Jul 21, 2020|

In-Depth Report: JD & C2M: Uncover Hidden Demand


by Yuchuan Wang

  • According to the “C2M-The Ultimate Mode of Industrial Digitization” report published by SWS Research in May, the market size of C2M in China is expected to reach to RMB 1.4 trillion yuan (~US $200 billion) in 2022.
  • Last November, Lei Xu, CEO of JD Retail, announced that in the next three years, over 100 million new products and C2M products will be launched on JD’s platforms.

With the development of big data and AI, Consumer-to-Manufacturer (C2M), a new flexible manufacturing model has emerged in recent years. By analyzing massive amounts of data and generating insights regarding demand, C2M helps optimize product design and circulation to meet specific demands.

Consumers are increasingly shopping for a personalized experience. They have very clear requirements for the products they buy, not only in terms of appearance down to the smallest detail, but also price, functions, delivery and after-sales services and even the manufacturing process.

This trend has disrupted the traditional supply chain: What and when to launch new products are no longer determined by the supply end only. Now, the preferences and psychology of consumers is more important than ever, which may set the fundamental for brands to build their competitiveness and preempt the market. E-commerce, home to the most comprehensive consumption data, has become a key channel for manufacturers to better understand their customers.

Lei Xu announces JD to sell over 100 million new products and C2M products in the next three years
Lei Xu announces JD to sell over 100 million new products and C2M products in the next three years

JD.com is an early mover in C2M. The company’s C2M model leverages AI, big data, and supply chain technologies to help partners analyze consumption trends and insights based on JD’s over 387 million users base.

As early as 2013, JD accidentally created its C2M model during a customer feedback session. At that time, the PC market was facing extreme pressure from smart phones and tablets. As the market wasn’t able to provide diversified products, there was a huge decline in consumption throughout the industry. JD’s sales team, however, saw from product reviews that many customers did want PCs with better performance, so they invited a group of JD customers to share their expectations of the future evolution of the PC industry. Following the session, JD had an idea to use big data to discover niche needs for new market growth. As a leader in computers and electronics retail, JD applied C2M to gaming laptops first.


Identify the needs

Launching a new product is difficult. Researches show between 65% and 75% of new offerings fail outright or miss their profit goals. Numerous factors can cause failures. Some products fail to capture the real needs of customers, while other products are too similar as to existing product offerings. C2M helps to identify the real needs beneath the surface.

“We don’t purely look at sales data, we look at user click rates,” said Aqiang Qin, head of supply chain management in JD’s Computer and Digital business unit. Shortly after curved monitors came on the market in 2017, JD discovered that there was a lot of interest in the products since users’ click rate of such products on JD was up to 22%, but the sales only accounted for 11%. According to JD’s analysis, there were two main reasons. First, there were limited curved monitor offerings on JD at that time. Second, they were quite expensive and beyond many customers’ budgets.

“Understanding the need, we took action to negotiate with manufacturers to produce more curved monitors and lower the price.” In just one year, curved monitors represented 21% of monitors sold on JD, which matched the click rate. Leveraging a similar approach, Qin’s team raised the sales of 2K and 4K monitors from RMB 1 billion yuan to RMB 2.5 billion yuan in just two years.

As JD becomes the largest retailer in the high end monitor sector, to further drive sales it has to move up to the manufacturing end. Seventy percent of the cost of monitors come from the LCD panel.

“For gaming laptops, customers always want larger screens for a wider view of games and they want them to be lighter weight for portability, which are obviously quite contradictive,” said Qin, “If we want to further develop our C2M model, we have to collaborate with upstream LCD manufacturers.”

Limited by the way manufacturers cut the display, there were only two sizes for gaming laptop in the past, 15.6-inch and 17.3-inch. Based on JD’s big data analysis of customer reviews and normal distribution of sales, customers were in great need for a display that was between the two sizes. JD provided this insight to gaming laptop brand Thunderobot and the two parties found that, if adopting an ultra-slim frame, a 16.6-inch laptop could have a similar volume as the 15.6-inch one but increase the display area by 14%, similar as the 17.3-inch laptop.

JD provided this insight to gaming laptop brand Thunderobot

JD and Thunderobot quickly started communicating with manufacturer BOE, a leading electronic components producer in China. “Having the statistics on hand, we convinced BOE to launch an exclusive production line for 16.6-inch screens, as it reflects the needs from customers.”

LCD production line at BOE
LCD production line at BOE

Thunderobot’s new gaming laptop was launched in 2019 as the world’s first 16.6-inch laptop. It has quickly become Thunderobot’s best-selling product on JD.

So far, JD has become the largest e-commerce platform for gaming laptops and sells tens of millions of products each year. Forty percent of gaming laptops selling on JD are developed through JD’s C2M model.

Sales of OMEN Gaming PC series collaborated with HP have exceeded RMB 1 billion yuan. In January, JD and HP also announced to launch 100 C2M products in the next two years. Another C2M product collaborated with Logitech, the silent mouse, has seen dramatic demand with more than 100,000 sold since 2016. Sales of the Dell C2M laptop tailored for designers on the first day of JD’s 618 Grand Promotion was five times that of the average sold in May.


A replicable JD C2M model

Customer demand for different products can depend on circumstances and changing preferences.

“For example, when buying air conditioners, people will choose very different products before and after marriage. Men and women also differ in product preferences. The C2M capability provided by JD covers the full life cycle of a product, from the design, to sales forecast, inventory preparation, and marketing. We help customers design products, and we help brands find their customers,” said Ruixue Zhou, head of the integrated innovation at JD-Y, JD’s smart supply chain business unit.

JD’s C2M method consists of a proven process.

JD’s C2M method consists of a proven process.

First, JD produces a detailed report outlining demand for products leveraging JD’s extensive consumption data and industry insights. AI plays a critical role in this process to help analyze consumption trends, consumer decision trees, which show consumer motivations for purchasing decisions, and more.

Second, JD works with partners to roll out simulations including creating mockup pages on the JD app and obtain customer feedback such as clicks, browsing duration and the rate at which products are added to the cart.

Based on the first two steps, partners manufacture products that customers have illustrated will have high demand. JD also provides support for product launch and precision marketing, as part of the C2M process.

The company’s C2M model now helps shorten market research time by 75% compared with traditional offline means and shorten the new product launch cycle by 67%.

The model has been expanded to other categories, including home appliances, cell phones, fast moving consumer goods, fashion and home products, and more. For example, in the pet food category, by analyzing the profile of Nestlé Purina consumers, JD found that most consumers are highly educated and higher spending. As the general trend shows pet owners are willing to pay higher for quality, JD suggested Purina to upgrade its product to meet customer expectation. Most recently, JD helped leading high-end electronic tools brand WORX design a best-selling drill for male customers.

JD’s C2M initiative provides brands the perfect opportunity to reach targeted consumer groups. During the 618 promotion from June 1st to 14th, sales of C2M products on JD increased 622% year-on-year.

Yueting Chai, Director of National Lab for E-commerce Transaction Technology at Tsinghua University shared his view on the “C2M: Retail as the King” seminar hosted by Academy of China Council for the Promotion of International Trade. He believes, to some extent, C2M is the ultimate form of retail and may be a mainstream part of in retail in the future. It satisfies the ultimate form of the development of information network and the direction of retail, that is, personalization, miniaturization, publicity and sharing.

According to JD’s research, only 10% of consumers surveyed are aware of the concept of C2M. But 92% of consumers surveyed are satisfied with C2M products although they might not even know how the product is designed.