by Tracy Yang and Brad Burgess

“JD.com has set a new standard and solution for the modern supply chain,” said Wang Wei, Director of the Market Economy Research Institute of the Development Research Center of the State Council of China. “As an important part of the new infrastructure, developing an information-based, digital, and smart supply chain will also further the drive toward being more information-centric, digital, and smart, ultimately contributing to supply-side structural reform. We will accelerate the transformation of China’s economy, forming a virtuous circle of national economic development.”

The story of JD.com is a tale rife with twists and unexpected surprises. The company founded by Richard Liu, Chairman and CEO, two decades ago was first and foremost a retail company. A man who unwaveringly believed in providing real products at a real price, Liu greatly respected leaders like Sam Walton, the legendary founder of Wal-Mart, and saw him as setting the benchmark and standard for the traditional retail industry. Liu had a similar vision to set an industry benchmark for China in the retail industry.

Liu said before that JD’s growth “can be explained simply: it is nothing more than making constant ground-breaking innovations to a business model to meet new customer needs and leveraging the Internet to reconstruct the supply chain system, reduce costs, improve efficiency, and ultimately, create value for consumers.”

Indeed, the China “economic miracle” has been attained through continuous – arguably, breakneck – breakthroughs. When change is the one constant, it’s imperative to lead the change or be left behind.

 

The Case for Change

In 2017, Liu emphasized the nature of the company’s transformation when he pointed out that JD “will leverage technology to transform the business model we built over the first 12 years to become a purely technology company.” Under this guidance, JD has continued to build its 5G network, cloud computing, big data and artificial intelligence over the past three years.

The impact of this decision cannot be overstated. The company has recently upgraded its overall brand positioning to be “a technology and service enterprise with supply chain as its core”. As JD has transitioned its business model from being a purely retail company, it has built strength upon strength, marrying technological innovation with its “asset heavy” but increasingly profitable fully owned in-house logistics business – resulting in what many recognize as the best supply chain in the business. JD’s supply chain is capable of predicting what people want before they know they want it, delivering and replenishing product across China in the midst of China’s – and, now the world’s – biggest public health crisis in over a decade; and, doing so without breaking circuits in the process. Let’s talk a little bit more about this in detail.

JD’s efforts in developing its smart supply chain and smart logistics have paid off in the fight against COVID-19, which has given rise to the recognition of JD’s role as a pioneer in the “New Infrastructure Project”: the infrastructure development underway in China supported by 5G, AI and IoT.

The sudden outbreak of COVID-19 has tested many industries in China, and the retail industry is no exception. Facing a series of challenges, such as slow production and poor logistics, JD.com relies on its core advantages in smart supply chain and smart logistics to ensure the normal supply of products at stable prices, provide fast delivery as well as transport prevention materials. In doing so, JD has played a key role in ensuring social stability at a challenging time and demonstrating the value of JD’s business model.

 

Unshakable strength in supply chain management

JD has been delivering products to Chinese consumers during the epidemic period, which is supported by JD’s strong supply chain management capabilities and achievements in technology innovation.

At the end of December 2019, JD Logistics’ monitoring system flagged a significant increase in mask sales in Wuhan. JD Logistics immediately prepared 70,000 masks for its couriers in Wuhan and carried out rapid replenishment and internal alerts. This “smart decision making” supported through big data laid a solid foundation for the business to take the lead in fighting the epidemic, while the smart supply chain provided an important guarantee for the rapid transportation and distribution of prevention materials to secure people’s basic needs.

In fighting the epidemic, JD Logistics centralized the smart logistics network for all products nationwide, accurately managing the transportation capacity overall, and prioritized orders sent to key hospitals in Hubei province. The network that JD Logistics had already established in Hubei also played an important role in this success. The sorting center in the Wuhan Asia No.1 was operational in Q4 2019 and was critical in ensuring Wuhan consumers’ daily needs. This particular sorting center can handle one million orders a day to meet the needs of people across central China.

To reduce human contact during the epidemic period, JD has deployed autonomous delivery robots to send products to consumers. In addition, JD has launched several other contactless delivery methods to better protect its staff and consumers.

 

Guaranteeing Chinese consumers’ basic needs

During the epidemic, the supply of various medical and protective equipment – such as masks, disinfectants, and hand sanitizer – was tight. JD’s smart supply chain advantages are the key to ensuring supply at stable prices of all kinds of protective medical protective equipment regarding supply, warehousing and distribution, and platform control.

JD has taken a series of measures, including working more closely with partners to provide enough daily needs for Chinese consumers at stable prices, so that they can buy products online or offline at a reasonable price whenever they want without needing to worry about inadequate supply.

