Lin Xiaohai, Alibaba's vice-president and general manager of Alibaba Distribution Platform, at a news conference in Hangzhou, Zhejiang province, Aug 28, 2017. [Photo provided to China Daily]

Millions of unchained mom-and-pop shops will be included into LST system

E-commerce titan Alibaba Group Holding Ltd aims to deepen its omni-channel deployment by transforming millions of mom-and-pop stores in China via a data-backed retailer management system.

By encouraging merchants to link into the LST app, the online shopping emporium hopes to unlock the consumption potential of shoppers from second-tier cities to even lower-tier townships and villages by enhancing the merchants' capabilities in marketing, delivery and inventory management.

The goal to include 1 million unchained stores into the LST system in one year is the latest instance of Alibaba's New Retail strategy, which features customized manufacturing, seamless online-to-offline shopping, and precise demand-prediction based on big data and algorithms, Alibaba CEO Daniel Zhang said on Monday in Hangzhou.

China has nearly six million retailers ranging from street stands and kiosks peddling soft drinks and snacks to street corner stores selling groceries, most of which have less financial leeway and limited negotiating power, said Lin Xiaohai, Alibaba vice-president and general manager of Alibaba Distribution Platform.

To address that, partner shops can bank on Tmall's procurement strength to secure previously unattainable products from brands directly and at competitive prices, said Lin, a fast-moving consumer goods veteran who spent two decades at retail giant P&G Co before joining Alibaba last year.

Furthermore, an inventory monitoring system is in operation to give real-time advice on product display and portfolio adjustment. This is coupled with a three-layer warehouse system covering 200 cities and townships to ensure the timely delivery of products, based on geographical shopping preferences that are logged in Alibaba's data book.

"Our goal is to digitalize all grocery stores by shortening their procurement cycle and doubling gross merchandise volume in a year," Lin said, adding that LST wants to grab one-third of all sourcing channels for small businesses by 2020.

"We are very excited about the LST business … because it helps enhance transparency, professionalism and efficiency in the industry," said Andrew Kennedy, vice-president of customer development at Unilever China, an Alibaba partner, on the data-driven distribution model.

Alibaba tested the service a year ago by inviting a select number of merchants to try out the service. Benefiting from a clear depiction and analysis of nearby demographics, half a million participating shops saw their gross merchandise volume skyrocket 28 times year-on-year in July, according to company data.

Fang Wei, owner of a 150-square-meter foodstuffs store in Huangshan, Anhui province, said the connection to LST helped to boost sales "significantly", without disclosing sales figures. He looked forward to better leveraging the platform's other functions, such as the procurement-on-credit service.

The LST service helps Alibaba fill the void of connecting smaller-scale business entities, after the internet giant tapped into high-end shopping chains like Intime Retail Group Co Ltd and Bailian (Group) Co Ltd.

Alibaba also plans to revamp 10,000 LST shops into Tmall Co-branded stores this year, which features a deeper level of cooperation from sourcing to use of data.