by Vivian Yang

Although China is leading the world in economic recovery from the COVID-19 pandemic, a full recovery in consumption will likely take time. At the same time, in a world where lockdowns and restrictions in movement have become the norm in many places across the globe, the consumption of not only products, but services – from online medical consultations to at-home installation services – are front and center. Amidst this rebound, JD.com is stepping up efforts to strengthen its services offering as greater and more adaptive services are of critical importance to enhancing customers’ experience in the post-COVID era.

As China’s largest online and offline retailer, JD.com is committed to providing trusted products and services to its customers. From services for consumption of products to consumption of actual services, the coronavirus outbreak has accelerated JD’s innovative “product + service” model. In the first half of 2020, JD identified three main trends in this model that have brought resilience and new growth opportunities for the company and the industry.

 

Connecting Online and Offline via Services

To mitigate the impact of the lockdown on traditional offline businesses, JD has been utilizing and leveraging its platform to improve its online-to-offline (O2O) services.

During the lockdown period, as people moved online to seek medical advice and purchase products, the surging popularity of telemedicine generated booming demand for drug delivery. In response, JD quickly enhanced its collaboration with more than 200,000 offline pharmacies across over 200 cities in China. Online customers in service-covered cities can select nearby pharmacies and place orders that will be delivered to their doorsteps within 30 minutes. Due to the speed, ease and safety of this service, called O2O, it took off immediately after following its roll-out earlier this year. Its popularity continues to grow. For this year’s 618 Grand Promotion, the first nationwide sales promotion event in China after the lockdown, the transaction volume of  fast drug delivery service offered by JD Health on a single day, June 18, was 492 times greater than the same day last year.

Home buying might be the last thing people think about when it comes to online shopping. But when combining its superior service with real estate at a time of social distancing, JD provides buyers with  confidence to finalize deals before they even visit the property in person. During 618, JD Real Estate introduced an RMB 6.18 yuan (about US $1) “Five Benefits Service Package”, comprised of housing selection assistance, exclusive offers, price protection, “cancel for any reason” insurance, and online reservations. Over 500,000 home-buying orders were made with these standard benefits on JD.com.

The strength of JD’s O2O platform is that premium services and omnichannel solutions ensure that customers are always in good hands. Michelin is a prime example for the automotive market. Through the company’s strong partnership with JD.com, customers who purchase tires from JD’s first-party Michelin flagship store will be offered priority to choose high-end car service networks such as TYREPLUS. There, they can enjoy a one-stop premium service experience, including tire shopping, delivery, installation and maintenance. During the 618 , over 80% of those who purchased tires on JD’s selected platform were offered offline car repair services. The transaction volume of car maintenance services on JD increased 293% YoY.

 

Standardized Services

JD’s standardized services have been popular throughout the pandemic not only because they are transparent, efficient and quality-controlled, but also because they are always available to meet customers’ needs wherever they are and whenever they want.

Take fresh flower delivery service as an example. Flower delivery service has long been beset by problems such as decentralized planting, a long supply chain, high risk of packaging damage, and inconsistent service quality. To remedy these challenges, JD brought in its cold chain logistics and Allianz insurance services (JD has a 30% stake in Allianz China）to its flower booking and delivery service. This allowed JD to standardize its products and services, such as one-hour flash delivery. The transaction volume of flower sales on JD’s platform increased by 150% during the 618 shopping festival alone.

The “one-hour delivery circle” is part of JD’s omnichannel fulfillment supply chain innovation program. By strengthening collaboration with Dada Group (JD’s joint venture for local on-demand retail and delivery platform), JD’s online supermarket business JD Super has connected over 10,000 bricks-and-mortar stores in 100 cities with 3 million products that can be delivered to people’s homes within one hour. A number of supermarkets, FMCG companies and consumer electronics brands have participated in this program and more partners are continuing to join, providing multi-category choices and a convenient shopping experience for thousands of housebound customers.

Beyond last mile delivery, JD ensures its “last mile services”, or after-sale services. JD Service Plus is the new frontier on this effort. Currently, customers can find over 6,000 service products in 37 service categories on JD, such as installation, repair and cleaning for electronic products, home appliances, and furniture; maintenance for bags, shoes and clocks; eliminating dust mites; air quality tests and air purifying services and much more. Using JD Logistics’ nationwide network, customers can enjoy these services conveniently by ordering services to their home, sending products to JD Service Plus or visiting JD’s offline service stations in person, with rapid response, transparent pricing, trained professionals and guaranteed quality.

JD Service Plus

 

Building Customized Services

Consumers’ increasingly diversified consumption needs are propelling JD to create  more customized services.

