by Rachel Liu
Lei Xu, CEO of JD Retail attended the annual China Entrepreneurs Conference held by China Entrepreneur Magazine on December 6th. He gave a keynote speech titled “Become friends with changes in a changing world”, sharing his reflections on the industry and company management.
There are over five million SKUs in JD’s hundreds of warehouses around China, and the inventory turnover period is 34 days. This represents world-leading supply chain management capability. In the past 17 years, JD Retail spent over RMB 15 billion yuan on improving customer experience, resulting in the company’s outstanding customer reputation. Although JD has become the largest retailer in China, the industry is changing constantly, and Xu mentioned he is constantly reflecting on how to maintain a leading position in the industry.
First, he said that game changers in an industry are usually unpredicted. For example, the digital camera industry is not declining because of worsening camera quality, but because more people are using smart phones to take photos. Sales of instant noodles are decreasing due to the rising popularity of food delivery.
“It’s necessary to not just focus on the industry you are in. Then who or what should we focus on? I believe it’s the customers and the changing of their consumption habits and [shopping] scenarios,” said Xu.
The number of customers born after 1995 is rising. JD has observed that these consumers have very low brand loyalty. They love to try new brands, especially ones that become popular via the Internet. These customers are also particular about their own hobbies and choices. They have very small “social circles” to discuss things they like. These circles can generate many niche market and provide new opportunities for retailers.
“New trends are very challenging for all companies in the industry. JD grew from constantly meeting customers’ demands. We need to be very sensitive to the changes and follow them closely, or we will be left out,” said Xu.
Another concept Xu shared is how to operate a company with an Internet-based structure. He got this idea from watching his children playing Lego. He found that Lego starts will small bricks, and with a certain amount of bricks, people can build different large toys. This inspired Xu that a company can build their basic capabilities as toy blocks that can be combined easily to face the changing market environment.
“This is to emphasize the ability to cooperate in the company. Good cooperation is seamless and low cost. Bad cooperation results in everyone doing their own thing,” said Xu. “We live in a changing era, and by befriending these changes, we can grow better and faster.”
