Nov 17, 2020|
JD Q3 2020 Earnings: A Great Potential for Fresh Produce on JD
by Ling Cao
“JD has long paid high attention to the fresh produce category,” Lei Xu, CEO of JD Retail, explained on JD’s third quarter 2020 earnings call on Nov. 16th.
Xu explained that JD’s fresh produce category is divided into five business models: online B2C, SEVEN FRESH (JD’s offline fresh supermarket), social e-commerce group buying, B2B and the forward warehouse model, which means putting the most frequently bought inventory nearest to customers. “We noted that many companies have selected one model to attract traffic flow, however for JD, we would rather create a more sustainable and long-term business model by building supply chain and service capabilities, said Xu.
He added, “Some of these business models have to be focused on the specific region and localize services in order to perform in the long run. So, in addition to our B2C and other business models, we will continue to explore new models.”
Xu also highlighted the steady performance of JD’s SEVEN FRESH. During this year’s Singles Day Grand Promotion, JD opened two SEVEN FRESH stores in Beijing’s CBD district and Wuhan, providing a best-in-class omnichannel fresh produce shopping experience to customers.
Sandy Xu, CFO of JD.com shared, “Fresh produce is a strategic priority for JD.” She also addressed the sustainable business model strategy. “The fact is fresh produce is an even tougher category for e-commerce or retail due to the low ticket size and high loss ratios during the production and fulfillment process. So we don’t believe subsidies are a competitive advantage.” She added that the key is to find a solution to improve the operating efficiency of existing business processes and reduce operating cost. “So, we will continue to invest in infrastructures to build our core advantages in this category.”
Fresh produce surged once again this Singles Day, but according to Lei Xu, the company has only scratched the surface. “The online shopping penetration rate for fresh produce is still relatively low. There’s still space to grow,” he said.