Data from the 618 shows that the transaction volume of motorcycles and bicycles increased by 61.1% and 57.6% respectively, while retro motorcycles increased 500% year-on-year. As travel restrictions loosen, many young customers are turning to JD to buy more personalized and fashionable cycling gear. To cater to their needs, JD has taken a number of steps, including collaborating with bicycle makers to produce more customized products, utilizing the so-called Customer to Manufacturer (C2M) model. With the C2M model, JD can better understand customers’ preferences so as to organize cycling activities and offer more tailor-made after-sales services online or offline to increase customers’ engagement with the platform.

Online auctions are another service gaining traction. During 618, JD put a wide array of items up for auction, including residential properties, jewelry, luxury goods, ceramics, art collections, handicrafts, tea and wine, automobiles,etc. An online auction of old coins has been viewed more than 1.21 million times and an auction of Pu-erh tea cake has been viewed over 270,000 times.

JD also introduced an exclusive iPhone full-price trade-in plan for Apple fans during the 618. With this special offer, if a customer purchases an iPhone 11 during the month of June, they can exchange it for the iPhone 12 once it is released later this year and only pay the price difference between the two phones. This way, customers won’t have to worry about the depreciated value of their iPhone 11 and miss the chance to try out the iPhone 12.

 

JD Auction Page during the 618 Grand Promotion

According to China’s National Statistics Bureau, service consumption expenditures in 2019 accounted for 45.9% of all household consumption expenditures per capita—1.7 % higher than in 2018. This steady growth is mainly attributed to the country’s rapid urbanization and widespread increase in consumption. When compared with developed economies like the U.S. and Japan, where service consumption expenditures account for over 60 percent of household consumption expenditures, China has significant potential to continue developing in this area.

Under the backdrop of the post-COVID economic recovery, JD continues to innovate in the service consumption area using the solid infrastructure it has developed over the years in technology, supply chain, and logistics. Through integrating online and offline, physical and virtual, , JD is prepared to succeed in the new normal of the economy and surge in growth after the pandemic. But most of all, the trust that JD has built with its customers, partners and merchants is what makes it possible to bring more breakthroughs in its service offerings.

 

(vivian.yang@jd.com)

by Yuchuan Wang

• According to the “C2M-The Ultimate Mode of Industrial Digitization” report published by SWS Research in May, the market size of C2M in China is expected to reach to RMB 1.4 trillion yuan (~US $200 billion) in 2022.
• Last November, Lei Xu, CEO of JD Retail, announced that in the next three years, over 100 million new products and C2M products will be launched on JD’s platforms.

With the development of big data and AI, Consumer-to-Manufacturer (C2M), a new flexible manufacturing model has emerged in recent years. By analyzing massive amounts of data and generating insights regarding demand, C2M helps optimize product design and circulation to meet specific demands.

Consumers are increasingly shopping for a personalized experience. They have very clear requirements for the products they buy, not only in terms of appearance down to the smallest detail, but also price, functions, delivery and after-sales services and even the manufacturing process.

This trend has disrupted the traditional supply chain: What and when to launch new products are no longer determined by the supply end only. Now, the preferences and psychology of consumers is more important than ever, which may set the fundamental for brands to build their competitiveness and preempt the market. E-commerce, home to the most comprehensive consumption data, has become a key channel for manufacturers to better understand their customers.

JD.com is an early mover in C2M. The company’s C2M model leverages AI, big data, and supply chain technologies to help partners analyze consumption trends and insights based on JD’s over 387 million users base.

As early as 2013, JD accidentally created its C2M model during a customer feedback session. At that time, the PC market was facing extreme pressure from smart phones and tablets. As the market wasn’t able to provide diversified products, there was a huge decline in consumption throughout the industry. JD’s sales team, however, saw from product reviews that many customers did want PCs with better performance, so they invited a group of JD customers to share their expectations of the future evolution of the PC industry. Following the session, JD had an idea to use big data to discover niche needs for new market growth. As a leader in computers and electronics retail, JD applied C2M to gaming laptops first.

 

Identify the needs

Launching a new product is difficult. Researches show between 65% and 75% of new offerings fail outright or miss their profit goals. Numerous factors can cause failures. Some products fail to capture the real needs of customers, while other products are too similar as to existing product offerings. C2M helps to identify the real needs beneath the surface.

“We don’t purely look at sales data, we look at user click rates,” said Aqiang Qin, head of supply chain management in JD’s Computer and Digital business unit. Shortly after curved monitors came on the market in 2017, JD discovered that there was a lot of interest in the products since users’ click rate of such products on JD was up to 22%, but the sales only accounted for 11%. According to JD’s analysis, there were two main reasons. First, there were limited curved monitor offerings on JD at that time. Second, they were quite expensive and beyond many customers’ budgets.

