen, and the role must be full-time.**
**2. Products are mainly imported goods and Taobao brands, currently about 1,000 SKUs.**
**3. Expired goods cannot be returned; whoever secures the store gets the business.**
**4. Commission on best-selling products is basically 1-2%.**
According to insiders of the Retail Link project, the project is currently very painful. Since its launch last year, the first batch of city partners and city partners have basically all left, and contact with first-tier brand manufacturers has mostly resulted in refusal to cooperate. Overall, the project should be considered a failure at this stage.
First, I think 1688 uses an open platform model for Retail Link, with product sources and city partners as the two ends of the platform. The launch of this business and its cooperation terms are related to the structure of large companies and Alibaba's genes.
Projects like Retail Link report to multiple presidents (vice presidents). Do you think the presidents will speak at decision meetings? If they don't, they wouldn't be in that position. Although they are professional in their familiar fields, for FMCG B2B they can only rely on common sense and genetic habits to make decisions, which brings many problems.
What is common sense? For example, common sense believes that the purchase price of goods in individual supermarkets is higher than in chain supermarkets because chain supermarkets buy in larger quantities. But in reality, due to taxes and payment terms, the purchase price in individual supermarkets is generally lower than in chain supermarkets. Another example: common sense believes that supermarkets must rely on ERP systems to order goods, but in reality, the ERP systems of individual supermarkets do not manage inventory, only prices, so individual supermarkets generally rely on handwritten notes and phone calls to order goods.
Although presidents are high-level, they lack deep understanding of FMCG small store distribution. They rely on common sense to make judgments, and **executors in large companies will prioritize following the orders of decision-makers. Because failing a project is not a big deal, but being seen as having execution problems is fatal.** Alibaba is an internet company, but personal development is still most influenced by superiors, and being responsible to one's position is more important than being responsible to the project.
In addition to relying on common sense, presidents are also good at relying on genetic habits to give orders. Alibaba's gene is the open platform, because Alibaba's core Taobao is an open platform.
At its launch, Tmall Supermarket also operated as an open platform. Alibaba required all suppliers to send goods to the warehouse, suppliers set prices, Alibaba charged a commission, and settlement was based on sales. Suppliers saw these conditions as consignment with commission. A-class brands never do consignment, and their prices are relatively transparent, being price-image items. If priced too high, customers would think all goods are expensive. So Tmall Supermarket was also difficult at the beginning, and after a few months of suspension, it relaunched, converting some A-class brands to distribution self-operation to solve the problem.
Common sense believes that consignment is always better than distribution, but that is not necessarily true. Now Tmall Supermarket has too many consignment items, which may not be a good thing. Some products on Tmall Supermarket have huge sales and fast turnover. If Tmall Supermarket signs a distribution contract with a supplier with 30-day payment, assuming the supplier's inventory turnover is 10 days, then using distribution can occupy 3 times the supplier's inventory funds.
If Tmall Supermarket signs a consignment contract with a supplier with 30-day payment, and all sales are settled before day 30, then on day 31, it basically cannot occupy supplier funds, and on average can only occupy 1.5 times the inventory funds. So in high-turnover situations, distribution is actually more beneficial to Alibaba than consignment, but Alibaba still promotes Tmall Supermarket as an open platform, claiming it does not bear inventory costs. How many people realize that the distribution system is actually more suitable for Tmall Supermarket's business model? (The most important reason is the management of goods; see my previous article "Using 5 Tables to Optimize B2C Profitability").
**In short, the success of Tmall Supermarket is actually the success of Alibaba's traffic, not the success of the model. Introducing the open platform model to FMCG B2B may not be effective.**
**2. What pain points should Internet + distributors solve?**
I think brand manufacturers, distributors, and individual supermarkets form a stable triangular structure, and we doing B-end e-commerce are the third party.
Our value lies in helping distributors save channel costs, and the extent of savings is the upper limit of our value. To force entry into others' stable structures, one must think about one's own value. In fact, traditional distributors have already reduced channel costs to a relatively low level, and there is not much room for significant reduction.
So Zhang Chenyong thinks the focus should not only be on cost savings. **Around small stores, the following three value points can be explored:**
**1. Reduce distribution channel costs;**
**2. Increase store sales and profit levels, making quality products easier to enter terminals;**
**3. Bring small store traffic online and monetize it.**
These three are in increasing value order. Focusing only on reducing distribution channel costs will limit one's space. Currently, most B-end e-commerce companies are trying to enter from point 1, a few are attempting point 2, and I am mostly thinking about how to achieve point 3.
**The most common way to reduce channel costs is centralized warehousing and distribution, aggregating orders for delivery to reduce distributor vehicles and manpower. At the same time, salespeople are freed from delivery to focus on store services and cover more stores.** But individual supermarkets' systems do not manage inventory, which hinders centralized warehousing and distribution.
Individual supermarkets and chain convenience stores are different business models. Individual supermarkets have low cost and low gross margin, while chain convenience stores have high cost and high gross margin. No taxes and low labor costs mean individual supermarkets can profit with daily sales of 3,500 yuan. Chain convenience stores, which need to allocate headquarters costs, need at least 7,000 yuan in daily sales to break even. So chain convenience stores use good image and standardized service to endorse products, increase gross margin, and operate differentiated products.
**So can we combine the low cost of individual supermarkets with the high profitability (differentiated items) of chain convenience stores? Can we use the transparency of the internet to circulate better quality products to terminals?** After all, traditional best-selling products are not necessarily the most cost-effective; they may be best-sellers because they entered the market earlier or have better marketing. How to use the internet to endorse the channel and build a channel brand in consumers' minds?
Small stores have the characteristics of low unit price and high frequency. A small store at the entrance of a community is visited by 90% of the community's residents. It serves 200-500 customers daily and 2,000-5,000 customers monthly. How to bring this traffic online, build a community closed loop, and monetize the traffic is a topic I have been focusing on and researching. Interested readers can scan the QR code below to view previous articles on my public account; I won't introduce it here.
FMCG B2B, improving individual supermarket profitability, and mining small store traffic value can be combined and coordinated to generate value, integrate and promote each other, and stack high frequency. For example, introducing inventory management not only helps centralized warehousing and distribution to reduce channel costs, but also supports business analysis, reduces inventory turnover, and imitates chain convenience store operations to improve small store profitability. The logistics of small store replenishment can also integrate online ordering with self-pickup or C2B fresh food pre-sale. In short, researching how to tap small store value has great potential. Once successful, it can reshape the retail landscape, which is my career pursuit.
文/紫藤院张陈勇 公号csdso2o 私号zcyshow 专注零售O2O,转载请注明作者。
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