In-Depth Report: What does 362m JD Customers mean?

In-Depth Report: What does 362m JD Customers mean?

by Tracy Yang

On March 2, JD.com released its Q4 and FY2019 earnings results. The core indicators all exceeded expectations. The number of annual active customers reached 362 million in 2019, increasing 27.6 million as compared with Q3 – the highest growth rate in the past 12 quarters.

Compared with the previous three quarters, the growth rate showed a significant accelerated growth trend. The accelerated growth of JD.com’s annual active users results from JD.com’s continued emphasis on customer experience.

 

The Winning Strategy

JD.com always puts customer experience first. In 2007, after obtaining the first round of financing, Richard Liu, Chairman and CEO of JD.com, argued strongly that JD.com should build its own logistics network, because at that time, 70% of JD.com’s customer complaints were related to logistics.

A large number of customers either complained about slow delivery, or that they found their packages were seriously damaged. Considering JD.com’s demand could not be met by China’s logistics companies at that time, Richard Liu believed that only a self-built logistics network could solve this problem. When talking with the investors, Richard Liu highlighted that building up a large number of logistics centers and information systems would really transform the company’s future core competitiveness and continuously improve the user experience. Many people may think that it is a money-burning action, but he believed it is worth it for the user experience.

Richard Liu and his forward-thinking paid off, and today JD Logistics has been successfully transformed from a cost center to a profit center. JD.com relies on its nationwide logistics network to provide same-day and next-day delivery service to Chinese consumers, a level of service no other e-commerce company at JD’s scale in the world can match. Fast delivery has become one of JD.com’s key differentiators and has helped the company win the favor of Chinese consumers. Even competitors who were not optimistic about JD.com’s heavy asset model have followed suit and begun to focus on the logistics network.

In the past 10-plus years, JD.com has built a professional and high-quality logistics service team with more than 180,000 employees, among whom all the couriers are full-time employees, trained and managed by JD Logistics. They enjoy top-notch welfare benefits in the logistics industry, including insurance policies and a housing fund. Over 800 couriers bought their own homes in 2019, and the number of employees earning over RMB 20,000 per month increased by 225% YOY.

 

“Value-added” Delivery

JD.com’s couriers cover designated housing communities, office blocks and other areas each day. Unlike the couriers from other logistics companies, JD.com’s couriers are obviously more likely to gain the trust of consumers, and they will even become friends with them. In the community, they will say hello to the customers as if they were familiar friends. Chinese consumers sometimes put garbage bags outside of their doors and then throw them away when they go downstairs. JD.com’s couriers will take the initiative to help their customers throw away the garbage when they make deliveries. This obviously goes beyond the typical relationship between service personnel and users.

In addition, JD Logistics released the industry’s first five-star delivery service standard, which is based on previous customer feedback and JD’s understanding of premium delivery service. JD.com hopes in addition to fast delivery, JD couriers can also make Chinese consumers feel warmth and care in their daily interactions.

With the outbreak of COVID-19, JD’s couriers are going above and beyond the call of duty to be there for customers. They do everything they can to help people in China, from helping customers buying emergency medical supplies, to buying medicine for chronic diseases, to taking care of consumers’ pets. Although they are just ordinary people, in this critical period, they have become the heroes in every city.

 

Customer First  

Customer service and aftersales service are important steps to guarantee the customer experience and JD.com has always paid great attention to this. Richard Liu has adhered to the value of “customer first” from the very beginning and set a good example for all JD employees.

In the early days when JD.com was established, to save money, Richard Liu was reluctant to rent a house. He slept in the office for four years and worked until midnight every day, sleeping on the floor of the office. He put an old-fashioned alarm clock next to him and would set it in two-hour increments, so that he could keep his promise of 24-hour service and check if there are any customer complaints. At that time, Richard Liu was JD.com’s very first customer service personnel.

