by Ella Kidron

On March 2, JD reported its fourth quarter and full-year 2019 financial results (full press release here). The company saw strong performance across key metrics including user growth, net revenue and profit, reflecting the strength of its retail business model, and its dependability, to customers and partners alike. An infographic with highlights from the release can be found at the bottom of this article.

JD has made ongoing efforts to improve its service. This has enabled the company to not only meet, but to anticipate and exceed consumer expectations.

At the same time, a strong supply chain and logistics infrastructure and technology expertise has made JD a partner of choice for companies in a wide range of industries far beyond retail. JD’s guarantee of authenticity, combined with its promise of fast delivery, including same-day or next-day deliver as standard – a level of service matched by any company globally – keeps people coming back again and again. It all really comes down to trust.

 

Trust: Foundation for development

Continued commitment to the customer and to the customer experience has cemented customers’ trust and reliance on JD. JD has been investing in lower tier cities for years, establishing its nationwide logistics network to cover these areas early on. It has also leveraged its supply chain resources to provide quality products and different price points.

JD customers come in all shapes and sizes, ranging from people in lower-tier cities, to tier one cities, and from Chinese nationals to expats. Their impressions differed based on their experience, but trust came up repeatedly in conversations with them. For some, it’s trust from being a veteran user, while for others it has built up based on repeated positive experiences in a short period of time.

Ms. Niama is a five-year expat resident, currently living and working in Beijing’s Chaoyang district. She shared, “I started to shop on JD a few years ago and it was revolutionary for me. I find everything I need with just a click.”

Ms. Niama often turns to JD from everything from clothes and electronics, to cosmetics and gifts for her family back home in Morroco. She continued, “The beauty is the delivery speed. When I leave China, JD will be the thing I miss the most.”

Ms. Wu is a Chinese national from Tongdao, Hunan, who is currently living and studying in France. She remembers her years as a JD customer fondly. “It’s quick. Also the delivery service is a huge advantage. With others you have to worry about other delivery services throwing your packages around, but with JD, you never have to worry. Sometimes you can even become friends with the couriers. And the coupons help me save a lot.”

Whether it has been in customer engagement initiatives, especially in lower-tier cities, improvement of experience through unique omnichannel initiatives, or expanded product selection by giving consumers the products they ask for through Consumer-to-Manufacturer (C2M), trust is the common thread that has driven the company to a strong 2019, and positions JD for future growth.

Loyalty: Robust customer growth

JD saw robust user growth in Q4, especially in lower-tier cities (defined as 3-6 tier cities), with annual active customer accounts increasing to 362 million in Q4, due to innovative marketing, superior product selection and better customer service.

During the 2019 Singles Day（November 11^th）sales festival, growth in lower-tier cities drove new customer growth, with the number of lower-tier cities users placing orders increasing 60% YoY and over 70% of new users on JD during the period from lower-tier cities.

Mr. Dai, who resides in Urumqi, is a regular customer who also participated in the Singles Day festival. He was brief yet resolute in explaining why he shops with JD. “Quick! I order today and get it tomorrow. The couriers are well-dressed and polite. They deliver to your door.”

Ms. Harrison, an expat resident of Beijing who was just a few months into her China journey and joined JD ahead of Singles Day said, “To be honest, I don’t fully understand it because I can’t read Chinese, but all I know is that once I make an order, before I know it, the JD courier is calling me to let me know my package has arrived. It’s unlike anything I experienced in my home country.”

Convenience: Enhanced customer experience

JD has continued to leverage its supply chain and logistics strength to push into omnichannel with several models. JD’s Omnichannel Fulfillment supply chain innovation program sources products that customers order on JD from offline stores closest to customers. What it means is that, particularly for every day necessities like bottled water, when an order places an order through JD’s first-party retail model online, JD’s supply chain system can source the product from a partnering offline outlet in the customers’ surrounding area, instead of the product having to travel from JD’s warehouse to a delivery station and ultimately to the customer.

Launched on Singles Day last year, JD’s E-Space, is a 50,000 square meter mega store that offers consumers the chance to try virtually anything in the store, including washing machines, vacuums and even go-karts and Segway-type devices. To buy anything in the store, consumers simply scan a QR code next to the product which will take them to JD.com where they can purchase the product and choose to have it delivered home. What it means is that even consumers who are not located in the Chongqing area where E-Space is, can enjoy same- or next-day delivery of products in the store.

