Even with rapid online and modern retail growth, China still has 6 million mom-and-pop stores dominating the neighbourhood grocery market. Alibaba has set itself a clear goal: connect the country’s informal micro retailers — targeting the 85% of offline retail sales in the country.
The Chinese eCommerce giant is using its retail-management platform called Ling Shou Tong (or retail-integrated) to connect small groceries to its inventory-management system. Alibaba is rolling out the platform to grocery shops in China for free — using their storefronts as fulfilment-and-delivery centres and gaining access to customer habits and trends.
The Ling Zhou Tong’s app makes recommendations to shopkeepers about product purchases and how to merchandise their products — all based on sales analytics. Store owners can use the app to place orders and Alibaba ships it directly from its warehouses — cutting out the traditional middlemen. To support the activation, Alibaba employs 2,000 foot soldiers, who work purely on commission to convince store owners to sign up to the platform.
The programme has been hugely successful — connecting more than a million mom-and-pop stores in the country. Customers have praised the service and storefront branding and merchandising. But the roll-out hasn’t been without problems and concerns.
Fulfilment is sometimes too slow, with deliveries only made the next day. Some shopkeepers also worry about relying too much on Alibaba — forcing them to compete with online shopping and the convenience it brings. There are also concerns over Alibaba’s access and ownership of store data.
The Hangzhou giant is not alone in its quest for informal retail dominance. JD.com, China’s second-largest online retailer, is also trying to win back mom-and-pop stores with its Zhang Gui Bao programme. The company previously entered the space in 2014 when it acquired Paipai from Tencent. However, a year later, it closed the platform citing counterfeit products and service issues.
With a growing customer base, Alibaba has taken a clear lead in winning over China’s mom-and-pop stores — and they are well on their way to capture a bigger slice of the retail pie.
Video: Alibaba’s Ling Zhou Tong