External Services Accounted for 40% of Revenue for JD Logistics

External Services Accounted for 40% of Revenue for JD Logistics

by Ling Cao and Tracy Yang

By the end of 2019, JD Logistics’ revenue from external services accounted for more than 40% of its total revenue, reflecting the success of its open, technology-driven strategy. External services are any logistics and supply chain services outside of JD’s first-party business, including services provided to parties beyond the e-commerce industry. JD’s full-year 2019 earnings released this week revealed this encouraging achievement.

JD Logistics has driven the steady growth of JD.com as a whole, with JD’s FY2019 net service revenues from logistics services and other businesses up significantly from 16.8% and 27.0% in 2017 and 2018 to 35.5% in 2019. In addition, JD’s fulfillment expenses as a percentage of net revenues decreased to 6.4% in 2019, down 0.5% from the same period in 2018, mainly due to economies of scale from enhanced logistics capacity utilization and staff productivity.

Three advantages pointed out by Zhenhui Wang, CEO of JD Logistics during earnings conference call are the driving force behind this. “First, JD Logistics strives to provide the best experience in the industry. Second, it puts products in locations nearest to its customers by leveraging JD’s integrated fulfillment capabilities and e-commerce experience. Third, JD Logistics uses technology to drive efficiency and cost reduction.”

JD Logistics continues to focus on lower tier market penetration, improving service efficiency and quality. In 2019, JD Logistics launched a program to further increase delivery efficiency in lower tier markets. As of the end of 2019, 24-hour delivery covers 88% of China’s districts and counties.

Wang said, “Tens of thousands of employees are working to make sure medical supplies and daily necessities will reach areas in need, including Hubei province.” He added, “JD Logistics always puts employees’ health first. We’ve ensured all kinds of protective supplies reach frontline employees from the beginning of the epidemic period.”

JD Logistics is also supporting enterprises resuming operations by offering frontline positions and providing free software to small and micro enterprises.

“Customers trust the service we are able to provide during the epidemic period, and we will continue to improve the experience,” said Wang. Many merchants used or started to use JD’s fulfillment services during the epidemic period, and have reaped substantial benefits as a result.

 

(ling.cao@jd.com; tracy.yang@jd.com)

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