Jeff Towson, Peking University and CEIBS professor with a 3.1 million-person following on LinkedIn, wrote in a post, “The store is also focused on dramatically improving the customer experience. [JD is] attempting to reinvent the retail experience – with a focus on ‘experiential retail’”.

JD E-Space in Chongqing

7FRESH, JD’s offline fresh food supermarket brand also launched two new store models. 7FRESH LlFE is focused on becoming the “go-to” store for the surrounding community. With a store area of between 300 to 400 square meters, 7FRESH LIFE combines restaurant + fresh food grocery +convenience store and provides more than 3,000 items, including fresh produce and daily groceries as well as ready-to-cook and ready-to-eat food. The first store is located in the Huilongguan residential area of Northern Beijing and services 38 surrounding residential compounds and three office areas, reaching 50,000 families and 1,000 office professionals. Delivery is available within a 1.5 km radius in as fast as 30 minutes. At the same, consumers will find an extended selection of products online, such as large-size products, beauty and baby and material products.

Ms. Chen is a middle-aged professional living in Beijing’s Dongzhimen area while her parents live in Northern Beijing. She often goes to 7FRESH for groceries for the week for both her and her parents’ houses, but now her parents can also go to 7FRESH LIFE. “When the first 7FRESH opened, I’d make a special trip out to Yizhuang just to go there. Now there are more stores closer to my parents’ house, it’s much more convenient.”

SEVEN FUN, the lifestyle brand launched under 7FRESH is aimed at servicing the working professional. With 12 food stalls, many of which are part of popular local or national chains, three bars and a full-grocery section, SEVEN FUN can cover all meals – breakfast, lunch and dinner – and also offers a place to hang out, catch up and even catch live music on occasion. For the busiest of professionals, delivery is also available within a 1km radius of the store.

Selection: Consumers benefited from C2M initiative

Launched several years ago, JD placed even more emphasis on its Consumer-to-Manufacturer (C2M) initiative this year. JD’s C2M model leverages the company’s big data and customer analysis capabilities to optimize a brand’s products specifically to meet the unique demands of the Chinese market. As China’s largest retailer, JD has access to a vast database of customer feedback, as well as specialized data analytics tools which can perform sophisticated key word searches and trend analyses.

During the 2019 Singles Day shopping festival, sales of C2M PCs increased 491% YoY and 2 of 5 monitors sold were C2M monitors. Recent data from JD revealed that sales of C2M health-related home appliances from January 25-February 21 tripled compared with the same period last year.

Challenge: Bringing in more trust

The trust cited by several customers in conversation is not just a big driver of a strong 2019 for JD. It is also why, when the COVID-19 outbreak struck in mid-January, in the most trying period of time for people from all walks of life in China, people turned to JD.

JD has spared no efforts in the fight against the coronavirus. The company immediately stepped up and mobilized its resources across retail, logistics, technology, health and other areas – to provide immediate support for the anti-virus fight.

It has ensured people’s livelihoods through regular supply and delivery of daily necessities across the country, while providing much needed support to ensure a continuous supply of emergency medical goods in the epidemic epicenter in Wuhan.

Ms. Wang, a middle-aged JD customer in Beijing’s Daxing district mentioned while picking up her latest package from JD’s makeshift delivery station outside of her apartment, “The only time I’ve gone outside since the virus hit is to pick up my packages from JD. I only trust them. I don’t know what I’d do without [the JD couriers].”

Today, well over a month into the outbreak, this sentiment remains. In fact, JD’s net promoter score, a measurement of customer satisfaction, reached record high levels in January. In addition to providing basic needs and medical supplies, customers have turned to JD pick up healthy habits while at home.

Ms. Fan, a young professional who has been in self-quarantine in Beijing for the past month, said, “During this special period, with restaurants closed, you have no choice but to become a ‘big chef’ at home, exploring your own way to cook something tasty. I’m no exception.”

According to JD data, in the month of February, sales of kitchenware, such as multi-purpose knives, woks, pots and baking tools have all increased significantly, with baking tools taking the lead, increasing 332% compared with the same period last year.

Ms. Fan continued, “My friend in Shanghai has been teaching me how to cook remotely. The other day, she showed me some pictures of her dishes and recommended a pot she’d bought on JD. I didn’t order immediately because I didn’t believe that in the epidemic it would still get to me on time. But when I finally made the order, JD surprised me. Even in this period, I got the package the next day.”

