by Hui Zhang

JD started selling automotive supplies in 2012, and has been cooperating with many brands since then, including Mobil, Michelin, Pirelli, Castrol, Dunlop, Shell, Bridgestone, Continental and others. With more and more consumers going online to buy automotive supplies, the question of how to ensure a high-quality customer experience has become a key priority for JD.

As China’s auto market undergoes rapid development, many online platforms are trying to take advantage of the huge potential of the market. However, very few platforms have figured out how to stand out, due to the unique nature of automobile consumption.

Unlike most one-time purchases that are paid for and delivered at the same time, the consumption and usage of cars is a long-term process, with repair and maintenance accompanying the automobile’s entire lifecycle.

Most internet platforms are limited by their own capabilities, focusing only on the sales process, making it difficult for them to provide sustainable services to consumers in the long run. For those internet platforms that do focus on the automotive aftermarket, with services such as repair and maintenance, most do not have front-end sales capabilities and supply chain advantages, making it difficult for them to be recognized by consumers.

In contrast is JD Auto, which stands out by leveraging its supply chain capabilities and platform’s advantages.

“JD’s auto business has covered the full life cycle from automobile parts and accessories purchasing, maintenance services, to new car and motorcycle sales,” said Yan Qing, general manager of JD Auto.

Yan Qing, General Manager of JD Auto

Parts and Accessories

Earlier this year JD called on more than 20 leading automobile supply brands, which includes 3M, Philips and Johnson & Johnson, to join the “Auto Supply Quality Alliance” to provide customers with peace of mind by ensuring the quality of products including car purifiers, foot mats, seat cushions, invisible car garments, protective film for cars, car cleaning solutions and more.

JD has become a trusted platform for consumers to buy automotive supplies by always placing consumers at the center. During this year’s Singles Day Grand Promotion from November 1^st-11^th, sales of products tagged as high-quality by JD increased by 247% year-on-year, with in-vehicle appliances, car charging equipment, and invisible garments increasing by 5.6 times, 4.5 times, and 2.9 times respectively year-on-year.

In addition to directly working with individual automobile brands, JD has also eyed China’s industrial belt, which gathers a large number of manufacturers. JD signed an agreement with Tiantai county of Zhejiang province, which is one of China’s main production zones for car accessories, to deepen cooperation on the marketing and branding for Tiantai’s car accessories manufacturers.

Under the agreement, JD will work closely with Tiantai’s over 200 manufacturers, offering direct sales of various products at factory prices to customers across China both online and offline. To help manufacturers better understand consumers’ needs, JD will frequently deliver customer insights and consumption forecasts based on JD’s big data and R&D capacities, with the goal of facilitating more C2M (Customer-to-Manufacturer) products—and ultimately increase sales and brand awareness.

JD is also exploring innovative cooperation with automobile brands, such as FAW Toyota. FAW Toyota not only launched a flagship store on JD.com, but also allows consumers in China to purchase and schedule maintenance services online and then bring their vehicles to FAW Toyota’s offline service centers at their convenience through the cooperation.

JD Car Club：O+O

Selling auto parts is only the first step for JD to compete for a share of the automotive market. Since buying auto parts online is always followed by offline installation demands, JD stepped into the offline maintenance field in 2018 to bring omnichannel services to people across China.

As measured in September 2020, China has become one of the largest automotive markets in the world with over 275 million cars. The average age of cars in China is about 4.9 years, which is getting closer to the 5 years’ threshold when car maintenance demand will surge, as experience shows from the international market, ushering in the boom of the trillions-of-yuan worth automotive aftermarket.

Observing the industrial trend as well as aiming to bring omnichannel services integrating both car part sales and maintenance services to consumers, JD launched an offline automotive initiative called JD Auto Service, known in Chinese as Jingdong Jingche Hui, (京车会，literally means JD Car Club) in 2018. Through JD Auto Service, customers can buy auto parts or maintenance services on JD.com, and then go to a JD Auto Service location for installation. To ensure high-quality service, each of the offline stores is screened to meet JD’s strict standards before joining the network.

Maintenance Workers Working in JD Auto Service Store

“It’s not enough to only authorize JD’s brand to franchised offline stores,” said Qing. “Branding authorization is only the first step, and it’s more important for both JD and offline maintenance stores to work together to improve maintenance services, enhance operation efficiency and facilitate the intelligent transformation of offline stores.

