On August 18, the 4th B-end e-commerce study tour organized by this official account visited Alibaba Retail Link's headquarters and listened to introductions by Alibaba's relevant leaders about the Retail Link project. The author has compiled the introduction content for manufacturer and distributor friends who couldn't attend, to help them understand Retail Link's policies and model.

About Retail Link's Operating Model: Retail Link builds a closed B-end trading platform, providing one-stop procurement services for 60-100 square meter retail stores in 3rd to 6th tier cities. Retail Link does not participate in transactions between buyers and sellers; manufacturers jointly supply goods, third-party logistics handle delivery, and city partners help manufacturers complete ground services. Alibaba's Retail Link positions itself as an ecosystem, doing B2b2C, aiming to help mom-and-pop stores sell goods.

The core competitiveness of the Retail Link model lies in product structure and service model. In terms of product structure, Alibaba has the biggest advantage: imported food, agricultural specialties, and quality products can make the product mix of small stores more reasonable. In terms of services to small stores, Retail Link has a team of city partners who are self-employed and dedicated to helping small and medium stores. Through this team, they can help stores better optimize their operations, improve profitability, and help enterprises distribute products and provide ground services. By the end of the year, this team is expected to cover 1 million small and medium stores in China.

Specific Ways of Cooperating with Distributors: Alibaba Retail Link believes that the B2B concept is different from B2C. B2C links can be reduced, but B2B is different; every B link adds value and cannot be replaced. Moreover, FMCG has low gross margins, and the self-operated logic of FMCG B2B trying to profit from intermediate links cannot work. Therefore, Retail Link proposes not to replace distributors but to optimize supply chain efficiency and cost structure.

Cooperation Method: Distributors list products on Retail Link as required, stores place orders, and distributors deliver themselves.

Brand Qualification: Must provide a brand authorization letter issued by the brand owner. If distributing/representing multiple brands, must provide authorization letters for all brands simultaneously.

Listing Scope: Distributors can freely choose the regions to list based on their own distribution capability, such as a single prefecture-level city or an entire province. However, the listing scope must comply with the coverage scope of the authorization letter issued by the manufacturer, i.e., the distributor is authorized to sell online in the corresponding region. In principle, one product per region per distributor.

Deposit: To ensure service quality, Retail Link charges a deposit: 10,000 yuan for prefecture-level cities, 20,000 yuan for provincial level, and 50,000 yuan for cross-provincial.

Transaction Commission: Because Alibaba Retail Link's city partner team helps distributors distribute products on the ground, merchants need to share commissions with city partners. Merchants set product commissions according to the categories on the Retail Link backend; different categories have different commission ranges, and merchants can freely choose the commission rate within the corresponding range. For example, if you choose the "pencil" category, there will be a corresponding commission range, and the enterprise can freely choose how many commission points to provide within the range set by Retail Link. Of course, the higher the points, the higher the enthusiasm of city partners.

Product Listing: Distributors list products independently and set prices independently, but they cannot choose more than 5 categories.

Logistics and Delivery: Within the regional market, orders are delivered by the distributor themselves. If your product has a certain sales volume, you can send goods to Cainiao Logistics' warehouse, and Retail Link will coordinate third-party logistics to assist with delivery.

Returns and Exchanges: It is important to note that for online transactions, if it is not a quality issue or a supplier problem, products purchased by stores are generally non-returnable.

Settlement: T+0, settlement based on actual sales.

Distributors' Views on Retail Link's Cooperation Model and Policies:

  1. For small stores, in the future, they can use Alibaba or Taobao's ecosystem resources to transform retail stores into community life service centers, a "small store ecosystem" or "similar to Beiquan model." There is great room for imagination and value-added services. Retail Link has great appeal to small stores and has obvious advantages over other platforms.
  2. In the early stage, Retail Link's main direction basically overlaps with brand channels. For strong brands, it is just a transfer of existing volume, not attractive. Later, the platform's ability to subdivide channels (such as internet cafes, water stalls, bakeries) and penetrate deeper will determine its appeal to brands. But in their hearts, they only want to cooperate with channels that may generate incremental volume.
  3. As distributors, the willingness to cooperate with Retail Link is strong or even necessary. With the rise of so many platforms, considering operating some OEM products brings new opportunities and possibilities for success, with great room for imagination.
  4. Personally, I want to first cooperate with weak products in hand. Only by getting on board first can we observe and think about our role and value in the new channel changes, and possible opportunities, such as considering operating some OEM products, representing some products suitable for platform operations, and whether there are new opportunities or a time window and dividend period brought by channel changes.
  5. It feels that with the entry of various internet giants, the difficulty of operating regional B2B platforms is increasing. For distributors, "self-building, joining, or integrating and following" really needs to be re-evaluated.

Specific Ways of Cooperating with Manufacturers: Cooperation Method: Retail Link cooperates with enterprises using a consignment model, i.e., whether the enterprise delivers itself or places goods in Cainiao Logistics' warehouse, Retail Link adopts a settlement method based on actual sales.

Brand Qualification: For own brands, must hold a trademark registration certificate with the seller as applicant or assignee, or a trademark license certificate with the seller as licensee, etc.

Listing Scope: Enterprises can freely choose the regions for product listing based on their existing offline supply and sales system. For example, a manufacturer in Henan has an agent in Hangzhou, but no agents in other prefecture-level cities in Zhejiang. The enterprise can choose to list in all markets except Hangzhou.

Transaction Commission: Alibaba requires manufacturers to list products at a net price excluding tax. Retail Link then adds a certain percentage based on the product category before selling. Different categories and brands have different markup points. It should be noted that these markup points are not taken by Alibaba but are given as commissions to city partners to encourage them to help enterprises recommend their products to small stores.

Operations: Retail Link is responsible for product listing, promotional activities, transactions, and other operations. After store transactions, Alibaba assigns orders to manufacturers. Since many small and medium enterprises have non-well-known products, to help enterprises sell quickly, the trading platform has a special trial sales category. New products under this category will be sold to small stores at very low prices in limited quantities for trial sales. If the trial sales show that the product can be sold in stores, they can reorder at the original price. According to Alibaba personnel, the current repurchase rate of listed products can reach about 60%.

Logistics and Delivery: In cooperation with manufacturers, Alibaba Retail Link adopts two warehouse operation models: virtual warehouse and physical warehouse. In the early stage of product listing on Retail Link, sales are low, and enterprises need to deliver goods to stores themselves. When sales on the Retail Link platform reach a certain scale, enterprises can place goods in Alibaba's Cainiao warehouse in advance. Cainiao will assist enterprises in delivering goods to stores in the shortest time. Different products have different delivery fee amounts.

Returns and Exchanges: Same as distributors: as long as it is not a product quality issue, products purchased by stores are generally non-returnable and non-exchangeable.

Settlement: T+0, settlement based on actual sales. As soon as the store confirms payment, the payment arrives in the enterprise's Alipay account in real time. However, note that the settlement price here is the net supply price, unrelated to the transaction price.

A Manufacturer's View from the Study Tour: Retail Link currently adopts a quasi-self-operated model. Alibaba started as a platform. For manufacturers, partner commissions and Cainiao deductions are fixed. To have an advantage in terminal supply prices, they must make concessions on ex-factory prices. This is a contradiction. If the B-end price has no advantage, it is difficult to get stores to order. Second, partners have too many SKUs, and manufacturers need to add manpower to maintain and promote their products' offline sales.

Regarding Retail Link's city partners, Alibaba has disclosed sufficient information, so we won't repeat it here.

Zhao Bo's Comments on Alibaba Retail Link: Regarding Alibaba Retail Link, it must be said that after more than a year of trial and error, they have indeed figured out how to do Retail Link. First, from a model perspective, cooperating with local distributors to list A-type products, cooperating with small and medium enterprises that have quality products but weak channels to enrich and improve enough SKUs, then using Cainiao logistics and third-party city distribution logistics to help enterprises solve product delivery. Finally, using city partners to help enterprises solve product entry into stores and terminal services. In this way, Alibaba does not need to have a single item or a vehicle. Through resource integration, it can quickly reconstruct the FMCG channel supply chain.