“Understanding the need, we took action to negotiate with manufacturers to produce more curved monitors and lower the price.” In just one year, curved monitors represented 21% of monitors sold on JD, which matched the click rate. Leveraging a similar approach, Qin’s team raised the sales of 2K and 4K monitors from RMB 1 billion yuan to RMB 2.5 billion yuan in just two years.

As JD becomes the largest retailer in the high end monitor sector, to further drive sales it has to move up to the manufacturing end. Seventy percent of the cost of monitors come from the LCD panel.

“For gaming laptops, customers always want larger screens for a wider view of games and they want them to be lighter weight for portability, which are obviously quite contradictive,” said Qin, “If we want to further develop our C2M model, we have to collaborate with upstream LCD manufacturers.”

Limited by the way manufacturers cut the display, there were only two sizes for gaming laptop in the past, 15.6-inch and 17.3-inch. Based on JD’s big data analysis of customer reviews and normal distribution of sales, customers were in great need for a display that was between the two sizes. JD provided this insight to gaming laptop brand Thunderobot and the two parties found that, if adopting an ultra-slim frame, a 16.6-inch laptop could have a similar volume as the 15.6-inch one but increase the display area by 14%, similar as the 17.3-inch laptop.

JD and Thunderobot quickly started communicating with manufacturer BOE, a leading electronic components producer in China. “Having the statistics on hand, we convinced BOE to launch an exclusive production line for 16.6-inch screens, as it reflects the needs from customers.”

Thunderobot’s new gaming laptop was launched in 2019 as the world’s first 16.6-inch laptop. It has quickly become Thunderobot’s best-selling product on JD.

So far, JD has become the largest e-commerce platform for gaming laptops and sells tens of millions of products each year. Forty percent of gaming laptops selling on JD are developed through JD’s C2M model.

Sales of OMEN Gaming PC series collaborated with HP have exceeded RMB 1 billion yuan. In January, JD and HP also announced to launch 100 C2M products in the next two years. Another C2M product collaborated with Logitech, the silent mouse, has seen dramatic demand with more than 100,000 sold since 2016. Sales of the Dell C2M laptop tailored for designers on the first day of JD’s 618 Grand Promotion was five times that of the average sold in May.

 

A replicable JD C2M model

Customer demand for different products can depend on circumstances and changing preferences.

“For example, when buying air conditioners, people will choose very different products before and after marriage. Men and women also differ in product preferences. The C2M capability provided by JD covers the full life cycle of a product, from the design, to sales forecast, inventory preparation, and marketing. We help customers design products, and we help brands find their customers,” said Ruixue Zhou, head of the integrated innovation at JD-Y, JD’s smart supply chain business unit.

JD’s C2M method consists of a proven process.

First, JD produces a detailed report outlining demand for products leveraging JD’s extensive consumption data and industry insights. AI plays a critical role in this process to help analyze consumption trends, consumer decision trees, which show consumer motivations for purchasing decisions, and more.

Second, JD works with partners to roll out simulations including creating mockup pages on the JD app and obtain customer feedback such as clicks, browsing duration and the rate at which products are added to the cart.

Based on the first two steps, partners manufacture products that customers have illustrated will have high demand. JD also provides support for product launch and precision marketing, as part of the C2M process.

The company’s C2M model now helps shorten market research time by 75% compared with traditional offline means and shorten the new product launch cycle by 67%.

The model has been expanded to other categories, including home appliances, cell phones, fast moving consumer goods, fashion and home products, and more. For example, in the pet food category, by analyzing the profile of Nestlé Purina consumers, JD found that most consumers are highly educated and higher spending. As the general trend shows pet owners are willing to pay higher for quality, JD suggested Purina to upgrade its product to meet customer expectation. Most recently, JD helped leading high-end electronic tools brand WORX design a best-selling drill for male customers.

JD’s C2M initiative provides brands the perfect opportunity to reach targeted consumer groups. During the 618 promotion from June 1^st to 14^th, sales of C2M products on JD increased 622% year-on-year.

Yueting Chai, Director of National Lab for E-commerce Transaction Technology at Tsinghua University shared his view on the “C2M: Retail as the King” seminar hosted by Academy of China Council for the Promotion of International Trade. He believes, to some extent, C2M is the ultimate form of retail and may be a mainstream part of in retail in the future. It satisfies the ultimate form of the development of information network and the direction of retail, that is, personalization, miniaturization, publicity and sharing.

According to JD’s research, only 10% of consumers surveyed are aware of the concept of C2M. But 92% of consumers surveyed are satisfied with C2M products although they might not even know how the product is designed.

 

(yuchuan.wang@jd.com)