Introduction: The new retail era has arrived. Does the giants' 'battle' in convenience stores hint that a new conflict is about to begin? Once again, the times are seated under the stage of history. Who will be crowned king? It remains to be seen! According to data from the National Bureau of Statistics, in 2016, 84.5% of total retail sales of consumer goods in China were offline, with only 15.5% online. Offline remains the main channel for domestic retail, especially for small and medium convenience stores across the country. Since the beginning of this year, convenience stores have consistently been at the top of the new retail topic list, and JD.com's recent plan to incorporate one million convenience stores has stirred up another wave. The convenience store sector holds a vast blue ocean, and JD.com is not the only giant looking to incorporate convenience stores; many have already laid out their plans. Today, let's discuss Yiyatong's O2O retail ecosystem, JD.com's New通路, and Alibaba's Retail通. Giants are rushing to seize the new blue ocean of convenience stores.
Yiyatong Using Supply Chain + Internet to Create a New O2O Retail Ecosystem Currently, small and medium retail stores in China face bottlenecks in their development. Traditional retailers, due to their small scale, generally suffer from poor bargaining power, outdated business methods, and single profit models. Under the impact of internet e-commerce, they face dual pressures of high operating costs and difficult transformation. On the other hand, due to increasingly prominent high costs (traffic costs + logistics costs) and counterfeit issues, the advantages of internet e-commerce are gradually disappearing. "Only the supply chain can change the 'scattered, chaotic, poor, and small' situation in China's circulation industry. Integrating and transforming the development of China's circulation industry is our mission," said Zhou Guohui, Chairman of Yiyatong, calling for the use of internet + supply chain thinking to integrate resources and build a strong O2O supply chain business ecosystem.
Yiyatong's Development and Strategy Founded in 1997 and headquartered in Shenzhen, Yiyatong is China's first listed supply chain enterprise. It now has over 500 branches, more than 30,000 employees worldwide, and its service platform covers over 380 major cities in China and more than 10 major countries in Southeast Asia, Europe, and the Americas (including Hong Kong). Its business areas cover FMCG, IT, telecommunications, medical, chemical, home appliances, clothing, security, precious metals, and other industries, providing professional supply chain services to over 2,000 well-known domestic and international enterprises. Yiyatong's development has gone through three main stages. Before listing, Yiyatong mainly provided supply chain services for production enterprises in the industry, focusing on breadth supply chain services with a service-centric strategy. After listing in 2007, Yiyatong launched depth supply chain services, proposing the "380 Plan" to create 380 depth supply chain distribution platforms, adopting a platform strategy. After 2015, Yiyatong upgraded the "380 Plan" to implement an O2O ecosystem strategy, aiming to create a trillion-scale supply chain ecosystem.
The "380 Plan" That Must Be Discussed Since Chairman Zhou Guohui proposed the "380 Plan" in 2010, it has become an important direction for Yiyatong's subsequent development and has successfully promoted the rapid growth of the company's stock and business volume. What exactly does the "380 Plan" aim to do?
Operating Model: The "380 Plan" aims to establish 380 distribution and distribution execution supply chain service platforms within 3-5 years. The specific operating model is: Yiyatong cooperates with excellent retailers in 380 cities across the country, establishing joint venture subsidiaries with Yiyatong holding 60% and local distributors holding 40%, thereby connecting to millions of retail terminal stores. This plan was introduced because Zhou Guohui believes that retail terminals generally suffer from scattered, chaotic, and poor conditions, lacking systematic management and operation. Local distributors are familiar with local culture, environment, and resources, while Yiyatong has a strong supply chain system. Cooperation between the two is expected to create China's first commercial ecosystem platform. It is understood that since the implementation of the "380 Plan," Yiyatong's supply chain channels have extended down to the township level. For example, in the Guizhou market in cooperation with P&G, supply chain service channels have extended to the township level.
