#ERinChina with JD.com

Earlier this month, Essential Retail was lucky enough to visit Beijing and Shanghai to spend some time learning about the Chinese retail titan, JD.com.

To give you a sense of the size and scale of the company: Last year it reported $55.7 billion in revenue, while its anniversary 6.18 sale, which concluded last week, totalled record sales of $24.7 billion in a mere 18 days. It boasts 300 million active customers, making it China’s largest retailer both on and offline. And its extensive logistics network covers 99% of China’s population, with 500 warehouses and 7,000 delivery stations fulfilling 90% of orders within 24 hours.

Before the trip, we spoke anecdotally to our retail colleagues in the industry and got the sense that most of us in the West are more familiar with JD.com’s Chinese competitor, Alibaba, which has been making strides encouraging British brands to sell their goods on its marketplace platform over the last couple of years. JD.com, on the other hand, started its online business in 2004 as a traditional retail proposition – buying stock in bulk to sell on at a marked up price. It now also offers a marketplace platform for its retail partners, while putting them through a stringent vetting process to eliminate fake goods from the supply chain.

Out of the 150,000 people working at the company, 50% work in logistics. But the company is heavily investing in automation and robotics to help it keep up with the increasing Chinese appetite for eCommerce. One portion of a warehouse in Shanghai is already fully automated. This “dark” warehouse only requires four people to be on hand in case something goes wrong and its robots can fulfil up to 200,000 orders each day. JD.com was also the first company in the world to gain aerial rights to test drone delivery. While this part of the logistics business is on a much smaller scale, it has already completed 20,000 drone trips to rural customers in the Chinese provinces of Jianjsu and Xi’an.

JD.com has also moved into physical retailing, with its upmarket grocery store 7Fresh (two branches in Beijing), its retail “experience stores” (aka showrooms, of which there are 400 across China), and its unmanned stores (way ahead of Amazon Go, with over a dozen in operation across the country).

Annoyingly, the company wouldn’t disclose a full store count – blaming the fact that the figure is constantly changing with stores opening every day. Founder and CEO, Richard Liu, was recently quoted saying that the company had ambitious offline expansion plans to launch 1,000 convenience stores every day, which we learnt while in China would mostly be franchised.

Looking at digital retail in China is like looking into a crystal ball and seeing the immediate future of the retail industry – lightning-fast delivery, innovative payments, and genuine use-cases of technologies like augmented reality, blockchain and drones. And Essential Retail’s main takeaway from this trip was how JD.com also seems one or two steps ahead of the rest of the retail world – we still get excited in the UK when Amazon launches a new Prime postcode, while JD.com has been offering same-day delivery on orders placed before 11am as standard for the last seven years.

Now it has created all of this retail technology, the next revenue generator for JD.com is to outsource this technology to retailers around the world (one unknown retailer has already placed its order for a fleet of drones!). It makes sense, JD.com has spent the time and money investing and once the technology works at scale, it claims it is fairly cheap to roll out elsewhere.

By the end of our week in China, this was the clear message from JD.com: Retail-as-a-service, as it calls it, will be a major part of its business strategy going forward. And while its expansion plan doesn’t mean we will all be shopping on JD.com rather than Amazon and seeing 7Fresh-branded stores popping up on our high streets, this retail powerhouse is primed and ready to sell its advanced retail technology to Western retailers, who having seen the future in China, will undoubtedly be interested in playing catch up.