Alibaba announced last week that it has recruited one million convenience stores in China, around one-sixth of the total market, to use its LST (Ling Shou Tong) system as their ‘one-stop solution for digital transformation’, embracing New Retail and offering better services to their local neighbourhoods.
LST is designed to help these mom-and-pop stores by providing a platform where operators can crunch sales and operations data, analysing it and turning it into insights. The LST platform aims to remove the friction and layers between FMCG (fast-moving consumer goods) brands, distributors and shop owners. This has helped brands connect with elusive stores across China that could formerly only be reached through multiple layers of sub-distributors, if at all.
There are estimated to be more than six million corner stores in China, but most have struggled to survive under the pressure of skyrocketing rent and staff costs, as well as an inherent lack of management tools. They have been sold the dream that LST will give them the option of becoming what’s known as a “Tmall Corner Store.” Through a makeover and optimization of product selection, inventory tracking and in-store digital advertising, these stores have shown they can reverse the sector’s downward revenue trend. Alibaba statistics show that when a mom-and-pop store transforms itself into a Tmall Corner Store, its daily turnover increases by 30%, on average.
“New Retail not only empowers the big players, it will also allow every street corner store to benefit,” said Daniel Zhang, Alibaba Group CEO. “We share a common goal with millions of small shop owners, which is to turn every one of them into a smart store that blurs the boundaries of online and offline retail to bring together the power of both retail spaces.”
LST taps into Alibaba’s big data to advise store owners on customer preferences, pricing strategies and inventory levels. As a component of the Alibaba ecosystem, LST also allows shop owners connected to the platform to bring their business online, enabling these stores to be found on the Taobao app, Tmall, AutoNavi Map, Alipay and Ele.me to expand their reach. Shop owners can also lease unmanned vending machines from LST to generate more revenue during non-operating hours.
For FMCG suppliers, Alibaba claims LST helps them identify matching stores in terms of customer and product profile, implement precise marketing strategies and assist in decision-making, based on sales.
“In the past year, more than 3,500 FMCG brands have landed on LST, thanks to the proven track record of the platform in providing store owners with logistics, sales and marketing support. By strengthening the presence of these corner stores, LST offers value-added services in local neighbourhoods,” said Lin Xiaohai, General Manager of LST.
The development is positive for reaching the masses of consumers in the ‘less sexy’ stores in ‘less sexy’ smaller cities. Consumers in these cities remain much less likely to buy online, so having an bricks & mortar presence is a key step expanding presence and sales in these cities. It has also been a very smart initiative for Alibaba to grow its presence in every corner of China through the ‘Tmall Corner Store’ branding, and source a whole new pool of data, at little cost to Alibaba.