From the current model, there are no fatal bugs in Alibaba Retail Link. The only thing that is debatable is the service capability of city partners, from two aspects: First: The entry and maintenance of enterprise products in stores not only requires excellent product strength but also requires ground promotion personnel to invest a lot of energy for continuous maintenance. Generally, an excellent salesperson can normally sell no more than 25-45 SKUs. Beyond this number, the salesperson basically cannot sell well. This determines that city partners are unlikely to favor any enterprise's products. Therefore, for enterprises to stand out in a competitive market, they still need their own ground promotion to manage. Second: City partners are in a self-employment model, which requires partners to have strong self-discipline and business development capabilities. But people are lazy. Without management, training incentives, and assessment, I think it is difficult to have sustained enthusiasm and ability for terminal expansion and maintenance. For product ground promotion and maintenance, Retail Link could consider allowing enterprises to participate in maintaining their own products while city partners serve small stores.

The Relationship Between Distributors and Retail Link: The distributor from Mengniu summarized it well above, so we won't delve deeper here. Most distributors' current understanding of B2B still does not go beyond their own business. Distributors facing B2B platforms can basically be divided into three types: First, most distributors don't understand, don't act, and if they can't continue, they change careers. Second, they wait and see, just watching without practicing. Third, they haven't figured it out yet, rush in, and then lose half their money.

Many distributors who are eager to build platforms have not found their true value and position. Distributors doing infrastructure for trading platforms may be more in line with current interests.

What is infrastructure? Unified warehousing and distribution logistics, self-branded OEM products, becoming suppliers to matching platforms like Retail Link, third-party professional ground promotion service teams, etc., are all infrastructure.

Doing infrastructure well is also a big business.

The Relationship Between Manufacturers and Retail Link: At the meeting, I chatted with a manufacturer of preserved fruits. Because they don't make money on B2C stores, they think cooperating with Alibaba on B2B won't make money either, so they don't plan to do it.

Frankly, most FMCG company bosses don't understand B2B well. Many don't think B2B is an opportunity now, and they think listing on Alibaba Retail Link will affect their offline business, rather than being a rare window for rapid growth and overtaking on curves.

I think they may be influenced by the communication style of Alibaba Retail Link's procurement department. Alibaba's procurement requires that the price for product listing must be a net price lower than the distributor's purchase price. Many enterprises can't stand it when they hear this. In fact, it's not like that:

B2C changes the transaction location and relationship between product and consumer by delivering goods directly from factory to consumer, but B2B does not. Consumers still buy goods in traditional retail stores, so the essence of retail has not changed. The elements in traditional marketing theory are still valid, such as availability, affordability, and willingness to buy. This requires manufacturers to have very high requirements for product distribution rate (market coverage), price (product pricing), and in-store display (brand image).

B2B only reconstructs the backend of the supply chain, changing the store's purchasing channel and the efficiency of the entire supply chain. Therefore, as offline, if you don't leave enough profit for the channel and sell cheap goods, you will die!

On Retail Link, enterprises should not sell cheap goods. Instead, they should sell to small stores at the same purchase price that distributors under the original channel gave to stores! Enterprises should use the high profit from factory to retail store to do online operations, branding, ground promotion, and terminal services!

B2B platforms are not places to sell cheap goods, but places to sell selected quality goods. What enterprises originally did is just done in a different way. So to do well on FMCG B2B platforms, you must return to product quality and build product strength, brand strength, and channel strength with enough patience.

Summary: The reconstruction of traditional supply chains by FMCG B2B is an inevitable trend. Alibaba Retail Link's model is relatively mature, and the author believes there will not be major adjustments in the short term. For manufacturers and distributors, whether it is chicken ribs or an opportunity depends entirely on their own thinking and resources. The window period is not long. Whether they can seize the opportunity, manufacturers and distributors will judge for themselves. Finally, I wish all manufacturer and distributor friends, as Alibaba's slogan advocates:

Making it easy to do business anywhere.

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