Voices from Accenture Public Service


Alibaba’s Ling Shou Tong retail management platform is changing how small, independent, usually family owned shops, operate in China. In my previous blog, I mentioned the possibility of a retail network based on predicted demand, localised inventory, crowdsourced labor and new data sources all controlled and optimised by an artificial intelligence engine that constantly learns and adapts. With Ling Shou Tong now in over 600,000 (10 percent)[1] of these small, independent shops in China, that network is now a reality, and it’s disrupting China’s retail industry.

Ling Shou Tong launched in 2016[2] to help China’s six million small independent shops with data-driven inventory management. Stores provide the platform with customer behavior data and act as local fulfillment and delivery centers in turn for Ling Shou Tong’s brand recognition, sales insights and distribution network. The platform is used by store owners to order Alibaba products through an app and fulfill online orders. That same platform gives them insight into what customers are buying and uses analytics to help them with inventory management and replenishment strategies.

Not only does this model disrupt retail (it disintermediates middlemen since store owners deal directly with Alibaba), it also has a potentially disruptive impact on post and parcel delivery. Ling Shou Tong gives Alibaba inventory in a broadly distributed, local network.  By centralising management of that inventory on a common analytics platform, Alibaba has essentially created a virtual brick and mortar network it can use to optimise fulfillment. This could be used to solve an important last mile challenge by making same-day delivery possible by picking from local inventory; however, vendors will have to price competitively and deliver quality service to gain a stake in the network.

Ling Shou Tong is redefining the traditional supply chain into an efficient digital network, centralised through its cloud-based platform. This is part of a broader plan called “new retail,” part of Alibaba’s strategy to develop a new economic infrastructure, which blends online and offline operations, in China and potentially influence other areas of the world.[3]

This strategy is very different to Amazon’s. Amazon is working aggressively to place content closer to consumers by opening its own facilities. Where Alibaba is focusing on coordination and enablement, Amazon’s platform aims to control its own distribution centers and shipping fleet. Amazon has scaled its facilities from 59 in 2011 to over 700 in 2018, in an effort to localise inventory, meet ambitious shipping targets and lower the cost of the last mile.

Of these two disruptive scenarios, which will win? Is it better to have an ecosystem of players, each having a stake in the supply chain? Or will it be important to own the infrastructure and control? Only time will tell. What is clear is that retail supply chains are transforming, and post and parcel organisations will need to learn to operate within these new models to take full advantage as the market changes.

Read more about The New Delivery Reality for Post and Parcel Players.

[1] “A New Era of Shopping” http://www.bjreview.com/Business/201711/t20171117_800110317.html Alibaba is trying to reinvent China’s mom-and-pop stores

[2] “Online Retailers Go Offline in China” https://www.economist.com/business/2018/04/07/online-retailers-go-offline-in-china

[3] “A New Era of Shopping” http://www.bjreview.com/Business/201711/t20171117_800110317.html

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