Through the cooperation, JD will provide standardized trainings to technicians on maintenance skills and offer preferential policies of car parts ordering through JD’s B2B platform, JD Cloud Match (Chinese name:京东云配), in a bid to guarantee quality and ensure timely delivery speed. In addition, JD will also provide technology support by introducing a CRM (Customer Relationship Management) system to help offline store manage their inventory and consumers intelligently.

At present, JD has opened over 1,200 car maintenance stores that integrate online and offline services in 200 cities across China. Car parts for these stores are supplied from JD’s B2B auto part selling platform that ensure low purchasing cost and high delivery efficiency for offline stores.

Li Songhai is the owner of one of JD Auto Service’s franchised stores which is called JD Auto Service Qingran Store, located in Beijing’s Daxing district. Covering an area of 300 square meters, Li’s store joined with JD Auto Service in 2018, and was the first one in Beijing to join the initiative.

JD Auto Service Qingran Store

“I found the innovative initiative of JD accidently, which I believed it to be a promising one,” said Li when asked why he had chosen to cooperate with JD Auto Service. “JD is a trustworthy and reliable platform, and I always shopped on JD, such as buying home appliances. I decided to have a try by joining the initiative to increase profits of my store.”

Thanks to JD’s technology support, the intelligent inventory management system will notify offline stores when replenishment is necessary in a timely manner, and will help offline store to digest the overwhelming inventory by recommending different promotional activities to them.

Now the store has embraced inspiring results and it already opened another store thanks to the additional traffic brought by JD, which is recognized as a guarantee of quality and authenticity.

“JD helped us set up standardized services while introducing traffic from online to offline, keeping us consciously moving forward,” Li said. “There are several key elements to improve our sales. First and foremost, professional skills are very important to auto maintenance. Secondly, offering good consumer services is also significant for us in maintaining consumer relationship.”

During this year’s Singles Day period, sales of automobile services grew rapidly as JD Auto Service is widely recognized by consumers for its efficient, transparent and highly standardized maintenance services. The order number of maintenance packages sold through JD increased by 220 times and sales increased by 3 times compared with the same period last year.

“The automotive aftermarket is an industry that emphasizes maintenance skills and services, so for the automobile industry, online and offline integration will coexist for a long time,” Qing said.

Cloud Match

Auto parts supply chain is one of the most complex supply chain systems. The complex distribution hierarchy and fragmented marketing models have created a serious information barrier between the suppliers of auto parts at the top and consumers at the bottom. The long-term complex situation also resulted in high inventory and turnover costs for brands and suppliers, and the frustration of car owners at auto maintenance stores who can’t find the right parts.

To address the contradictory situation in China’s auto aftermarket, JD announced plans to set up a JD Cloud Match to directly connect auto parts manufacturers, brands and dealers with offline maintenance stores, so as to promote information transparency and bring high-quality products to car owners in a timely manner leveraging JD’s logistics capabilities. Thus JD successfully built a B2B2C closed loop of auto business in China.

So far, JD Cloud Match has offered services to tens of thousands of maintenance stores in 30 provinces, municipalities and autonomous regions across China.

In 2019, JD Auto launched a new network to optimize the supply chain of spare auto parts. The network, Cloud Match Alliance (Chinese name:云配联盟), currently covers over 13,000 registered merchants and has more than 1,500 core members. Through the network, JD can help better match manufacturers and brands with dealers. At same time, offline dealers can also choose to join JD Cloud Match so as to precisely access maintenance stores which are in need of high-quality spare auto parts.

In addition to setting up platforms to connect every segment of the auto supply chain, JD also developed its own brand, Jauto (京安途, literally means JD’s safe trip), to enhance its own supply chain capabilities. Jauto is the first such brand in the industry to cover engine oil, tires, accessories and more. The products are sold by nearly 500 dealers and serve over 10 million car owners.

Jauto Products

Becoming Car Dealer

JD has not limited itself within only selling auto parts and offering maintenance services—it is ambitious in its aims to cover the whole life cycle of automobiles. JD started selling motorcycles in 2015 after it found that more than 2 million consumers go to JD.com every year to search or buy motorcycles and peripheral equipment. To further complete its auto business, JD started selling cars in 2018, and has now extended cooperation with FAW-Volkswagen Audi, SAIC Volkswagen, Dongfeng Nissan, Beijing Hyundai, Haima and more

Buying motorcycles online is becoming a trend for Chinese consumers. During the Singles Day promotion, sales of motorcycles on JD increased by 103% year-on-year, with Wuyang-Honda, YAMAHA, Benelli , CFMOTO, Cyclone and other international and domestic first-tier brands occupying the top five of the sales list.