Whether it is now during COVID-19, or in the future when it passes, JD will continue to deliver trust, and to empower its partners to do the same.

(ella@jd.com)

 

by Hui Zhang

• JD Health has built the largest pharmaceutical retailer in China, accounting for more than 15% of China’s pharmaceutical retail market.
• JD Health’s pharmaceutical business has been extended to cover B2C (Business-to-Consumer), B2B (Business-to-Business) and O2O (Online-to-Offline), aiming to build the most extensive and complete retail ecosystem in the industry.

 

To help patients in need to buy the right drugs at a fair price, JD Health, as a veteran of pharmaceutical e-commerce in China, initiated a charity project in which the company provided drug subsidies of RMB 1,000 per person to those registered with the local government. At the same time, JD Health is taking advantage of JD’s nationwide logistics network, which covers 99% of the population in China, to ensure drug supply to people living in China’s remote areas.

“I rely on my labor to be able to support my family, however, more than 20 years of back pain brings me a lot of suffering. Usually, I can bear the pain to do farm work, if it’s windy or rainy, it will be pretty difficult for me to even get out of bed. Not to mention not being able to do farm work, I might need my young children to take care of me,” said Wanhe Pan, a farmer from Zhumi Village of Fushun county in southwest China’s Sichuan province.

The only source of income for Pan’s family is farming, and his chronic back pain brings much difficulty to the less well-off family. Pan’s story is just one of many cases in the remote mountainous areas in China where access to medical care is limited. Apart from the burden of medical expenses, remote locations and limited transportation options also become obstacles in the treatment of disease. Faced with sudden illness, many people like Pan can only choose to procrastinate, which would lead them to miss the best window for treatment, leave them unable to work, and exacerbate their poverty.

There is an even more alarming figure behind the lack of medicine in rural areas in China. According to official data, China produces as many as 15,000 tons of expired drugs every year, a considerable part of which is circulated to small rural clinics through illegal second-hand drug markets. People from not only rural or remote mountainous areas, but also low-tier citers or towns are faced with limited drugs selection, expired drugs, inability to access to drugs for chronic diseases, high prices, and more.

JD Health started its pharmaceutical e-commerce business by selling health products online for the first time in 2013, marking an official step into the pharmaceutical retail business. Its pharmaceutical e-commerce business has been extended to cover B2C (Business-to-Consumer), B2B (Business-to-Business) and O2O (Online-to-Offline), or omnichannel, aiming to build the most extensive and complete retail ecosystem in the industry. JD Health has become the largest pharmaceutical retailer in China, accounting for more than 15% of China’s pharmaceutical retail market, with more than half of the drugs sent to fourth tier cities and below, according to JD’s data.

 

B2C: Largest Retail Platform

JD Pharmacy, as a core part of JD Health’s B2C business, was established in May 2016. It has become China’s largest pharmaceutical retail platform, online or offline in just three years, and its growth rate is four times higher than the industrial average rate in China. JD Pharmacy is also the first of its kind providing both medication consultation and drug purchase services in the industry. JD Pharmacy has a team of doctors and pharmacists to provide patients with medical consultation and services of medication usage. Relying on JD’s big data to help consumers in health management, JD Pharmacy’s health management team follows up with patients who have purchased medication from the platform, and offer furthers medication usage suggestions.

A rich supply of drugs, and an efficient and convenient drug purchase experience have made JD Pharmacy widely welcomed by Chinese consumers.

“It’s not only convenient for me to buy medicine from JD Pharmacy, but also for my parents living in different places. The elderly can’t always go out to buy medicine due to poor physical condition. I can place an order on JD Pharmacy today, and my parents can receive the medicine the next day, which is a huge help to us,” said Chen Xue, who works in Beijing.

In addition to medication retailing, JD Pharmacy also launched a medication purchase service for families to solve problems encountered by consumers in daily drug purchase. The ‘Family Medicine Kit’ service is committed to providing families with one-stop medication and health management services ranging from drug recommendation, medical consultation, and health knowledge sharing to pharmaceutical after-sales services. It provides consumers with not only commonly used medicines at home, such as medicine for cold, fever and cough, but also medication usage instructions, and free medication consultation from professional pharmacists according to their needs. Considering household medicine expires easily, JD Health also worked with JD’s insurance business team and JD Logistics to offer free one-time replacement services for expired drugs.