The "3+5 Ecological Strategy" is the core. The upgraded "380 Plan" in 2015 focuses on building the O2O ecological strategy, with its core connotation being the "3+5 Ecological Strategy": 3 refers to the online Yushang.com + Cloud WeChat Store + Hele.com; 5 refers to offline distribution platform + O2O finance + terminal media + retail service platform + value-added services. Through horizontal integration and vertical specialization, it achieves a perfect combination of O2O and aggregates numerous brand enterprises, distributors, logistics providers, retail terminals, and other partners to create a trillion-scale ecosystem with unlimited possibilities. Through the layout of the "3+5 Ecological Strategy," Yiyatong has shifted from the previous "platform strategy" to a comprehensive "O2O ecological strategy." In the future, Yiyatong aims to cover 1 billion consumers, cover more than 5 million physical stores nationwide, and deliver products directly to 380 major cities and 2,800 county-level cities, with the entire ecosystem's annual transaction volume exceeding one trillion.
Star Chain under the O2O Ecological Strategy. Star Chain integrates Yiyatong's upstream and downstream advantageous supplier resources, unites millions of terminal stores and consumers, and uses a combination of online and offline methods to create a cross-border, platform-sharing, and symbiotic supply chain business ecosystem. It is committed to creating a symbiotic development platform for small and medium retailers, upgrading traditional stores into new "online + offline" custom comprehensive malls. These stores can not only sell their own goods but also sell over 200,000 types of imported goods from major brands and around the world that Yiyatong possesses. Additionally, they have functions such as consumer financial services, media services (brand promotion), and enhanced services to help small and medium retail stores grow stronger. Yiyatong's convenience store model is top-down, using supply chain and platform advantages to deeply integrate terminal stores. What about JD.com, the largest self-operated e-commerce company in China? What is its convenience store model?
JD.com New通路 Reshaping the B2B Channel On April 10, JD.com announced that it would open more than 1 million JD convenience stores nationwide within the next five years. In fact, at the end of 2015, JD.com had already established the New通路 Business Unit. In 2016, the JD New通路 Business Unit built a team with strong supply chain and ground service capabilities, launched a one-stop B2B ordering platform "JD掌柜宝" for small and medium stores nationwide, and launched a big data service platform "慧眼" for brand owners. It also boldly stated: In 2017, JD New通路 aims to cover more than 500,000 small and medium stores nationwide! Under the traditional channel model, brand owners need to go through four to five levels of distribution and sub-distribution to reach terminal small and medium stores in third to sixth-tier regions. This model causes several problems: first, after passing through multiple channels, the circulation cost of goods is high, ultimately leading to small and medium stores not making money and consumers paying high prices; second, multiple channel links lead to low efficiency and slow turnover of goods; third, the complexity of channels leads to rampant counterfeit and shanzhai products, ultimately harming brand owners and consumers. JD New通路 will significantly reduce intermediate circulation costs, allowing small and medium stores to make money, consumers to enjoy quality products, and brand owners to save costs, thereby achieving new sales breakthroughs. This first brings about the elimination of circulation links, greatly reducing intermediate circulation costs, allowing small and medium stores to make money, consumers to enjoy affordable products, and brand owners to save costs. Secondly, it improves efficiency, accelerating the turnover of brand owners' goods. Thirdly, JD's brand direct supply model ensures product quality and eliminates counterfeit and shanzhai products.
Profit Model Currently, JD New通路's revenue model mainly comes from three aspects. First, product price difference revenue. JD New通路 is primarily self-operated; all products on its front-end platform, the 掌柜宝 APP, are self-operated. The source of goods is direct cooperation with manufacturers. Second, cash flow revenue. Mom-and-pop stores purchase goods with cash on delivery, while the supply side has payment terms. Therefore, if sales efficiency is high, the payment will "stay" in JD's account for a long time, creating cash flow revenue. Third, advertising and data revenue, but related businesses have not yet been launched.
Cost Structure From the business architecture of JD New通路, the costs mainly include ground promotion costs, warehousing and distribution costs, and the development and maintenance costs of the 掌柜宝 APP and related systems. Ground promotion costs mainly refer to the cost of ground promotion personnel—"ground service brothers." Compared to other B2B platforms that develop ground promotion systems through partners, all JD ground promotion personnel are recruited employees, and JD pays salaries and social insurance. The income composition of "ground service brothers" is base salary plus commission. JD New通路 states that ground service brothers are recruited regionally, each covering 300-400 stores. In addition to developing mom-and-pop store resources, they are also responsible for training mom-and-pop stores on purchasing, conveying promotional information, guiding product selection and terminal display, and conducting store inspections.
