by Ling Cao

JD kicked off its 17^th 618 Grand Promotion on June 1^st. Home appliances, including air conditioners, refrigerators and washing machines saw sales surge. Customers are pursuing health-centered products after the COVID-19 outbreak. Data shows that purification and sterilization air conditioner sales increased 10 times YOY during June 1-2, sterilization refrigerator and washing machine sales increased 550% YOY. Each of 30 brand of air conditioner products hit RMB 10 million in just 10 minutes on June 1^st. In just one hour, sales of high-end refrigerators and washing machines from brands like Casarte, Siemens and LG increased nearly 8 times y-o-y. During June 1-2, outbound orders for hot-selling air conditioners from JD’s warehouse increased nearly 270% compared with daily average during the last week in May.

The coronavirus also changed the way people purchase home appliances. Industry data shows that in Q1 2020, online home appliance sales accounted for 55.8% of total home appliance retail sales, which was the first time this percentage had surpassed 50% benchmark, while JD’s home appliances accounted for 29.1% of total sales nationwide, making JD the top home appliance retailer online or offline in China.

JD will continue to offer discounts and benefits for home appliances customers during 618 and ensure a smooth shopping experience even during the peak sales period. JD can do this because it focuses on how to build long-term sustainable advantage. One key factor is JD’s supply chain. For bulky items like home appliances, in addition to high-quality products, guaranteed service covering fulfillment, installation and post-sale is also essential to attract customers.

An integrated and leading bulky supply chain as a Guardian

JD has built an integrated bulky supply chain infrastructure, which is one of core differentiators for the company to be able to dominate the industry. Due to factors such as the large size of products, high value and non-standardization of SKUs, it is common that the inventory might be stored in various warehouses and transfer of goods is necessary. Those issues lead to increased difficulties in fulfilment and higher door-to-door transportation costs. Consequently, the customer experience tends to be negatively impacted. With the large quantity of bulky orders made during 618, it is a significant challenge to the reliability of JD’s bulky supply chain system.

JD leveraged its integrated warehousing and logistics network to put some of the bulky products from the brands’ factories in JD’s warehouses nationwide ahead of time, and leveraged its big data for inventory replenishment, and accurately predicted the shopping habits and preferences of customers. Haier, the domestic leading home appliances brand is one of the key cooperation examples. Both parties have cooperated on the forward warehouse since last Singles Day (November 11^th), and now JD has opened nearly all of its forward warehouse resources to them, allocating about 300,000 square meters of space to Haier. This allowed JD to prepare the proper amount of each SKU in each warehouse in its seven regional areas, which made it possible to deliver the orders from warehouses closest to customers, hence greatly improving fulfilment efficiency.

Due to the uncertainty of the virus situation, many merchants didn’t prepare enough inventory for 618 before April. When the situation gradually stabilized in China, customer demand increased, forcing many merchants to adjust their inventory strategy to add more products for 618. The factories also rapidly ramped up production. This resulted in a large amount of inventory added to JD warehouses within a short time period. Thanks to JD’s technology expertise, the company was able to do sales forecasting and prepare additional fulfillment resources in advance. For the first time, JD implemented “batching” for its AI-powered pre-order technology to help improve book delivery. The system is able to complete 50,000 intelligent voice interactions per hour and increase efficiency throughout the whole bulky supply chain.

JD has also introduced the very first automated storage and retrieval system (AS/RS) for bulky items in Asia’s e-commerce industry in one of JD’s Asia No.1 logistics parks, which can highly increase the efficiency and reduce labor intensity.

Building strength and innovation based on customer experience

JD’s home appliances team has focused heavily on customer experience since the beginning. “Smart, high-end, tailored and healthy are the key trends for the air conditioner industry.” said Kening Wu, head of the air conditioner sales department at JD. “To some degree, the epidemic has made customers care more about health. Our data shows that keywords searching for sterilization air conditioner in March is over 26 times than that of February. Sales of all the health related home appliances from late January to now are three times that of the same period last year.” He added.

