How JD.com Ruled 2018 Retail
Mention retail, and people think of the global tussle between Amazon and Alibaba. But 2018 belonged to JD.com, which made it the largest retailer in China.
The achievement is no mean feat. It faces Alibaba at every twist and turn in China, competing against a rival eco-system that blocks their efforts constantly while addressing one of the biggest customer bases that is also most impatient on delivery times.
Yet, JD.com triumphed.
In a Forrester study entitled Case Study: JD.com Delivers Superior CX with Digital Supply Chain and In-house Logistics (paywall), the research firm highlighted the main reason JD.com’s success: creating a tightly controlled CX ecosystem.
Architecting Last-mile Leadership
No matter how impressive the buying experience, delivery leaves lasting impressions. This is where JD.com focused.
In China, where the online retail market exploded, delivery is a huge struggle. A vast geography, different levels of maturity in logistics across different cities, and a consumer that is weaned on same-day delivery promises are big challenges. The Forrester report noted that Chinese customers are “the most demanding, advanced and innovation-hungry digital shoppers.”
JD.com understood that it needed to make online and offline delivery “seamless”. So, it partnered with Walmart to jointly create a supply chain that integrated inventory management and speed up delivery.
Any retailer will tell you the biggest nightmares lie in assortment planning, procurement and inventory replenishment – especially during holiday seasons when nearly one-fifth of the world’s population shops.
To counter these issues and create a strong CX, JD.com did three things that cemented its leadership:
- Invest in in-house logistics: JD.com has an in-house logistics operations for the last mile that is manned by 85,000 personnel who handle same or next day deliveries. According to the report, the company fulfills more than half of the first-party orders within 12 hours and 90 percent within 24 hours. It also has a white-glove delivery service, JD Luxury Express for those who do not mind paying more for personalized service.
- Completely marry the physical with the digital. JD.com uses advanced technology to architect a unique customer experience that does not impinge on consumers. For example, when consumers “magic mirrors” to view products, the company pushes tailored information to the company. Other services include having food cooked onsite or using the 7FRESH mobile app to deliver items within 3 kilometers in as little as 30 minutes, said the report. The company is also trialing unmanned convenience stores that are stocked based on customers’ preferences.
- Build an ecosystem of traditional retailers and tech firms. JD.com developed a vertically integrated online-to-offline platform that connected traditional retailers and local businesses. According to the report, Dada-JD Daojia, formed when JD.com’s online platform merged with a crowdsourcing delivery platform, brings “fresh produce and groceries to more than 20 million monthly users within an hour through a network of 100,000 traditional retail stores.” The strategic partnership with Tencent allows JD.com to sell directly to WeChat users while gaining valuable transactional, behavioral, and attitudinal data.
Building on CX dividends
The report noted that JD.com will face challenges in the coming years. Alibaba is ramping up its own operations and set to become a “formidable competitor”. Although JD.com’s revenues grew by more 30 percent year-on-year in the second quarter, its operational expenses also remain high that is setting investors grumbling.
However, the company is looking to build on its CX wins to address these challenges. The Forrester report noted that it already set up automatic replenishment capabilities for 85 percent of its fast-moving consumer goods; online availability of most self-operated goods is currently above 97 percent. “By optimizing delivery paths in real time, JD.com enables its couriers to deliver up to 150 packages a day in metropolitan areas — up from 60 just five years ago,” the report said.
Its logistics infrastructure, which remains its main competitive differentiator, is also gaining international investor money. In 2018, Google poured USD 550 million in investment for building next-gen infrastructure for the retail industry and set a new benchmark.
Whether the company will remain at the helm is difficult to predict in a fast-paced retail market. But it definitely shows that CX investments do pay big when done right.
