Ahead of its annual online shopping extravaganza, popularly known as Singles Day, last November, Chinese tech titan Alibaba unveiled its Ling Shou Tong retail strategy.
Ling Shou Tong’s idea is simple: To connect convenience stores, often mom-and-pop stores, to the e-commerce giant’s network of supply chain, logistics and data analytics – and by doing so, revamp how these shops operate.
As it said on its news portal Alizila: “The programme doesn’t just give a cosmetic update to convenience stores. It’s also an extreme tech makeover, injecting modern analytics to improve, streamline and automate operations that have long relied on elbow grease and intuition.”
In practical terms, this means when shopowners order goods via the Ling Shou Tong app, analytics of their stores would suggest to them the products that are most in demand. They are also able place their orders online, in a centralised manner, without having to negotiate with multiple distributors.
Alibaba said a large number of mom-and-pop stores in China are owned by those over 45, who “log long hours and do everything themselves”, and these are characteristics that could apply to small retailers here in Singapore too.
LING SHOU TONG IN SINGAPORE?
But could Alibaba bring the Ling Shou Tong concept to Singapore?
IDC’s lead analyst for Future of Commerce Lawrence Cheok said in an email that this retail strategy provides similar benefits for consumers and small merchants here, such as greater supply chain efficiencies and, hopefully, competitive prices.
However, he noted that Ling Shou Tong is similar to the tech titan’s other rural commerce initiatives in that it is an effort to more deeply penetrate the local domestic market, given that e-commerce is mostly saturated in the top tier cities. With that in mind, he questioned if bringing this retail concept here is the “lowest lying fruit” for the Singapore market.
Other analysts also downplayed the possibility of Ling Shou Tong being brought here, with Forrester Research’s senior analyst Xiaofeng Wang saying that Singapore is not ready for the retail concept as consumers or small merchants are not prepared for it.
Ms Wang pointed out that mobile payment in China is already so dominant, with the majority of consumers and small merchants, even street stall owners, using this method on a daily basis. So upgrading to Ling Shou Tong and using digital means to order and manage inventory “wouldn’t be that far away” for these mom-and-pop shopowners.
“In Singapore, there’s still a long way to go,” the analyst said in an email. “Majority of consumers and merchants still use cash in hawker centres even after QR code payment is launched.”
Gartner’s research director Adrian Lee also said that while the concept is “innovative”, he does not see it “playing out well” here.
Mr Lee said in his email that Ling Shou Tong needs several conditions to be successfully implemented: A near ubiquitous digital payment channel and point-of-sale management to facilitate seamless checkout, a robust and integrated logistics network and fulfillment partners such as Cainiao and sufficient number of store owners who believe in the value of tapping into the company’s massive inventory to gain cost savings when stocking up.
“For the above reasons, I do not believe that Ling Shou Tong is viable in Singapore.”
NEW RETAIL METHODS “A MATTER OF TIME”
That said, IDC’s Cheok is of the opinion that Alibaba’s New Retail strategy, which Ling Shou Tong is a part of, will spread to the rest of Asia. Chairman Jack Ma had said last October that New Retail will “bring about a restructuring of the global supply chain and change the complexion of globalization from the domain of big businesses to small businesses”.
The imported retail concept would be a variation of the China model “in order to cater to local requirements” and would likely entail partnerships with local players who can provide value, the analyst explained.
“For instance, Alibaba would require local consumer data and insights to provide the same benefits they are providing to the Chinese merchants. In addition, new supplier relationships would be required to cater to local merchandising preferences,” he said.
Should this happen, it will “definitely impact the bottom line for competitors caught unawares”, Gartner’s Lee suggested.
“Amazon will have an advantage in that they’ve launched similar converged retail initiatives and is also sufficiently funded to scale up,” he said. “The capital investment required to carry out Ling Shou Tong will prove an obstacle for local supermarket chains and players like honestbee.”