As more and more customers have individualized demands, JD also leverages big data to forecast the most suitable product for them. For example, JD saw many customers’ comments which showed interest in aesthetically pleasing air conditioners. One innovative idea was born immediately: Why not cooperate with a certain IP (such as a movie) or designer to decorate the exterior on an air conditioner so that it’s not just pure white? Why not design a gaming-themed exterior to make the product more appealing to millennials? “These types of C2M products are currently in the works. You always need to think one step ahead to stable your position in industry,” Wu commented. One industry data shows that apart from cooling capabilities, appearance is the second priority criterion for customers, accounting for 33.7% of concerns.

JD has cooperated with 63 home appliance brands covering 200 kinds of products for C2M home appliances, including leading brands such as TCL, Midea and Little Swan. Late last year, JD cooperated with Little Swan on tailored baby and maternal wall-mounted type washing machine and sold on JD exclusively online. Both companies started to develop this project since late 2018. During the process, JD has done extensive customer research and big data analysis, which found that there was huge demand for this feature. The product, launched in 2019, remains popular and received good review from customers. One customer commented, “The small wall-mounted washing machine with disinfection and drying functions looks very cute, I bought it for soon-to-be born baby.” C2M will certainly be one of the key trends to promote stable development for the home appliances industry.

“The capability to utilize feedback from our user profiles and help them design requirement-based products is one of our key advantages, thus C2M will be our core strategy going forward. Besides, we have different measures to target different customers. For example, we recommend smaller washing machines for those who live alone.” added Shuangxi Wu, head of refrigerators and washing machines sales department at JD.com.

Another challenge is how to maintain sales volume as home appliances have an 8-10-year lifecycle. Wu shared, “We also found there are opportunities for a second home appliance need, such as baby and maternal small washing machine to separate washing tasks, as well as new emerging categories, such as an ice bar to stock several bottles of beverages. These are also two of the fastest growth categories in my business. The other one is dryers.”

Replacing an old product for a new one is also a trend.  According to industry data, in 2019, there were 430 million air conditioners at Chinese households (which is equivalent to one AC per family if China’s entire population were divided into families of three). The huge number also means that there is great potential for consumers to make replacements. Industry data also shows that in 2020, over 52 million air conditioners exceed their recommended safe usage period. JD data also showed customer awareness of this demand – over 43% of customers who buy home appliances are replacing old ones.

Although home appliances is a traditional category, it has embraced new marketing tools like live streaming, which has grown fast during COVID-19. Brands also cooperate with JD for joint events. For example, on May 15^th, Mingzhu Dong, chairwoman of Gree Electric joined a livestream for Gree products on JD. From 8:00 pm to 11:20 pm, the livestream generated RMB 703 million yuan (nearly US$100 million) in sales. On May 20^th, Haier joined JD’s home appliances livestreaming and added 470,000 followers to its JD store on the day. For 618, there will be more livestreaming to help boost home appliances sales.

Omichannel: a new strategy especially in lower tier markets

JD has over 12,000 home appliances experience stores around China. They play an important role in ensuring customer experience, especially in lower-tier markets where consumers may not be as accustomed to buying them online. The function of these stores is not just to sell products, but also to serve as an offline experience and after-sales service center. “E-commerce penetration in lower tier markets still needs to be cultivated. The experience stores help JD provide our rich home appliances products to these customers, and is the best way to combine our products with an omnichannel sales strategy,” said Wu.

Customers also prefer this way of shopping. One JD home appliances experience store in Chaoyang, Liaoning province, a fourth tier city, reached RMB 1 million yuan in sales on June 1^st through WeChat promotion, live streaming, offline events, and more.

In addition, JD’s largest immersive experience store E-Space in Chongqing will also participate in 618, providing customers with subsidies and discounts. From May 30^th to June 1^st, E-Space visitors increased 300% compared with same period last month. Sales hit RMB 20 million, resuming to the level before the virus.

(ling.cao@jd.com)