“The development of JD’s auto business is similar to a fast-moving car, with the online sales business of vehicles, motorcycles, maintenance supplies, and auto parts as the front end, the JD Auto Service as the body, and the B2B supply chain as the back end,” said Qing.

Integrating JD’s B2B2C automobile business and providing omnichannel maintenance services is only part of JD’s trial in the auto market. In the future, JD Auto aims to develop intelligent solutions to empower the whole industry.

“In JD Auto’s vision, in the future, the online product transaction and the offline store service can be seamlessly integrated,” Qing said. “From buying a car to using it and repairing it, everything will be digital and intelligent.”

 

(zhanghui36@jd.com)

by Ella Kidron and Ling Cao

“What ability has gotten JD to where it is today, 10 years later?” asks Dr. Jon Liao, Chief Strategy Officer of JD.com. He addressed the audience during a keynote speech at the company’s 4^th annual tech summit, JD Discovery (JDD), held on Nov. 25^th in Beijing. The answer is JD’s unique supply chain infrastructure, which will enable JD to optimize cost, efficiency and experience across all industries.

Jon Liao, CSO of JD.com gives keynote at JDD

 

JD then and now

The world looks vastly different than it did ten years ago. Liao recalls Bill Gates’ well-known quote, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” From an external perspective, the consumer internet, which increased the efficiency of transactions, has become the industrial internet, increasing the efficiency of industry. Changing consumer habits, shopping scenarios and technologies continue to transform the retail industry. Livestreaming e-commerce, for example, has taken China by storm this year and is beginning to percolate into other markets. This general uncertainty has only caused JD’s commitment to supply chain to grow stronger.

Hu Hao, head of supply chain innovation at JD.com said in an interview, “Because retail is constantly changing, any scenario meant to serve customers must consider the notion of supply chain.” Supply chain is the number one consideration in ensuring a consistent experience.

In the same vein, the JD.com of 2009 was a 2,000-person company valued at US$250 million. Today, the company has more than 320,000 employees (according to Q3 financial results) and a market cap of US$130 billion. “In 2007, JD invested in supply chain, and this supply chain has become today’s JD,” explained Liao.

“In the past, when others were emphasizing platform and transaction efficiency, JD was doing industrial internet,” said Liao. “What we have been steadfastly committed to over the past ten years has become our most powerful infrastructure capability.”

 

Contributions of JD’s supply chain to society

JD Chairman and CEO Richard Liu’s “ten section” operating theory, is based on the idea that retail has ten components: creativity, design, R&D, manufacturing, pricing, marketing, transactions, warehousing, delivery and after sales. In 2007, Liu invested the first large sum of money he received into supply chain. The reason is he believed the first principle of retail revolved around three things: cost, efficiency and experience, where cost and efficiency represent supply chain and experience represents users. This is experience, which is visible. What is invisible, on the other hand, is the cost and efficiency of the supply chain.  Of the ten sections, JD has focused on the last five sections, beginning with transactions, and expanding to warehousing, delivery, after sales and marketing.

JD is able to manage over five million SKUs, a process which involves a massive storage system, sorting center, tail-end service network and more, all with the purpose of supporting consumers all across China within 24 hours (JD is able to deliver 90% of first party retail orders same- or next-day). “The computational and intelligent capabilities behind the scenes [required to realize this] are hard to image. This type of infrastructure has become world-leading, and the service we provide has become standard [in the industry],” said Liao.

The JD Logistics booth at JDD

The infrastructure is predicated on JD’s technology abilities covering smart supply, smart logistics and smart consumption. JD’s supply chain efficiency has already made significant contributions in China. Liao explained that in 2007, when JD made its first investments into supply chain starting with its logistics network, logistics costs of China as a whole were 18.4% of GDP. Today, that figure is 14.7%, a drop of 4%. “If we compare today’s 14.7% with Europe and the US where the number is less than 10%, we see that we still have a huge amount of room to improve efficiency, which is why we need to build new infrastructure in the future.”

 

Next steps for supply chain development

Liao characterizes JD’s next steps in supply chain development with a 4D- principle. He said supply chain should be constructed around deep connectivity, deep data (including entire industry chain data), deep tech (blockchain, edge computing and other technologies which can take the supply chain to the next level) and deep intelligence.