JD Pharmacy has already established partnerships with many well-known pharmaceutical companies both home and abroad, such as GlaxoSmithKline, Johnson & Johnson, Novartis, BMS, Bayer, Tongrentang, Yunan Baiyao Group, and Dong-E-E-Jiao.

 

B2B:One-Stop Drug Trading

In addition to the B2C business, JD Health started its B2B business by setting up a medicine procurement platform called ‘JD Medicine Procurement’ in 2017 to improve the circulation efficiency of traditional channels, and increase the transparency of information.

The main target of JD Medicine Procurement is to provide a ‘one-stop’ drugs trading platform for pharmaceutical industry enterprises, commercial enterprises, retail enterprises, medical institutions and pharmacies. Most of the customers in the lower reaches of drug wholesale are mainly drugstores, small and medium-sized chain drugstores, clinics and other medical institutions that are under great pressure to survive in the unprecedentedly competitive environment of China’s pharmaceutical market. Nearly half of them come from counties or towns in fourth tier cities and below. They have been faced with many challenges, such as incomplete drug procurement varieties, inability to compare prices, and long procurement cycles, for a long time.

“A few months ago, we still used the traditional method of procurement by phone and onsite purchase. It’s both inefficient and time-consuming as we lack of product information. I’m grateful that JD Medicine Procurement makes one-stop drug procurement a reality,” said Qiang Wang who owns a drug store in a fourth-tier city in China. He is also the No. 120,000 customer of JD Medicine Procurement.

Suppliers, who are mainly pharmaceutical enterprises in the upper reaches of drug wholesale, are facing quantity and inventory challenges from lower-tier cities.

“Pharmaceutical enterprises can mainly reach the first, second, and third -tier cities. It is very difficult for them to penetrate into cities below the fourth-tier cities, ” said Xiaomeng Mu, head of JD Medicine Procurement business.

The platform has been among China’s large-scale third-party pharmaceutical wholesale platforms since its establishment, covering 21 provinces and more than 400 cities, with more than 120,000 retail terminals and more than 600,000 items.

 

O2O: Covers 25 Provinces

Through cooperation with offline pharmacies, JD Health developed an omnichannel medicine delivery service to help pharmacies benefit more financially, while providing rapid drug delivery services to patients. The service now covers nearly 150 cities in 25 provinces across China. Consumers can place orders in nearby pharmacies through the service base on their locations, and the drugs are guaranteed to be delivered in 30 minutes.

Since the outbreak of coronavirus, more and more consumers use the omnichannel medicine delivery service to buy drugs through mobile phone in order to avoid cross-infection by going outside. The service has seen a significant increase in users and orders, with new users accounting for 80% of orders in the last month.

Compared with other pharmaceutical O2O platforms, JD Health has a team of professional doctors and pharmacists to provide comprehensive medical consultations and drug usage instructions to consumers, which attracts more offline pharmacy partners.

In January this year alone, Nepstar Drugstore’s order numbers from JD Health’s ominichannel medicine delivery service increased by more than 300% compared with the same period last year. One of Nepstar Drugstore’s operation managers said consumers are more likely to shop on JD thanks to the quality guarantee and fast delivery speed. In addition, JD Health also offers free 24/7 online consultation for all diseases during the outbreak of coronavirus, providing professional and convenient medical services to help avoid cross-infection. The free consultation services have also brought a lot of consumers to their offline pharmacies.

Apart from delivering medicine from pharmacies nearby consumers’ home, JD Health is also experimenting a new medicine delivery services which can link consumers with pharmacies in the whole city in Chongqing, Chengdu and Shenzhen. JD Health plans to promote the new service model to more than 20 cities across the country in the near future.

Lijun Xin, CEO of JD Health

The pharmaceutical business is only part of JD Health’s ambition and strategy in health industry. Lijun Xin, CEO of JD Health, previously announced that JD Health’s business focused on online retail and wholesale of medical products, internet hospital, medical services, and intelligent healthcare solutions. However, Xin readjusted the business focus to pharmaceutical supply chain, internet hospitals and chronic disease health management in the second half of 2019. JD Health is targeting the whole health industry, and is endeavoring to help JD’s over 300 million consumers in full life cycle health management.

“JD Health was only a pharmaceutical e-commerce company in the past. But now we want to grow into a real health company by offering consumers full life cycle health management services,” Xin said.

