by Vivian Yang

“If we make $1 profit, 30 cents go to our business partners, 35 cents for our employees and the remaining 35 cents for JD’s continuous growth,” said Jon Liao, Chief Strategy Officer of JD.com during the company’s third quarter earnings call on November 16^th, as he explained JD’s “35-Cents Theory” put forward by Richard Liu, the company’s founder and CEO.

Guided by this business principle, “JD is fully committed to a healthy ecosystem relying on cooperation, coexistence and co-evolution,” Liao added.

An analyst during the call mentioned that, under the impact of COVID-19, more and more brands and merchants are willing to use JD’s services. This not only demonstrates JD’s ability to provide advanced supply chain and logistics services at all times to its customers but also reflects its business philosophy for long-term and “win-win” growth with its upstream and downstream partners.

Earlier this year, JD provided a number of supportive measures to its brand partners and merchants, as well as to offline small businesses to help them recover from the epidemic. In the first nine months of 2020, there were 2,004 brand partners on JD’s platform achieving over RMB 100 million yuan in sales. During this year’s Singles Day Grand Promotion, 13,532 key brands increased their sales growth by over 300%, and the transaction growth rate of third-party merchants on JD doubled, comparing with the same period last year, far exceeding the industry average.

On the employee side, as of September 30^th, the overall employee number of JD.com surpassed 320,000. According to the earnings report, the number of employees for listed JD branches excluding part-time staff and interns reached 284,000.

During the first three quarters this year, JD has recruited 60,000 new employees despite COVID-19 pressure to ensure service quality and user experience and to support employment. Beyond that, it is estimated that JD’s growth has also helped to create over 18 million job opportunities in its business ecosystem during this period.

(vivian.yang@jd.com)

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. 16^th.

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.

(ling.cao@jd.com)

by Ella Kidron

JD reported third quarter 2020 earnings on November 16^th. The full press release is available here. The results indicate both the strong performance to date as well as the potential of JD’s supermarket category, represented by JD Super, the company’s online supermarket, and several other business models in the FMCG Omnichannel business group.

In her opening remarks, Ms. Sandy Xu, CFO of JD.com, mentioned that general merchandise grew 35% YOY, led by the supermarket and healthcare categories. Ms. Xu mentioned that “the supermarket is a key growth area that we are very committed to continuing our investment in to further strengthen our consumer mind share and market leadership. As our online B2C supermarket operation continues to generate growth momentum, we have been exploring various new models in different markets to better capture the growth opportunity in this category. Our aim is always to better serve the diverse needs of our customers with quality products and services.”

In the Q&A, Ms. Xu further elaborated on the promise of the supermarket category, mentioning that JD has seen a “structural opportunity” and that it will definitely be a strategic priority for JD. She added: “We have demonstrated or proved the business model for our traditional B2C operations. And now… we are also exploring different business models of initiatives in this area, covering top-tier and lower-tier markets.”

Mr. Lei Xu, CEO of JD retail further elaborated on the fact that the Chinese fresh food market is very different compared to the European and U.S. markets. “It’s more complicated,” he said, adding that in China the traditional retailers in the fresh food category – the top 10 players – only take up about 5% of the overall market. “That is a much smaller amount compared with the Western markets,” Xu said, referring to JD’s potential growth in this area.

JD Super has seen immense growth this year as it supported the livelihoods of consumers across China, especially at a time when few other players were able to do so. Consumers who turned to online for groceries during the pandemic, have increasingly made this transition a regular habit, choosing to purchase high frequency items through e-commerce that they previously would have bought offline. This trend has been made even clearer during the Singles Day Grand Promotion (Nov. 1^st-11^th). In the first five minutes on November 11^th, JD Super saw transaction volume generated by lower-tier markets consumers up 12 times YOY. Users in lower-tier markets accounted for 80% of JD Super’s new users during the Singles Day period.

Carol Fung, President of JD FMCG Omnichannel said: “It is very encouraging to see consumers’ continuous trust in JD Super and in JD.com. This is evidenced by strong growth in multiple products. Trust is what will enable us to win in user growth, lay the foundation for sustainable development and serve consumers to buy anything they need, anytime, anywhere. Omnichannel has become a key theme for our business and more brands are joining hands with us on this. We continue to find that our strong supply chain ability and the development of deep and sustainable win-win partnerships with brands are instrumental in meeting the needs of our diversified consumers across countless scenarios.”

(ella@jd.com)

by Ella Kidron

JD reported third quarter 2020 earnings on November 16^th. The full press release is available here and an infographic is below:

On the call to discuss the results, Sandy Xu, CFO of JD.com, emphasized JD’s strong user growth, driven by the company’s continued ability to win trust and recognition from more and more consumers. Ms. Xu mentioned that lower-tier cities contributed about 80% of total new users for the quarter. She also emphasized increased consumer loyalty, highlighting that JD’s premium membership program, JD PLUS, exceeded 20 million members.

Net service revenues, driven largely by performance of JD Logistics (JDL) were a highlight for the quarter. Zhenhui Wang, CEO of JD Logistics, said that JDL saw accelerated growth in Q3, attributed to its long-term commitment to the improvement of user experience. He emphasized that JDL’s value proposition is to provide the best user experience driven by technology. No matter whether it is during COVID-19 or normal circumstances, JDL always ensures to provide the best supply chain services, which is a key reason why brands choose to cooperate with the company.

As far as the e-commerce landscape overall, Mr. Lei Xu, CEO of JD Retail emphasized that under COVID-19 the overall growth of e-commerce has been rapid. He further stressed the importance of healthy user growth, mentioning that when users who have already been educated on other platforms become more frequent online shoppers, they will shift to a platform which emphasizes services and quality. Commenting on JD’s approach to users and the company’s use of livestreaming, Mr. Xu mentioned that JD advocates for “rational consumption” as opposed to impulsive, and that he sees livestreaming continuing to develop as a resource for more professional information about products, fitting JD user demand. Looking at the supermarket category, which has been a key growth driver for JD, with online supermarket JD Super, Mr. Xu emphasized the group’s leadership in omnichannel. He mentioned that the system is performing well and is well-received by brand partners.

JD Chief Strategy Officer Jon Liao focused on the creation of a healthy ecosystem in which JD and partners can continue to co-create.

Looking at the results as a whole, Ms. Xu highlighted that the results were, “driven by our unique business model and operating philosophy. But more important, JD’s resilience is underpinned by our relentless focus on offering trust value for our consumers, and unreserved empowerment of our business partners through technology and infrastructure.

Note: For all material above, please refer to the Safe Harbor statements in the press release

(ella@jd.com)