Supply chain development should also consider how consumption is changing. As can be seen across industries, consumption is moving from general to precise and accurate – from a market of many to a market of one; from a batch of goods to a single product. “Looking at the future of retail, this means getting the right product to the right customer in the right place at the right time.” This customer can be an individual consumer, enterprise consumer or even a government client.

If the first half of retail was represented by digital and smart technology, then the second half is about using new technology across many vertical industry supply chains. What will this supply chain look like? According to Liao: 1) Wide: extended from merchandise- to service-related industries, including finance, healthcare and the auto aftermarket, 2) Deep: from the domestic supply chain to the overseas market, helping the domestic supply chain go abroad and vice versa, 3) Thick: from serving customers to serving customers and enterprise clients, 4) Long: from retail, logistics and post-sales to upstream parts of the supply chain including R&D, design and more, and 5) Virtual: making traditional supply chain infrastructure virtual through data and technology applications.

 

Building supply chain infrastructure with partners

At the Open Day for JD-Y (smart supply chain innovation) held on Nov. 26^th in Beijing, Chen Lin, vice president of JD.com and head of JD’s ecosystem business, said that supply chain must have three characteristics: demand-driven; open and collaborative; and agile and responsive. He commented that even amidst uncertainty of COVID-19, perhaps the biggest uncertainty is user demand. Hau L. Lee, a Stanford professor and Chairman of the GSIC (the Global Supply Chain Innovation Center developed by JD and partners), explained that after 9/11, Zara started manufacturing clothes in more somber colors sensing this is what consumers demand. Today, with all of the technology and analysis tools, “every day is an opportunity to create a new product,” given that there are new consumer demands every day.

Chen Lin makes a speech during Y Open Day

An open approach is essential to meeting ever-changing consumer demand. Lin said, JD is strong sections 6-10 of retail, (marketing, transactions, warehousing, delivery and after sales) its brand partners are strong in the first five at the beginning of the product creation process (creativity, design, R&D, manufacturing, and pricing), further emphasizing the need for open collaboration.

JD already has evidence of successful supply chain collaboration with partners such as appliance manufacturer, Midea. Hu said: “In the collaboration between JD.com and home appliance company Midea, we optimize and collaborate on the forecasting, supply and demand, procurement, order execution and other processes, so as to make the supply chain more agile, easier to predict, and able to operate with more flexibility. In this case, both parties benefit in being able to perform better and optimize profit.” Kaishen Wang, head of the refrigerator e-commerce department at Midea, said: “After cooperating with JD, our inventory turnover days were reduced from 45 days at the most to only 28 days.”

At JDD, discussed how JD has reconstructed the medical supply chain to support daily needs. On the one hand, the efficiency of JD’s pharmaceutical supply chain has greatly improved, while connecting to the medical triage system. “Based on our internet healthcare platform, there are currently 80,000 doctors coming in contact with 120,000 consumers online each day.” JD’s supply chain is equipped with medical resources that enable people in rural areas to have access to the same quality of health care as top cities. JD’s “Family Doctor” service extends the supply chain from the commodity end to the medical services end. Behind it is a powerful medical technology and digital management platform.

Liao also discussed how JD could use its digital supply chain to reconstruct the PC supply chain. On the front end, JD’s big data and consumer insights indicate what type of display screen, processor and performance consumers are seeking. This information can be fed back to suppliers such as HP, and integrated organically with Intel, Microsoft, and others simultaneously. “In other words, from the first day of the product, we know very clearly which ones will [perform well]. We also know which kind of products we will need in Baoding and Chengdu, and when we will need them. From the very first day of production, we have a very accurate directional logic, which greatly reduces time to market.” The product’s design is also more accurate, improving the efficiency of the whole PC supply chain.

 

From empowering business to empowering society

“There’s no doubt that these next ten years and are the years of the industrial Internet.” Liao eyes three long term objectives for JD’s digital intelligent supply chain based on the industrial internet: 1) Empower the retail economy, covering 1.5 billion customers across the globe and nearly 10 million enterprises, 2) improve efficiency among industries and help clients reduce inventory turnover rate by 30% on average and lower the costs of society’s logistics costs to less than 10%, and 3) promote environmentally friendly programs. JD aims to achieve a 50% reduction in carbon emissions by 2030.

“In the future, every industry is worth doing again from scratch.” JD is developing the underlying supply chain infrastructure to enable partners across industries to hit that restart button. But the process has just begun. Liao quotes Winston Churchill, “Now is not the end. It is not even the beginning of the end. But the end of the beginning.”

Experts gathering at JDD

 

(ella@jd.com; ling.cao@jd.com)