In-Depth Report: JD.com: Building Resilience through the “Product + Service“ Model

In-Depth Report: JD.com: Building Resilience through the “Product + Service“ Model

by Vivian Yang

Although China is leading the world in economic recovery from the COVID-19 pandemic, a full recovery in consumption will likely take time. At the same time, in a world where lockdowns and restrictions in movement have become the norm in many places across the globe, the consumption of not only products, but services – from online medical consultations to at-home installation services – are front and center. Amidst this rebound, JD.com is stepping up efforts to strengthen its services offering as greater and more adaptive services are of critical importance to enhancing customers’ experience in the post-COVID era.

As China’s largest online and offline retailer, JD.com is committed to providing trusted products and services to its customers. From services for consumption of products to consumption of actual services, the coronavirus outbreak has accelerated JD’s innovative “product + service” model. In the first half of 2020, JD identified three main trends in this model that have brought resilience and new growth opportunities for the company and the industry.

 

Connecting Online and Offline via Services

To mitigate the impact of the lockdown on traditional offline businesses, JD has been utilizing and leveraging its platform to improve its online-to-offline (O2O) services.

During the lockdown period, as people moved online to seek medical advice and purchase products, the surging popularity of telemedicine generated booming demand for drug delivery. In response, JD quickly enhanced its collaboration with more than 200,000 offline pharmacies across over 200 cities in China. Online customers in service-covered cities can select nearby pharmacies and place orders that will be delivered to their doorsteps within 30 minutes. Due to the speed, ease and safety of this service, called O2O, it took off immediately after following its roll-out earlier this year. Its popularity continues to grow. For this year’s 618 Grand Promotion, the first nationwide sales promotion event in China after the lockdown, the transaction volume of  fast drug delivery service offered by JD Health on a single day, June 18, was 492 times greater than the same day last year.

Home buying might be the last thing people think about when it comes to online shopping. But when combining its superior service with real estate at a time of social distancing, JD provides buyers with  confidence to finalize deals before they even visit the property in person. During 618, JD Real Estate introduced an RMB 6.18 yuan (about US $1) “Five Benefits Service Package”, comprised of housing selection assistance, exclusive offers, price protection, “cancel for any reason” insurance, and online reservations. Over 500,000 home-buying orders were made with these standard benefits on JD.com.

The strength of JD’s O2O platform is that premium services and omnichannel solutions ensure that customers are always in good hands. Michelin is a prime example for the automotive market. Through the company’s strong partnership with JD.com, customers who purchase tires from JD’s first-party Michelin flagship store will be offered priority to choose high-end car service networks such as TYREPLUS. There, they can enjoy a one-stop premium service experience, including tire shopping, delivery, installation and maintenance. During the 618 , over 80% of those who purchased tires on JD’s selected platform were offered offline car repair services. The transaction volume of car maintenance services on JD increased 293% YoY.

 

Standardized Services

JD’s standardized services have been popular throughout the pandemic not only because they are transparent, efficient and quality-controlled, but also because they are always available to meet customers’ needs wherever they are and whenever they want.

Take fresh flower delivery service as an example. Flower delivery service has long been beset by problems such as decentralized planting, a long supply chain, high risk of packaging damage, and inconsistent service quality. To remedy these challenges, JD brought in its cold chain logistics and Allianz insurance services (JD has a 30% stake in Allianz China)to its flower booking and delivery service. This allowed JD to standardize its products and services, such as one-hour flash delivery. The transaction volume of flower sales on JD’s platform increased by 150% during the 618 shopping festival alone.

The “one-hour delivery circle” is part of JD’s omnichannel fulfillment supply chain innovation program. By strengthening collaboration with Dada Group (JD’s joint venture for local on-demand retail and delivery platform), JD’s online supermarket business JD Super has connected over 10,000 bricks-and-mortar stores in 100 cities with 3 million products that can be delivered to people’s homes within one hour. A number of supermarkets, FMCG companies and consumer electronics brands have participated in this program and more partners are continuing to join, providing multi-category choices and a convenient shopping experience for thousands of housebound customers.

Beyond last mile delivery, JD ensures its “last mile services”, or after-sale services. JD Service Plus is the new frontier on this effort. Currently, customers can find over 6,000 service products in 37 service categories on JD, such as installation, repair and cleaning for electronic products, home appliances, and furniture; maintenance for bags, shoes and clocks; eliminating dust mites; air quality tests and air purifying services and much more. Using JD Logistics’ nationwide network, customers can enjoy these services conveniently by ordering services to their home, sending products to JD Service Plus or visiting JD’s offline service stations in person, with rapid response, transparent pricing, trained professionals and guaranteed quality.

JD Service Plus

 

Building Customized Services

Consumers’ increasingly diversified consumption needs are propelling JD to create  more customized services.

Data from the 618 shows that the transaction volume of motorcycles and bicycles increased by 61.1% and 57.6% respectively, while retro motorcycles increased 500% year-on-year. As travel restrictions loosen, many young customers are turning to JD to buy more personalized and fashionable cycling gear. To cater to their needs, JD has taken a number of steps, including collaborating with bicycle makers to produce more customized products, utilizing the so-called Customer to Manufacturer (C2M) model. With the C2M model, JD can better understand customers’ preferences so as to organize cycling activities and offer more tailor-made after-sales services online or offline to increase customers’ engagement with the platform.

Online auctions are another service gaining traction. During 618, JD put a wide array of items up for auction, including residential properties, jewelry, luxury goods, ceramics, art collections, handicrafts, tea and wine, automobiles,etc. An online auction of old coins has been viewed more than 1.21 million times and an auction of Pu-erh tea cake has been viewed over 270,000 times.

JD also introduced an exclusive iPhone full-price trade-in plan for Apple fans during the 618. With this special offer, if a customer purchases an iPhone 11 during the month of June, they can exchange it for the iPhone 12 once it is released later this year and only pay the price difference between the two phones. This way, customers won’t have to worry about the depreciated value of their iPhone 11 and miss the chance to try out the iPhone 12.

 

JD Auction Page during the 618 Grand Promotion

According to China’s National Statistics Bureau, service consumption expenditures in 2019 accounted for 45.9% of all household consumption expenditures per capita—1.7 % higher than in 2018. This steady growth is mainly attributed to the country’s rapid urbanization and widespread increase in consumption. When compared with developed economies like the U.S. and Japan, where service consumption expenditures account for over 60 percent of household consumption expenditures, China has significant potential to continue developing in this area.

Under the backdrop of the post-COVID economic recovery, JD continues to innovate in the service consumption area using the solid infrastructure it has developed over the years in technology, supply chain, and logistics. Through integrating online and offline, physical and virtual, , JD is prepared to succeed in the new normal of the economy and surge in growth after the pandemic. But most of all, the trust that JD has built with its customers, partners and merchants is what makes it possible to bring more breakthroughs in its service offerings.

 

(vivian.yang@jd.com)

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