Click the image for details. On August 28, Alibaba announced plans to create 10,000 "Tmall Small Stores" in the 2018 fiscal year. At the same time, by 2018, Retail Link will cover 1 million small stores, achieving 30-minute delivery. The so-called "Tmall Small Stores" are smart stores upgraded from traditional community mom-and-pop shops through Alibaba's Retail Link platform. These small stores, scattered across countless corners of China's cities and rural areas, will have the opportunity to join the Tmall brand, gaining access to Tmall's online supply chain and offline warehousing, receiving guidance on shelf placement and product selection tailored to consumer demographics, and gaining more opportunities for offline development within the Alibaba ecosystem. Since the second half of last year, Alibaba has accelerated its new retail storm, shifting the online battle to a larger, integrated online-offline battlefield. From incubating new species to transforming traditional supermarkets, the debut of "Tmall Small Stores" signifies that Alibaba's offline expansion has formally moved from point to surface. According to Kantar China's "2016 China FMCG Internet B2B Market Report," the total transaction value of the FMCG B2B industry will reach 20 trillion yuan in 2018. Compared to categories like 3C appliances, books, and apparel where JD and Alibaba each have advantages, the penetration and control of millions of community stores reflect the fierce competition between Alibaba and JD in the FMCG category. "Retail Kr Planet" recently interviewed a senior convenience store industry insider, and we found that on this FMCG B2B supply chain penetrating community stores, JD and Alibaba have taken two completely different paths, related to their corporate DNA, which has also affected their respective expansion speeds and development. 1 JD and Alibaba's competition has reached the capillary-level community stores A friend who visited a Hangzhou "Tmall Small Store" last night told "Retail Kr Planet" that Tmall Small Stores completely renovate the signage and interior layout of community mom-and-pop shops. From the exquisite Tmall storefront sign to the cashier POS machine and Tmall-exclusive shelves, at least in appearance, it greatly improves the usually shabby and cramped storefront, attracting more consumers to enter. In China, there are currently over 6 million community mom-and-pop stores, with 70% distributed in 3rd-5th tier cities. 80% of store owners are over 45 years old, and most are unfamiliar with smartphones and the internet. They operate an average of 12 hours a day, with 15 hours in South China. Each small store serves an average of over 200 customers, with monthly turnover of 100,000 yuan, nearly half of which comes from cigarettes, 20% from beverages, and 10% from snacks. 60% of the store's turnover comes from traditional wholesale markets. Community stores are densely distributed and close to residential areas. "An inch closer, an inch of gold" is the golden rule of retail: the closer you are, the more valuable. So, since 2015, both JD's New Path Division and Alibaba's Retail Link have begun trying to penetrate and control community mom-and-pop stores, competing for the FMCG category. Markets not yet deeply penetrated by internet and technology have enticingly huge efficiency and profit improvement potential. 2 Beyond traditional supply chains: JD is more aggressive, Alibaba is more circuitous and experienced Liu Qiangdong has repeatedly stated: JD's core value is to reduce the number of times goods are moved in China through supply chain, logistics systems, and channel construction, thereby reducing distribution costs. In 2016, JD's New Path Division was listed as JD's Locomotive No. 1 Project. In April this year, Liu Qiangdong announced that over the next five years, JD would open 1 million JD convenience stores nationwide through franchising. Theoretically, this is correct: JD New Path continues JD's self-operated model of handling goods. It directly cooperates with brand companies, bypassing distributors and secondary wholesalers, using JD's own warehousing and logistics system, targeting small and medium retail stores in third-tier and below cities and rural areas, and building a large-scale ground promotion team. With its own warehousing and logistics system, terminal store owners only need to open the app at home to place orders directly. A few months after Liu Qiangdong's statement about "JD opening a million convenience stores," Du Shuang, who had been in charge of JD New Path Division since 2015, resigned, and was replaced by Zheng Hongyan, former general manager of PepsiCo's China bottling plants. Alibaba named its August 28 Tmall Small Store launch "Combining Wood to Form a Forest, Embracing Rivers into the Sea," and throughout the meeting, Alibaba executives repeatedly emphasized "inclusiveness." Alibaba CEO Zhang Yong said that the channel built by Retail Link must first be inclusive. Goods flow from brand owners layer by layer to distributors, sub-distributors, retail stores, and finally to consumers. It should be an inclusive and co-construction process. Only by jointly building such a platform can the entire goods circulation efficiency leverage the advantages of big data. "We hope to better integrate with your existing systems and play a greater role," Zhang Yong said. Clearly, Alibaba is taking an open cooperative platform model, cooperating with brand manufacturers to build an open platform. At the same time, it uses the manufacturers' existing distribution channels and resources to deliver goods directly to community retail stores. Currently, Retail Link accommodates brand distribution channels in two forms. One is for national brands, where brand owners designate various distributors to join, and the brand owner operates. The other is for local brands, where local service centers are set up, and local distributors and brand owners operate through local warehouses. 