 

(zhanghui36@jd.com)

 

by Yuchuan Wang

This past Chinese New Year has been unprecedented for Chinese people. Greatly impacted by the novel coronavirus (COVID-19) outbreak, people have been forced to stay at home to avoid infection. Markets, shopping malls and restaurants are all temporarily closed, while a surge in online orders – especially for fresh and instant food – has been seen across the country.

According to JD’s data, over 50,000 tons of fresh food were sold between January 20^th and February 13^th. Sales of meat and egg products increased by over 300% compared with the same period last year, while sales of frozen food and vegetables increased by 264% and 216%, respectively. From February 13^th to the 17^th, JD supplied 5 million bags of instant noodles to Chinese consumers. How could all these things happen?

 

When restaurants meet JD Fresh

Research from China’s National Bureau of Statistics shows that in 2019, 15.5% of the country’s restaurant revenues came from the Chinese New Year peak season, while 93% of China’s restaurants are currently temporarily closed due to the impact of COVID-19. But, it’s not only the restaurants that are suffering from the losses. Employees in the restaurant industry have also been forced to leave their positions.

Jindingxuan is a well-known Beijing restaurant chain opened 23 years ago, where Wei Han, a store manager, has served for 16 years. He didn’t go back to his hometown in Henan province during this past Chinese New Year holiday because he was expecting a busy holiday season like usual. Yet, the busy time didn’t occur, and instead, he received a notification about the temporary closing of his branch in Yizhuang, in the southeast of Beijing.

General manager at Jingdingxuan in Beijing, Mang Li says, “Many of our guests cancelled their reservations for the New Year’s Eve dinner. We have so far closed 18 of our 31 stores, and in our most popular Ditan branch, guest flow is less than 10% of what it used to be.”

While the flow to offline stores is disappointing, sales for ready-to-cook instant dishes is skyrocketing online. To help traditional restaurant enterprises get through this period, JD launched the “catering retail alliance” to enable enterprises to offer healthy and delicious packaged ready-to-cook or instant dishes across China through JD’s nationwide logistics network so that consumers can taste the original flavor from famous restaurants in their own kitchens. JD is also providing access to its C2M tools that provide big data analysis and insights to guide merchants to prepare and respond to specific demand by diverse communities, age groups, and even packaging preferences.

Jindingxuan’s ready-to-cook product: Braised Pork with Preserved Vegetable in Soya Sauce

According to JD’s data, sales of Jindingxuan’s ready-to-cook products during the epidemic increased nearly 300% in February compared with a month earlier. “We used to supply our ready-to-cook products to JD’s warehouses twice or three times a month. We are now delivering at least three times a week,” said Bing Qiu, Director of Marketing Department at Jindingxuan. “Although we have tried ready-to-cook food and e-commerce in the past, we did not regard it as the focus of our business. Impacted by the virus, our offerings have expanded by 50% to more than 30 categories.”

The same is happening to other industry players. From February 1 to February 17, sales of CP’s ready-to-cook products on JD increased 664% on a yearly basis. And the sales of the whole month of February are expected to exceed that of last November when Singles Day (November 11^th) sales was held. February orders for Xiaonanguo (a Shanghai classic chain restaurant)’s noodle product “Noodles Mixed with Scallion, Oil and Soy Sauce” were more than double the usual amount.

Affected by the epidemic, more and more restaurants have realized the importance of e-commerce and omnichannel. To date, over 200 partners have reached out to JD to join the alliance. Sales of related products have increased 450% from January 20^th to February 18^th compared with the same period last year.

JD not only opened doors of omnichannel to restaurants, but also created job openings for restaurant employees. After staying home for a week in his rented apartment in Beijing, Wei Han received some heartening news. JD.com launched a “talent sharing” plan, and Jindingxuan joined immediately. Under the plan, JD’s supermarket chain 7FRESH would hire short-term staff from restaurants, hotels, cinemas and other temporarily closed retail establishments.

Wei Han now is responsible for handling online orders at one of 7FRESH’s stores in Beijing. “This is different than what I used to do, but I am happy since I can still work and pay my bills,” said Han.

Wei Han working at a 7FRESH store

“It is JD’s responsibility to work with partners and help them and their employees get through this hard time,” said, Chunhua Cao, head of human resources at 7FRESH. More than 100 short-term employees like Wei Han are already working in 7FRESH.

 

Unsalable？No such thing!