Over the past decade, JD.com has invested more than RMB 15 billion in building up its customer service team. Currently there are more than 10,000 employees on the team and three major customer service centers have been built up in two cities in Jiangsu province, Suqian and Yangzhou, and in Chengdu, Sichuan province.JD.com’s customer service team has also become the largest one in China’s e-commerce industry with leading service and technical capabilities.

JD.com’s customer service team has also leveraged the company’s strong technology capabilities to further improve service quality and efficiency. Apart from human customer service, smart service robots are also used in daily service to Chinese consumers, including a smart sentiment-sensing customer service robot, an AI shopping guide, and more. Based on big data analysis of customer behavior, AI technology is widely used to deal with customer demands related to refund, return and repair, so that Chinese consumers can enjoy fast and personalized service.

In addition, favorable refund and return policies are also important for the overall customer experience. JD Fangxin Shopping is a great example. It includes instant refund, door-to-door replacement, fresh food compensation, damaged package return, price insurance, 30-day quality problem return, delivery delay subsidy, freight insurance service, etc.

During the Spring Festival this year, JD Super, JD’s supermarket, launched a price insurance service for its goods. If consumers buy goods from JD Super and find that the prices of goods are lower in the following period of time, they can get compensation in the form of money, Jingdou (an e-voucher which can be used as cash on JD.com) and so on. In fact, the price insurance service had already covered various categories, like home appliances, food and beverages, automotive supplies, fresh food, furniture,  and clocks. This is part of JD’s relentless pursuit of improving the user experience.

 

Word-of-mouth

JD.com has always focused on the ultimate demand in the retail industry. JD Retail continues to care about the improvement of word-of-mouth, which is impacted by product quality, shopping experience and customer service.

JD.com’s efforts have born fruits, which can be reflected in the company’s Q4 and FY2019 earnings results. JD’s impressive increase of 27.6 million new users is higher than its key competitor in China’s e-commerce industry. It is also worth noting that over 70% of new users in Q4 were from tier 3 to tier 6 markets. This aligns closely with JD’s strategy on low tier market penetration.

As one of the key initiatives for deeper penetration in lower tier markets, JD.com launched Jingxi (“xi” in Chinese means happiness), an app specially targeted at consumers with relatively lower incomes in lower tier markets.

JD’s survey found that unlike consumers in tier 1 and 2 cities, who stick to one app for the majority of their purchases, consumers in lower tier markets use multiple apps or platforms, and they will pick the platform based on the categories they are buying. In recent years, more and more consumers in those markets have begun to try online shopping and demand has shifted towards quality products.

 

User Lifecycle

During the Q4 and FY2019 earnings call on March 2, Xu Lei, CEO of JD Retail said, “The consumers in low tier markets like interactive and entertaining methods in online shopping rather than simply buying products. The purchases of those consumers are driven by impulsive buying and the conversion rate is also high. Based on insights on these consumers, JD.com will further develop interactive marketing initiatives to engage more with them and leverage its partnership with Tencent to obtain new users.”

In terms of user growth, JD.com points to both new user growth and current user maintenance. The company launched a series of innovative initiatives to achieve quality user growth.

The performance of current users is also very impressive, since JD.com began to focus on lean operation of current users. By analyzing the shopping behavior of current users, JD.com introduced the concept of user lifecycle, and divided current users into introduction period/growth period, maturity period and decline/loss period. For users in different periods, through machine learning and quantitative analysis, JD.com has formulated the optimal matching of appropriate marketing channels and user benefits and interests to promote user growth and drive conversion rates.

During the epidemic period, more and more Chinese consumers and enterprises rely on JD.com for daily work and life, which is a reflection of the trust JD.com has gained. From Jan 20 to Feb 28, JD.com had already provided a total of 220 million individual food items, covering rice, flour, noodles, cooking oil, meat, eggs, vegetables, milk and other daily necessities, weighing over 290,000 tons, to consumers across the country. The number is still climbing. Bearing trust in mind, JD.com will continue to carry out its “customer first” value proposition and shoulder its responsibility as a responsible retailer in China.

 

(tracy.yang@jd.com)

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