Supply-Side Policy On the supply side, JD New通路 cooperates directly with manufacturers. In terms of product sales volume, theoretically, FMCG products suitable for mom-and-pop stores on JD.com can be included in JD New通路 sales. However, the pricing system is different; JD New通路 offers more competitive supply prices for mom-and-pop stores. Users of 掌柜宝 need a business license as registration qualification. The value of this is to help brand manufacturers manage the destination of goods, avoid cross-region sales in the distribution system, and prevent market disruption.
Mom-and-Pop Store Policy At the terminal level of mom-and-pop stores, JD New通路's current policy is that the minimum order quantity requirement is relatively low. During promotional activities, orders over 99 yuan enjoy free shipping; otherwise, mom-and-pop stores need to pay a 5 yuan delivery fee. Currently, mom-and-pop stores typically replenish every few days or once a week. In terms of helping mom-and-pop stores sell, JD New通路 currently operates by: first, cooperating with store promotions, such as store anniversaries. Second, providing posters and terminal materials, partially serving to attract customers. Third, using ground service brothers to provide terminal display guidance, promotion, and product selection guidance. Counterattacking offline is not exclusive to JD.com; Alibaba has joined hands with four allies—Intime Retail, Suning, Sanjiang Shopping, and Bailian Group—to perfectly build the "Jiangsu-Zhejiang-Shanghai" new retail territory.
Alibaba Retail通 Helping Mom-and-Pop Stores Become the "Ant Soldiers" of New Retail The original intention of Alibaba's launch of Retail通 was to empower community retail stores to provide better services to community residents. Residents can use Taobao on their mobile phones to purchase daily necessities from convenience stores, supermarkets, and small shops that have joined Retail通, and enjoy home delivery services. In addition, Retail通 cooperates with Alipay and other businesses to gradually launch a full range of life services at community retail stores, including housekeeping service orders, travel ticket booking, utility bill payments, parcel collection and delivery, and even medical registration. Lin Xiaohai, General Manager of Alibaba Retail通 Business Unit, stated that the purpose of Retail通 is not to replicate the model of multinational chain convenience stores, but to create new Retail通 stores, creating new value and benefits. It provides support to retail stores from multiple aspects such as finance, data, logistics, and payment, integrating more value-added services to help stores upgrade and transform. At the product level, Retail通 will layer and manage products on the platform according to store needs, bringing more core supply sources to small stores. At the logistics level, Retail通 will use a flexible delivery method of regional warehouses + city warehouses + city distribution to provide retail stores with a one-stop new receiving experience. At the partner level, Retail通 initially emphasized the power of "people" during the early stages of opening new areas. Currently, it focuses on layered operations, defining corresponding work positions and granting corresponding rights. Alibaba Retail通 connects FMCG brands and distributors with small stores, providing retail stores with optimized product combinations, stable and reliable supply sources, and providing brand owners and distributors with stable distribution small stores, supplemented by logistics services. In the past, there were layers of intermediate channels between community retail stores and distributors. The product structure and gross margin composition of community retail stores often relied on the owner's experience, while distributors lacked control over the customer traffic and per-unit output ratio of individual stores. Retail通 effectively connects the two parties, using open data and data analysis to help retail stores optimize product combinations, maximize efficiency for both parties, and ultimately maximize the value of consumer services. Video: Understand Alibaba Retail通 in 3 Minutes Retail通 is a business under Alibaba's B2B division that helps community retail stores upgrade, with city partners responsible for providing services to these offline retail stores. At its inception, Retail通 stated that it would cover 1 million retail stores within three years, cooperate with more brand owners, integrate into the distributor system, help them improve efficiency, and reach more retail stores. On December 26, 2016, the Retail通 project, launched nearly a year ago, delivered a report card: the number of active stores that month exceeded 100,000, setting a historic high with an 81% growth rate. In the future, the biggest value-added point Retail通 provides to small store owners is changing the product structure. Shelf resources are limited; helping small stores introduce new products, providing quality assurance, and reducing operating costs are also the biggest drivers of Retail通's business growth. Looking back at the achievement of Retail通's active stores exploding to 100,000, Lin Xiaohai believes it is based on three correct decisions: first, in terms of product structure, starting from the long-tail products of 1688's source goods and entering FMCG; second, transitioning from a pure platform model to establishing its own warehousing and distribution system to provide deterministic services; third, first serving several major provinces well to improve the overall procurement experience.