The agricultural industry also faces significant challenges.

While the epidemic has awakened pent up demand for online shopping across the country, many farmers and agricultural enterprises face the dilemma of not being able to get their crops to end consumers.

“Strawberries were sold at RMB 30/kg before the Chinese New Year holiday. After the outbreak, we lowered the price to RMB 6/kg but we still lacked sales channels. My strawberries were nearly left to rot in the field,” said Qingmei Duan, a strawberry grower with over 10 years of fruit farming experience in Liaoning province in northeast China.

Dandong, where she is based and a border city to North Korea, is the largest strawberry production and export base in China, with an annual yield of over 200,000 tons. While the epidemic developed and increasingly strict protective measures were implemented, Duan’s dealers from other provinces were unable to come this year. At the same time, many local markets were closed due to the virus. “Offline channels, which used to account for 80% of my strawberry sales, were suddenly cut off,” she disclosed.

In addition to strawberries in Liaoning province, many other products including mangos from Hainan, apples from Shaanxi, oranges from Sichuan and flowers from Yunnan were struggling to find sales channels.

“Since the outbreak, there have been transportation restrictions across China, putting pressure on the delivery of agricultural products,” said Yishen Tang, head of JD Fresh. “The extended holiday intended to curb the spread of the virus also makes it difficult for dealers to purchase from farmers who have limited manpower. At the same time, many of the local sales channels such as markets have been temporarily closed. This complicated situation has led to nationwide fresh produce potentially becoming unsellable.”

According to iResearch, a market research and consulting company in China, traditional markets accounted for 56.1% of China’s fresh food sales channels in 2018, while e-commerce only takes a small bite with 4.1%.

As one of the pioneers in fresh food e-commerce that operates a global supply chain and nationwide cold chain network, to address this pressing issue, JD launched the “National Fresh Produce Green Channel” on February 10^th, leveraging its strengths in supply chain, logistics, operations, marketing and more. Open to both existing and potential partners of JD, the initiative provides 25 supportive policies to merchants, including fast enrollment, extra traffic, discounts or fee-free use of the platform among a host of other benefits to bring fresh produce directly from farm to table.

So far, JD has received thousands of requests from farmers and agricultural enterprises and helped them sell over 3,900 tons of agricultural products that were impacted by the coronavirus. In just two days,  helping over 30 local farmers get through the hardship and earn more money.

Seventeen years ago, a small outlet in Beijing’s Zhongguancun area started transformation, from brick and mortar to an online retailer because of SARS (Severe Acute Respiratory Syndrome), when the epidemic also stopped people from going outside and halted footfall at offline stores. That small outlet has become JD.com. Will the novel coronavirus change people’s shopping habits for fresh food over the long run? Will cold chain logistics leap forward in scale? Are we on the cusp of a major revolution for fresh food e-commerce? The unexpected arrival of the coronavirus raises many questions for decision makers.

“We’ve seen many agricultural production bases become increasingly aware of the significance of e-commerce due to the virus outbreak. We expect the scale of e-commerce companies’ sourcing directly from farms to further rise,” concludes JD Fresh’s Tang.

 

(yuchuan.wang@jd.com)

by Rachel Liu

On March 6, 2003, the first case of SARS (Severe Acute Respiratory Syndrome) was reported in Beijing. JD Multimedia, an offline company that mainly sold magneto-optical products in Zhongguancun, Beijing found itself in trouble. As customers dared not to go out to shop in the malls, the retail industry suffered a heavy blow, and in just 21 days, JD Multimedia lost more than eight million RMB. Certain that things could not continue this way, the company started to sell products through online postings. It was a huge success, and, in 2004, JD became a 100% online retail company.

In January 2020, COVID-19 (the “coronavirus”), a highly contagious virus believed to be similar to SARS, struck China. JD.com is already the largest retailer in China, online or offline and in a very different position than it was in in 2003. The company is now able to use the massive scale of its retail business, mature supply chain and logistics capability to support the fight against coronavirus.

 

First there was SARS

Retail has been in JD’s blood from the beginning. In 1998, JD Multimedia, the predecessor of JD.com, was engaged in a classic offline business: stocking and selling goods, first wholesale, then retail. At that time, the market was full of chaos and corruption. At the stores in Zhongguancun, authentic goods and knock-offs were sold side-by-side, making it hard for customers to pick authentic and authorized products.

