by Hui Zhang

Many Chinese people are choosing to stay in the cities where they work during the upcoming Chinese New Year, which falls on February 12 this year, amid a recent uptick in COVID-19 cases. For most Chinese, celebrating spring festival with family over a big meal of nearly ten courses is a tradition. This year, those who won’t be traveling  to their hometowns may already be worrying about how to enjoy the gourmet feast they had been looking forward to for many months. Fortunately, JD’s offline fresh supermarket SEVEN FRESH can provide a solution to their concerns.

Leveraging its supply chain advantage and partnership with well-known offline restaurants and chefs, SEVEN FRESH is providing not only fresh ingredients, but also a wide range of meals for customers, including ready-to-cook meal gift boxes and meal packages. The selections include ready-to-cook local specialties from all around China, such as steamed “eight treasure rice” from Zhejiang, sausage from Guangdong and lamb chops from Beijing.

SEVEN FRESH, as one of JD’s key omnichannel retail initiatives, was launched in 2018 and has positioned itself as a high-end offline retail supermarket. Each offline store has thousands of products covering food, fresh, FMCG and more. The first SEVEN FRESH store in Beijing has won great attention with a daily average number of visitors totaling more than 10,000 during its test run.

One of the key factors behind the success of the supermarket chain is its access to multiple supply chain networks. Thanks to JD’s supply chain, SEVEN FRESH can select products from JD’s partners for a wider variety of products to meet consumers’ needs. Additionally, SEVEN FRESH’s self-developed supply chain provides in-store food and beverage products made by itself. Finally, the supermarket chain also benefits from localized supply, which refers to local products, especially fresh produce. As a result, SEVEN FRESH maintains introducing  50% of new SKUs every year to keep commodities flexible and fresh.

Supply Chain Behind SEVEN FRESH

A mature and complete supply chain system can ensure the stable supply of fresh products, reduce the pressure of warehousing and transportation, and also cut down on unnecessary costs and losses. Thanks to JD ‘s overall logistics capability and cold chain warehousing system, SEVEN FRESH can offer a stable supply of Feitian Moutai (53-percent alcohol) that is super hot on the market. Many fruits that have never been seen in other supermarkets are available here, and 20% of the products in SEVEN FRESH’s first store in Beijing were imported. JD’s overseas sourcing supply chain has been applied to SEVEN FRESH, which has greatly reduced the cost of manpower and material resources.

In terms of SEVEN FRESH’s self-developed supply chain, SEVEN FRESH firmly believes that what distinguishes it from traditional supermarkets is its ability to meet consumers’ eating habits and bring them products that well suit their tastes.

In order to bring consumers local food in line with their tastes, SEVEN FRESH has introduced various localized products and well-known brands based on an analysis of consumers in and around the city where each store is located. In addition, SEVEN FRESH has also hired local chefs to ensure that consumers can have a taste of authentic local cuisine inside the supermarket.

For example, SEVEN FRESH opened a store in Huizhou, Guangdong province, on Sept. 22, 2019. The store reallocated meat, poultry, eggs and vegetables in accordance with the eating and consumption habits of local people, and directly worked with local produce brands including Guangzhou Restaurant. Established in 1935, Guangzhou Restaurant is famous for its Cantonese cuisine and mid-autumn mooncakes, and is known as “the best restaurant in Guangzhou”. The new store introduced Qingyuan chicken, a local free range chicken that has been recommended and highlighted by National Geographic of China, after SEVEN FRESH found chicken to be the most important ingredient for local daily diet. All Qingyuan chickens are directly sourced from farms to bring peace of mind for consumers.

As a city famous for having various delicacies, Huizhou’s residents not only have high requirements for ingredients, but also attach much attention to the flavors. In order to cater to the tastes of local consumers, SEVEN FRESH hired chefs from well-known local restaurants to bring consumers the most authentic local flavor. Guangdong people have a fondness for roasted marinated meat, so Seven Fresh has added local traditional roasted marinated meat dishes, such as white cut chicken, salt-baked chicken, marinated duck and other common marinated meat dishes commonly found on Huizhou people’s dinner tables, as well as roasted duck freshly made by SEVEN FRESH’s chefs to bring the familiar flavors to local people.