The Online Retail B2B Battle Is About to Begin Different Backgrounds In the entire Yangtze River Delta region, many large supermarkets have Alibaba investments. The largest one is Intime Retail. Coincidentally, in January of this year, Alibaba, together with Intime Retail, privatized it, causing Intime Retail's stock to surge 35.14% and triggering a "buying spree" in the retail sector. In February, Alibaba reached a strategic cooperation with Bailian Group, not only to sell goods offline through Bailian but also to connect the membership systems of both parties. JD.com did not engage in large-scale joint actions like Alibaba, but in 2016 it received a $4 billion investment from Walmart, with Walmart holding a 12.8% stake. JD.com relies on Walmart's supply chain system to provide products to domestic and overseas consumers, while Walmart connects to "JD Daojia" to earn more profits. Yiyatong, as a listed supply chain enterprise, has been deeply involved in the traditional supply chain field for 20 years. Using internet thinking, it has built a comprehensive one-stop service platform, established a "380" depth supply chain network covering cities at all levels across the country, and constructed a fast and efficient direct supply channel. It not only helps manufacturers, distributors, and small and medium enterprises bridge to new retail but also creates a mutually integrated and co-developed healthy business ecosystem.
Different Development Scales Although "JD New通路" was established earlier than Alibaba's, Alibaba's practice was a year ahead of JD.com. In August 2016, Alibaba's "Retail通" entered the convenience store ranks, providing an internet platform for urban community retail stores for ordering, logistics, marketing, and other supporting services. Behind "Retail通" are multiple procurement channels such as Alibaba 1688 and Taobao. Whether merchants use their own logistics or Cainiao logistics, "Retail通" will conduct real-time settlement transactions. Yiyatong is a supply chain service enterprise established in 1997. Although creating a new O2O ecosystem for retailers is also a new business, with nearly 20 years of deep supply chain service experience, it has rich online and offline resources in transforming supply chains.
Different Community Convenience Store Models JD New通路 mainly solves a channel problem, helping community convenience stores more directly and conveniently purchase brand products from the New通路 platform. "Retail通" mainly allows convenience store merchants to order through the platform and then provides merchants with a series of management experience service models. However, like "New通路," "Retail通" requires a certain deposit, and "Retail通's" offline training specialists are not Alibaba internal employees but are recruited from social personnel with relevant experience, officially called city partners. Merchants need to share commissions with city partners, and the amount of commission is set by the merchant in the "Retail通" backend based on product categories. Yiyatong's O2O ecosystem not only helps community convenience stores solve channel problems but also helps them change traditional business models, providing more value-added services to promote their transformation and upgrading.
Different Delivery Models In terms of delivery, Retail通 does not use Cainiao delivery for all products. If a product has low sales volume, the merchant is responsible for delivering it to the store; conversely, if sales are high, the merchant can place the product in Cainiao's warehouse, and Cainiao will deliver it to the store. According to Wanlian News, Yiyatong's Star Alliance also uses S.F. Express and other courier services for delivery. JD New通路 completely "borrows" JD.com's existing warehousing and distribution system. All goods enter JD.com's warehouses and are delivered to mom-and-pop stores through JD.com's distribution system. It is undeniable that the internet era has entered the second half. The traditional B2B field is currently facing huge challenges. Whether it is Ma Yun's "new retail," Liu Qiangdong's "new pathways," or Zhou Guohui's envisioned symbiotic O2O supply chain ecosystem, the essence is that traditional retail growth has hit bottlenecks, and the emergence of the long tail effect harbors a vast blue ocean. The bigwigs are invading with huge capital to compete in offline traditional retail, and 2017 is destined to be a critical period for this new retail battle. The six key areas of source, sales location, platform, community, logistics, and data will be the focus of competition among enterprises. Once again, the times are seated under the stage of history. Who will be crowned king? It remains to be seen! -END-