JD’s digital supply chain strengths were demonstrated when cooperating with upstream suppliers. For example, CP Group’s supply of poultry, eggs, noodles, convenience meals and other foods on JD experienced an unprecedented surge in orders during this past Chinese New Year holiday season due to COVID-19. During the course of inventory replenishment, JD’s strong supply chain capacity helped CP Group coordinate vehicles, transportation, and storage effectively to overcome logistics challenges ensuring the supply of goods urgently needed by the public during the epidemic.

 

Building up the next generation of retail infrastructure

The epidemic has dealt a big blow to offline businesses, like restaurants, cinemas, hotels and other businesses that rely on social interaction. JD has leveraged its core competitive strength to share its capabilities across the industry and help other players overcome the difficulties during the epidemic period, such as through its talent sharing program.

The rapid development of new infrastructure in China will strongly support the development of a smart supply chain and smart logistics in China, which has always been JD’s focus over the past several years. JD will continue to make every effort to create an efficient next generation infrastructure based on technology and data-driven supply chain and logistics, which can also serve as the industry benchmark.

 

(tracy.yang@jd.com, brad@jd.com )

by Ling Cao

In China, JD has made its reputation among customers for its fast and trustworthy e-commerce and logistics experience. This March marks the 10^th anniversary of JD’s same- or next-day delivery service, which set the industry standard for fast e-commerce delivery service.

The company has since launched several innovative logistics solutions such as scheduled delivery service, JD Luxury Express, white glove delivery service, and its new storage service “Jing Xiao Cang”. Continuous innovation makes it possible to not only keep its promise to customers and partners for superior service, but to even offer an element of happy surprise.

 

A High-End and Intimate Service

In June 2017, JD launched its high-end, intimate and trustworthy white glove delivery service, JD Luxury Express. JD is the first e-commerce company in the world to roll out this type of luxury service. The service currently covers a total of nine cities across China, including Beijing, Shanghai and Guangzhou, and enables customers to enjoy a high-end and special delivery experience.

The initial purpose of launching the program was to provide customers who are looking for luxury and high-value products online, the same type of high-end shopping experience they might experience when they shop offline. With JD Luxury Express, couriers are clad in distinct uniforms, and wear white gloves to deliver qualifying purchases to customers’ homes in electric vehicles rather than JD’s usual tricycles and scooters. JD also offers them social etiquette courses.

The business is expanding as customers have more requirements. On May 16, 2018, almost a year after JD launched the service, JD began to offer it as a value added service, on top of its existing free of charge model, and expand the category range to sports, health, cosmetics and gifts. This decision was based on consistent customer feedback and analysis. A survey of JD customers showed that 41.5% wanted the option to select luxury white glove delivery, especially when buying expensive products or purchasing gifts. Many customers who wanted the service said they would be willing to pay extra for it if their purchases didn’t automatically qualify.

Longfei Ma is among the first group of JD Luxury Express couriers and has been working with the service for almost three years. He said that customers are gradually getting used to this service, and thanks to the job, he learned a lot that benefits both his work and his everyday life, such as how to properly talk to people and how to dress formally.

When asked about his most memorable delivery, he said, “I remembered that in January, right before Chinese New Year, a young man bought many high-end health related gifts for his girlfriend’s parents in Shijingshan district of Beijing, and paid for the value-added JD Luxury Express service. He asked me to have a video call with him to check the gifts before delivery, and asked for my help to say warm blessings to the recipients”, Ma added. “I can tell that this delivery was of great importance to him. The parents seemed very happy when I arrived at their doorstep and explained that it is gifts from their daughter’s boyfriend. The young man also sent me a message of appreciation the next day. He said the delivery was perfect and memorable.”

Many of the brands feel that the service provides joint benefits for both the brand and the recipient, and see it as a core differentiator, enabling them to provide a luxurious, trusted and joyful experience on behalf of the sender. Brands who regularly work with JD include, Ferragamo, Prada and MIDO. Several electronics brands also take the opportunity to use the service when launching new, high-end products. During COVID-19, Huawei and Samsung both launched new, high-end products on JD: HUAWEI Mate Xs and Samsung Galaxy Z Flip (both over RMB 10,000 yuan), which were delivered by JD Luxury Express for free during the promotional period. For both products, JD customers who received their items via JD Luxury Express have become the very first users of the product in China.

 

Scheduled Delivery

In September 2016, JD started to offer a scheduled delivery service in select cities with two-hour delivery windows. In some cities, the window can even be narrowed to half an hour. The move to offer scheduled delivery is in response to customers’ needs for a more personalized service. JD’s customer surveys have shown 98% of customers have a need for scheduled delivery services, and 30% are willing to pay extra for it.

Imagine a young couple who needs to go to work every day while sending their daughter to kindergarten in the morning and pick her up in the late afternoon. If a package is delivered home, nobody is able to receive it during the day. With the service, the mother can easily order fresh food and ice cream, and request the order be delivered at 7pm when they arrive home. This way, she can better manage her time.