In terms of localized supply chain, the purchasing mode of fresh products in traditional supermarkets did not fully consider the origin and planting time of fruits and vegetables. It is very likely that fruits and vegetables might not arrive at a traditional supermarket until 3-4 days after picking, which means their freshness and quality cannot be guaranteed, resulting in rotten leaves and fruits. This not only negatively impacts the consumers’ shopping experience, but also damages the reputation of the supermarket.

Faced with this procurement challenge, SEVEN FRESH built a localized fresh supply chain that eliminates middlemen, and directly works with farmers to ensure fresh products can be sent to SEVEN FRESH from their origin. In this new system SEVEN FRESH places orders from the vegetable and fruit farm every afternoon, and the farm begins picking and packaging the produce after receiving the orders. All the fresh produce will be delivered to SEVEN FRESH stores overnight, and will be ready by the next day at around 4 am.

Experienced Chefs to Guarantee Tastes

SEVEN FRESH not only brings fresh ingredients for consumers, but also brings authentic on-site processed delicacies for consumers. These delicacies are loved by consumers, and the magic behind the delicacies are experienced chefs hired by SEVEN FRESH to make it easy for consumers at both home and work to enjoy delicacies that used to be only available in restaurants. One of these chefs is Wang Feng, who is mainly responsible for the research and development of stewed dishes.

Wang Feng

Wang comes from a family of gourmet chefs, and his grandfather and father have worked as chefs all their lives. Wang’s grandfather came to Beijing from Shandong province to work as a chef before 1949. He worked as a chef in Bejing’s well-known time-honored restaurant Badalou (八大楼) to serve the ex-royal family members of Qing Dynasty. His authentic Shandong cuisine was popular among them. Wang’s father, who worked at Fengzeyuan (丰泽园), also mentored many famous chefs of younger generation. Wang has learned not only the special cooking methods of various dishes from his grandfather and father, but also their persistence in creating good food.

“When I came to SEVEN FRESH for a job interview, I found that the creed that SEVEN FRESH adheres to is the same as my own, which is to offer consumers delicacies that are both delicious and healthy. Learning this convinced me to join SEVEN FRESH,” said Wang.

Wang is mainly responsible for the research and development of stewed and fried dishes . One of the offered dishes, the roast chicken with various flavors, was developed under the leadership of Wang and is very popular among consumers. In order to standardize the flavor of the roast chicken, it took him more than a month to study the recipe and 20 rounds of changes back and forth from the selection of chicken, improving the cooking process, and repeatedly asking the tasting team to check the flavor. Wang integrates his family’s understanding of delicious food into his current work, hoping that through his own effort and the resources offered by SEVEN FRESH, he can enable more and more consumers to eat delicious and healthy food.

“We have always adhered to the idea of bringing the best quality products that are also good for consumers’ health when we’re developing new stewed products,” Wang said. “We insist on using the best ingredients.”

Leveraging JD’s omnichannel experience, all SEVEN FRESH stores can provide doorstep delivery service to customers nearby in as fast as 30 minutes. As a result of SEVEN FRESH, consumers will not find it difficult to enjoy a big, delicious feast similar to the ones they might have had in their hometowns during Chinese New Year.

To ensure the livelihoods of many in the face of a recent spike in COVID-19 cases, JD’s SEVEN FRESH in Beijing and Hebei have increased inventory of daily necessities by 300%. Furthermore, the delivery services have been expanded to more areas, enabling more customers to receive products in a timely fashion.

 

(zhanghui36@jd.com)

by Ella Kidron

A fridge with sterilization, anti-odor and separation of dry and wet storage. A drill set perfect for at home DIY hardware projects. A gaming laptop with the monitor-screen ratio, resolution and refresh rate optimized for the most hardcore of gamers. A cat food with a high percentage of meat, high crude protein and that pays attention to cats’ gastrointestinal management.