3 JD's self-operated model vs. Alibaba's platform model: Which path has more advantages? From an industry-wide perspective, the FMCG B2B field is becoming a red ocean. Whether it's JD, Alibaba, or entities from physical retail crossing into B2B, they must ultimately rely on their most advantageous models, teams, resources, etc., to survive and become industry winners. Cross-industry insight and research are crucial Lin Xiaohai, Alibaba's vice president and general manager of Retail Link, joined Alibaba in September 2016. He was formerly the marketing president of P&G Greater China and led P&G's national distributor team reform, working at P&G China for 21 years. Compared to those with e-commerce backgrounds, Lin Xiaohai better understands the complexities of the FMCG industry and has more industry resources. JD also recognized this issue; the new head of JD New Path, Zheng Hongyan, comes from the established FMCG company PepsiCo. Alibaba excels at the platform model Alibaba's Retail Link model builds an efficient trading platform between manufacturers and small stores. Alibaba penetrates through POS implantation, obtains demand data, and forces brands to sell on the platform, enabling online transactions. Retail Link's goal is to cover 1 million retail small stores within three years, and it will soon strengthen advantages in supply, logistics, and products to provide better services to partners and retail stores. The self-operated model is JD's DNA Self-operated requires building warehousing and logistics, and self-purchasing products, which relatively ensures product quality and logistics efficiency, but the model is heavy, requiring strong capital support and professional supply chain foundations. These are JD New Path's advantages over other B2B companies. Alibaba Retail Link currently has only 18 large warehouses, covering 8 provinces: Shandong, Henan, Guangdong, Sichuan, Anhui, Zhejiang, Hubei, and Jiangsu. In contrast, JD New Path, relying on JD Logistics' accumulation, announced on July 1 that it has officially covered the national market. But currently, more than half of domestic FMCG companies still mainly sell through traditional channels, accounting for over 60% of total sales. The demise of the multi-level distribution traditional forces in FMCG will not be quick. JD's desire to reform the original system on a large scale faces significant backlash, high costs, and will take longer. JD goes left, Alibaba goes right: Who will cover 1 million small stores faster? Zhao Bo's PS: Although this article does not delve deeply into the relationship between the two platforms' models and market background or industry landscape, the topic raised by the author is worth deep consideration by every practitioner. Since both platforms have proposed covering 1 million small stores, regardless of the form, it will inevitably impact the traditional industry to some extent. Moreover, hundreds of various types of B2B platforms are also targeting this industry and market, and no one in this industry can stay out of it. For brand owners: Should the channel structure become wider, or should they focus on products and hand distribution to such platforms? For distributors: Should they do B2B themselves, or transform into service providers within the B2B platform's large supply chain system? For small stores: Should they stick to their own business, or align with one of the two platforms? For traditional FMCG professionals: Should they focus on the present, or try cross-industry transformation to become internet professionals? We suggest everyone think deeply, and you are welcome to leave comments to discuss your views with us. Click the image for details. The 3rd (CFIC) China FMCG + Internet Conference will be held in Chongqing in October 2017. At this conference, New Distribution has invited over 1,000 distributors, 500 brand owners, 200+ B2B platform founders, and 100+ investment and financing institutions to participate. The theme of this conference: "New Forces, New Ecosystem." We will invite well-known domestic B2B industry experts, mentors, and B2B platform founders to discuss the following topics:
How can the FMCG industry leverage B2B to achieve new growth opportunities?
How should the new supply chain behind new retail be built?
How can intra-city logistics help B2B achieve leapfrog development? Highlights of this conference: The industry's first "2017 China FMCG B2B Industry Competitiveness White Paper"
Case sharing of excellent transforming and upgrading distributors
Conference + exhibition upgrade: Hall 6 Internet Technology Exhibition strengthens networking
Leaders from Alibaba, Etern, Best Store Plus, GLP, Unilever, Hd, Yunmei, and other well-known companies will give speeches and share pioneering views. October 17-18, 2017 Chongqing International Expo Center Registration is now open. Long press the QR code below or click "Read Original" to register. Early bird tickets before September 15 enjoy a 30% discount! Add friend with note "Conference Registration" Click the links below to review the highlights of the first and second FMCG + Internet conferences: 2016 "FMCG + Internet" Summit Forum 2017 (2nd) China FMCG + Internet Conference Click the links below to review the highlights of the first and second FMCG + Internet conferences: 2016 "FMCG + Internet" Summit Forum -END-