Aug 19, 2020|
JD Earnings: Revenue Champion Category is FMCG and Fresh Produce
by Ella Kidron
JD’s position as not only the largest supermarket, but as Chinese consumers’ grocery store of choice was made clear in the second quarter 2020 earnings results, reported on August 17th.
On the earnings call, CFO Sandy Xu explained that the supermarket category, including FMCG and fresh produce, became the single largest product category by revenue in the first half of 2020, surpassing mobile phones, home appliances, and computers – JD’s former “champion categories” (which also performed well).
Xu said, “This steady shift demonstrates our strengthened brand recognition and consumer perception as an ‘everything-store’ with increasingly broader selections.” She explained that consumer demand for fresh produce continued to be robust in Q2, leading to an over 140% growth in the number of sales orders YOY, and strong topline growth following the jump in the first quarter. She added, “We are delighted to see that our supermarket category continued to realize scale benefits, improved operating efficiency with our in-house fulfillment capacity and collaborated effectively with third party partners under our omnichannel strategy.”
Behind the strong results is both customers’ and brand partners’ recognition of and trust in JD as a reliable provider of essentials. Brands’ dependence on strong partnership with JD, especially under the extraordinary circumstances of COVID-19 is a key trend of the second quarter results. A Nielsen report from the 618 Grand Promotion found that JD’s growth rate in the consumer goods sub-categories represented by food, clearly exceeded that of the market, demonstrating consumers’ trust in the platform.
Furthermore, JD’s own big data found that as of June 30, 2020, over 10,000 brands have achieved YOY turnover growth of over 100%, 7000 brands saw over 200% YOY turnover growth, and 5,000 brands saw 300% growth YOY. Two hundred brands saw transaction volume exceed RMB 100 million yuan, while over 20 brands realized transaction volume of over RMB 10 billion yuan. Famous Chinese cooking oil and rice brand Jinlongyu debuted 15 products on JD Super in the first half of 2020, among which the best performing product realized over RMB 500,000 in sales, achieving a month on month increase of 100%.
Another brand in the same category, Fulinmen leveraged JD’s massive user base and big data insights to create hot-selling C2M (Consumer-to-Manufacturer) products. Two customized cooking oil products saw sales increase over 5000% compared with the previous period. JD’s C2M initiative helps brands better understand and tailor their products to consumers. C2M projects can vary in complexity from adjusting size or packaging, to creating full-fledged new flavors or styles of a product, all with the goal of providing consumers the products they actually want and need.
There are several underlying reasons for the rapid growth of JD’s FMCG Omnichannel business, a combination of JD’s long-term approach to consistency and quality as well as its creativity in innovative business models. For starters, its forward-looking plan and business layout. Over the years, the platform has consistently provided high quality products and services, giving it a good word of mouth reputation among consumers. In addition, particularly during the height of COVID-19, JD Super relied on the technology, supply chain and logistics advantages of the JD.com ecosystem to work hand in hand with FMCG brands to ensure adequate supply and stable prices of daily necessities, and the overall impact of the pandemic on business. In the first half of 2020, JD sold a daily average of 1.47 million liters of cooking oil, and roughly 3 million kilograms of rice and flour. During the 618 Grand Promotion, three core categories under JD Super, namely dry food, baby and maternal, and alcohol all saw turnover exceed RMB 100 million yuan.
JD Super also leveraged a network of over one million offline stores and over 17 million available products to support work resumption and consumption recovery. The “One Hour Life Circle” concept, which brings daily necessities and other consumer goods to consumers’ fingertips, minimizing touchpoints between order and delivery, is one example of how JD Super has used its supply chain capability to add significant convenience to consumers’ lives when it was needed most.
During the earnings call, JD Retail CEO Lei Xu said: “Profitability improvement in the FMCG Omnichannel business, especially in FMCG and fresh, was very obvious this year. JD Super (JD’s online supermarket) is already the largest supermarket in China, online or offline.”