What do these seemingly radically different products have in common? They were all developed through JD’s Consumer-to-Manufacturer (C2M) initiative. And, at the heart of this initiative? The ability to detect the trends, and turn the trends into products that consumers race to buy. In other words, the ability to influence the entire supply chain, from design to end consumption.

There are countless definitions and ways of positioning C2M, and this comes as no surprise as it has become an e-commerce buzzword in China in the last few years. According to Hu Hao, head of supply chain innovation at JD.com, the majority of people understand C2M as reverse customization based on the mining of user insights.

Hu, however, sees it going deeper than that, all leading back to the supply chain. “In fact, from a supply chain perspective, C2M is more about how the insight into user demands, as well as the resources and capabilities of the whole supply chain, form an insight into new trends, new demands, new markets and new product opportunities, and about how to effectively integrate supply chain resources in order to preempt or rapidly respond to these changes in demand in order to improve overall supply chain efficiency.”

JD’s Hu Hao

When the C2M supply chain works as it should, consumers get the benefits of better products without even feeling it. According to JD data, only 12% of consumers know what C2M is, but it doesn’t matter because it turns out that nearly 90% of consumers are satisfied or highly satisfied with C2M products.

This is good news for brands and manufacturers, who can spend much less time on guesswork of how a product is going to land and can also be much more agile to changes. Ashely Dudarenok, Founder of Alarice and ChoZan, a consulting firm, explained: “One of the most-quoted stats from [the late] Harvard Business School professor Clayton Christensen said there are over 30,000 new products introduced every year…unfortunately 95% of them end up failing. With the C2M model, brands can improve their earnings by shortening the lead time and costs of product research and development.”

Ashley Dudarenok, Founder of Alarice and ChoZan

From idea to marketable product

According to market research firm iResearch, the C2M model generated an estimated $2.5 billion in sales in 2018, and is expected to generate $5.9 billion by 2022, more than doubling in the course of five years. One of the main reasons for this is the model’s ability to increase customer satisfaction. Dudarenok said: “As for consumers, the C2M model provides more sophisticated products that are tailored to better solve their pain points…For instance, the 3 best-selling products under the small home appliances category on JD during [Singles Day] last year were all C2M products exclusively offered on JD. More than 50 C2M products achieved sales of over RMB 100 million each on JD last year.”

JD’s advantage in C2M lies not only in accumulated insights from years of observing consumer behavior, but also in its ability to combine this with its legacy strength as a retailer – close proximity to the customer, strong relationships with suppliers and manufacturers, and an ability to respond rapidly to changes in demand. The company can quickly capture changes in demand at the consumer end and relay them to the manufacturing end. The C2M as a whole is highly in line with JD’s strategic positioning as a digital intelligent supply chain leader.

The JD C2M model includes several key steps.

1. Insight Report: Produce a detailed report outlining demand for products leveraging JD’s extensive consumption data and industry insights. This can result in guidance for brands on anything from size of a product, flavor or color, way to package it, and more

2. Online Simulation: Create a simulation of the actual purchasing process and observe consumer behavior such as clicks, browsing duration, and the rate at which products are added to the cart

3. R&D Manufacturing: Development of the product based on demand

4. Product Launch & Precision Marketing: Including support in marketing the product to the right customers. The C2M model is seen to help shorten market research time by 75% compared with traditional offline means and shorten the new product launch cycle by 67%.

Once the product is on the shelves, JD is able to ensure availability and secure delivery to customers. “JD’s impeccable logistics network also allows for smarter and cost-effective logistics and inventory management,” said Dudarenok.