JD’s founder Richard Liu took a different approach from many sellers in Zhongguancun. The company only sold authentic products at reasonable prices. As time went by, it accumulated a group of loyal customers. After moving the business entirely online in 2004, it was the reputation of authenticity that attracted the first group of customers to JD. The retail model enables JD to work directly with brand partners to source products, and to store them in its own warehouses, meaning it has higher control of product quality and can guarantee authenticity.

In 2007, JD stepped further in building its own supply chain—establishing its self-built logistics system and realizing the integration of warehousing and delivery. Many people would think that JD and Amazon share many similarities. Both adopted a retail model, controlling the supply chain. However, the building of the logistics network is what makes JD standout in the Chinese market. Different from the U.S., at the time, China did not have a nationwide logistics system, and the logistics industry was highly fragmented. At that time, half of the customer complaints that JD received were logistics-related: some people complained that the delivery was too slow, while others said that the parcels they received were damaged. This is because rough loading and unloading was common for logistics companies, and the electronics products that JD sold could not withstand this kind of treatment.

To provide a better customer experience, Richard Liu decided that the solution was to build its own logistics infrastructure, including delivery service. It was a controversial decision since it would require a huge amount of investment. However, Liu insisted on forging ahead because he believed this was the only way JD could control the entire supply chain and continue to provide high-quality service. In 2010, JD launched a delivery guarantee called “211”, also referred to as same- or next-day delivery. It guarantees that if customers place orders before 11am, they will receive products the same day, and if they place an order before 11pm, they will receive them before 3pm the next day. No other e-commerce company in the world can guarantee this and it sets the standard for delivery service.

Today, JD operates the largest B2C e-commerce logistics network in China that covers 99% of the country’s population. It also has become China’s largest retail platform for PC and digital products; China’s largest home appliance retail platform and also owns China’s largest retail business, online or offline.

 

Now, here is the Coronavirus

When the coronavirus struck the country, a huge amount of epidemic protection resources and daily necessities were needed across the country, quickly. Many customers are reluctant to go out to stores and turned to e-commerce instead. The outbreak of the virus occurred during the Spring Festival holiday, when many manufactures and delivery companies were closed. However, JD was still able to supply 71,500 tons of rice, flour and grain, 27.25 million liters of cooking oil, 40 million bags of instant noodles, over 50,000 tons of fresh produce, 3 million cans of baby formula, 400 million pieces of diapers, 5.88 million bottles of liquid soap, 3.61 million bottles of disinfectant and 1.59 million packs of wet wipes from January 20 to February 13. JD also donated 100 million masks and 60,000 other items, including medicine and medical supplies to Hubei province. How was JD able to do this?

The answer is that the years of effort in building its own supply chain infrastructures made JD the only company in able to do this. The biggest challenge for an e-commerce company during the virus is to ensure enough supply of products and deliver them to the people in need as soon as possible. JD’s retail model ensures that it can collaborate closely with partners to ensure adequate supply of the mostly needed products and control prices to ensure they don’t rise. This is the eighth consecutive year that JD has operated its logistics network during the Spring Festival, enabling products to reach customers throughout the entire period, and this year, with the coronavirus, also enabling continuous supply to hospitals and medical organizations.

 

The brighter and broader future

The retail model and self-built logistics network is what makes JD unique in the Chinese e-commerce market, and it has proven to be valuable in improving customer experience and ensuring authenticity. It has also played an important role in the fighting against the coronavirus. Behind JD’s retail model and logistics network is a highly efficient supply chain management system. The biggest advantage for a retail e-commerce platform, comparing with a third-party merchants platform, is the backend supply chain ability, including the selecting of categories and products, inventory management, sales prediction and replenishment, price strategy and promotions. JD has defined itself as a technology and services enterprise with supply chain at its core.

A good example is JD’s forecasting and replenishment system. The system integrates JD and brand partners’ information of products, such as life cycle, termination information, volume limits for sales events, and sales promotions that may impacts sales to improve the accuracy of forecasts. The integration of information on inventory and logistics information enables brands to complete replenishment automatically. JD had collaborated with Nestle to optimize the supply chain efficiency, and as a result, Nestle was able to improve the forecast accuracy to 85% and boost in-stock level to 95%. Starting from here, together with the technology-backed warehouse and logistics system, JD is able to constantly provide the most suitable products to customers at the lowest cost and highest efficiency.

 

 

(liuchang61@jd.com)