At the time, JD was already providing same- or next-day delivery, but the team wanted to provide a more personalized delivery experience that can be more precise for last mile delivery. Qiangming Zhou is the head of JD scheduled delivery service and the originator of the idea at JD. He said, “One of the most challenging parts is that the company needs to break the original fulfillment process rules from when customers make an order to preparing the parcel in warehouse to the last mile delivery. The whole process will require redesign of over 40 systems. Thanks to our powerful technology and capable team, we made it happen.”

Now the service can cover more than 246 cities, and JD is expecting to expand this service to more cities and categories. If JD misses the delivery time window, JD will return the scheduled delivery expense to customers, and give JD’s “Jingdou” (gold bean) loyalty points as additional compensation, which can be exchanged for products on JD. JD is also opening this service to some of the merchants who use its warehousing and delivery service, and even for parcel delivery in cities like Dalian, Liaoning province, where JD is testing scheduled delivery service for parcel pick up.

These are just several examples among many more innovations by JD Logistics to make sure it can provide sustainable and consistent value to customers and partners. Like Jon Liao, JD.com CSO said at JD Logistics 2020 annual meeting on January 11^th, “JD Logistics is the climber, which is competing with itself rather than others. It’s also the long-distance runner, which pursues long-term value.”

 

Mini Storage

In September 2019, JD launched Jing Xiao Cang (京小仓JD’s mini storage), its storage service for customers and enterprises. The program leverages JD’s warehousing and logistics capabilities to provide a professional storage solution, enabling customers and companies to store items for both short term and long term purposes. The service is managed by JD Logistics, JD.com’s logistics arm, which is pioneering provide this service as a supply chain infrastructure service provider. The service has now expanded to several cities, including Beijing, Shanghai and Guangzhou. JD expects to expand it to more cities this year.

When asked why JD decided to enter the storage market, Yang Lei, one of the two founding members of JD’s storage service program said, “JD Logistics has been eyeing this market for a while. We did a thorough market analysis before bringing this project to life.” According to the research, JD found that Chinese customers and enterprises are looking for convenient and reliable storage services.” Unlike in the US, where the public self-storage market is mature, with a market size of more than RMB 200 billion yuan（approx. $US 29.2 billion dollars）and a total storage area of more than 200 million square meters, in China, there is huge potential for development and growth. One of the driving forces for the growth of the U.S. self-storage market is high home rental expenses. China is experiencing a similar trend, as storage demand is rising, particularly in tier one and two cities, in step with high rental costs.

JD saw the potential of this market early on. Moreover, the company has the existing warehousing resources to support this service as well as a strong reputation among customers and enterprises. When asked why they are willing to store their items with JD, respondents answered that JD is “safe and trustworthy.”

“It’s not easy to launch a new business from scratch. But the company encourages us to work on innovative programs,” said Lei. “It’s like participating in a marathon, patience and persistence are the keys to success.”

One of the problems facing JD is that users will have plenty of nonstandard-sized items, which cannot all go into one box. How can JD earn customers’ trust and make them feel that the storage service is secure, when they cannot actually see which products are stocked in which container? JD relied on technology to build transparency into the process. The company will give each item a unique code, and couriers will also take pictures of each item, so that users can see the whole supply chain process and the photos from within the WeChat mini program app. Unsurprisingly, it took a big team from JD to work this out together, including couriers, as well as team members from warehouses, operations, systems and even payments, but the effort was worth it to ensure customers’ peace of mind in using the service. At JD Logistics, innovation programs have been highly supported. Jing Xiao Cang is among seven of the major innovative programs launched in 2019. Others include the company’s 5G powered logistics park and JD Cloud Box, JD’s self-developed logistics transaction platform. Zhenhui Wang, CEO of JD Logistics said at JD Logistics 2020 annual meeting, “In 2020, we will give innovative programs more support and space to develop. We want more colleagues to participate.”

The service has received good feedback from users thus far. Ms Wu, a Beijing-based mother is using JD’s storage service to stock two containers holding approximately RMB 150,000 yuan worth of Lego bricks for her child. She said, “It’s quite convenient as it helped me spare two cabinets of space in my house.” Wu added, “I plan to store out of season clothes, small appliances, and old furniture with JD.”

Mr. Cao, regularly lives overseas, and his wide range of hobbies meant he had a bunch of equipment to store in his home in China. He used JD’s storage service to store eight containers of goods, including an exercise bike, skateboards, ski suits, a guitar and more. Cao said, “JD’s storage service can free up space in my house and store my beloved equipment in a secure and convenient way.”

Lei and the team are continuously making updates to the program based on user experience. The team plans to add several other functions, such as allowing customers and enterprises to store items in one city, and have them picked up and delivered to a location in another city.

Today, JD is still the only company who can provide all three services at scale, day in and day out. With people having come to expect this type of service, the challenge facing JD is how to go the next step further and exceed expectations. When it comes to service, it has always been JD’s mission to exceed customers’ expectations.

 

(ling.cao@jd.com)