C2M in practice

So, what types of products and categories are ripe for C2M? “The core of C2M is user mindset,” said Hu. “It is centered on user demand. When looking at whether a [product or category] is suitable for C2M, the judgment needs to return to user demand. Categories where demand, popularity and trends change quickly, demand is heavily segmented, individualized and differentiated are ripe for C2M.” The demand fluctuation of such products is large, and the supply chain “bullwhip effect” is apparent.

The bullwhip effect refers to the supply chain phenomenon describing how small fluctuations in demand at the retail level can cause progressively larger fluctuations at the wholesale level. It gets its name from the physics involved in cracking a whip. With the bullwhip effect, each participant in the supply chain influences the entire chain with their forecasting inaccuracies, so any change in one area can have a profound impact on others. “Having insight into user demand in advance through C2M can be effective in reducing the supply chain bullwhip effect and optimizing costs in the entire supply chain,” said Hu.

Several examples from JD’s business illustrate this. In one case, JD worked with leading home appliances brand Midea to design a custom fridge. Through an in-depth analysis of consumer data, JD realized that consumers’ heightened awareness of food safety was influencing their post-COVID-19 outbreak shopping behaviors. This is especially the case for families with children. Looking at consumer search behavior, JD was able to see that in addition to basic functions to retain freshness, other priority functions included sterilization, microcrystalline (believed to help preserve meat and other food items), anti-odor, separation of dry and wet storage and more. The company recommended that Midea create a fridge focused on health-conscious functions such as sterilization capabilities as the main selling points. When the fridge series finally came to market during the 2020 618 Grand Promotion (June 1^st-18^th), daily average sales were up four times YOY.

In another example, JD helped U.S. food giant Mars launch high-end cat food through C2M under its Nutro brand. The e-commerce company was able to hone in on granular product characteristics such as “high percentage of meat”, “high crude protein”, “pay attention to cats’ gastrointestinal management” and “no grain and natural.” With this information, Nutro selected fresh chicken meat, and the product consists of over 80% animal protein, and is grain free, ensuring no burden on cats’ digestive systems.”

Nutro Max C2M cat food

C2M: From China to “the World”

C2M has largely been talked about as a China phenomenon, but that doesn’t mean it is restricted to the China market. The secret to the globalization of C2M? Accumulated understanding of local consumer insights and the ability to drive the global supply chain to quickly respond to changes in demand.

Hu explains that the core of the C2M model involves, one: Big data, AI technology and C2M platform ability, and two: Supply chain data and scenario accumulation. “The mature use of AI and technology and platform ability in China’s domestic market can be used to serve many countries and regions, but creating a product that is suitable to each country’s individual consumers depends on international supply chain data and a steady accumulation of scenario data,” he said.

According to Dudarenok, with the increasing sophistication of consumers, reverse customization is “somewhat inevitable.” She added: “Product manufacturing needs to evolve from the traditional approach of an R&D-driven process to a consumer-driven process.”

The new “super e-commerce trend”

But even with the promise of C2M, the value of the model is not always adequately understood. Dudarenok added: “The biggest misunderstanding is that most people fixate too much on getting ‘lower prices’ when it comes to C2M products. The primary purpose of C2M should be more on leveraging big data analytics and evolving traditional manufacturing from an R&D and marketing-driven process into a consumer-driven process, rather than simply offering dirt-cheap deals to consumers. Competitive pricing is still important, but should not be the sole focus, i.e. how suppliers get that balance between low price and quality is also important.”

In a sense, C2M is still in early stages of development. Hu believes it will bring huge changes to the industrial and retail supply chains. “In the future, JD will strengthen its investment in supply chain big data and AI technology to enhance the quality of demand insights. We will also combine the experience of category experts with AI to proliferate industry ‘know how’ throughout the industry,” said Hu. JD will continue to improve its own C2M capabilities, and expand its reach upstream and downstream to improve the efficiency of the supply chain for all.

Like JD, Dudarenok is optimistic about C2M’s road ahead. “The C2M model will only become better and more mature, and it may even become a super e-commerce trend like livestreaming today,” she said.

 

 

(ella@jd.com)