JD.com is Leveraging Traditional Brick-n-Mortal Outlets to Supercharge Delivery Rates

As e-commerce shopping platforms surge forward and transform the world of retail, many industry observers have been predicted the imminent death of traditional shopping in brick-and-mortar locations.

But the Chinese online retail giant JD-Com (also known as Jingdong) is proving that brick-and-mortar locations are far from a dying species. In fact, JD is embracing physical locations sites to create an innovative logistics strategy that will make delivery of products faster than ever before.

JD.Com’s goal is to reduce delivery times to as little as 30 minutes to any location across the vast distances of China. That’s no small accomplishment considering that China is the largest country in the world by landmass comprising 9,708,961 square kilometers.

The key to making lightning-fast delivery possible is leveraging existing offline retail outlets. JD.Com employs an AI (Artificial Intelligence) algorithm to coordinate these outlets with JD warehouses and distribution centers. Using AI, proximity to a customer’s location can be swiftly matched with the nearest possible connection between the product and the end-user.

The retail outlets include a variety of business types, including convenience stores, supermarkets, major brand stores, and even giant Wal-Mart hypermarkets. There are 175 Wal-Mart hypermarket locations scattered across China. JD-Com entered into a partnership agreement with Wal-Mart in 2016. The ability to leverage the huge storage capacity and distribution sites owned by Wal-Mart is a key factor for enabling items ordered via the JD e-commerce platform to be near the buyer.

Another important partner is the JD logistics effort is Nongfu Spring, a major Chinese beverage brand. Li Zhou is the chief secretary of the board of Nongfu Spring. He said that he sees “huge potential” to increase orders from offline channels of distribution. He said the program will soon roll out in more Chinese cities and locations.

By partnering with JD, Nongfu was recently able to deliver 90% of its orders within two hours. This occurred on the final day of JD’s popular June 18 Sales Festival, known as the 6.18 Festival. This promotional event is extremely popular with JD’s 300 million active online users. It runs for 18 days featuring special sales and deals with all JD platform operators. Li Zhou said overall sales made by Nongfu Springs have increased by 20% thanks to its association with JD.

Another positive development from the AI-assisted e-commerce push using brink-and-mortar infrastructure will be increased penetration into smaller and more remote cities in China. The current penetration rate in China’s first-tier and second-tier cities is 36.4%. That figure is just 13.8% in smaller cities.

JD.Com was founded in June of 1998. The company is the brainchild of Liu Quingdong. Born in 1973 in Suqian, Jiangsu province, Liu Quingdong graduated from the Renmin University of China where he earned a B.A, in sociology. He later earned an EMBA from the China Europe International Business School.

His first business sputtered, but Liu Quingdong learned from his mistakes and pushed forward. He took a job with Japan Life and achieved considerable success as a director in computers, business and logistics for that firm. After two years with Japan Life, he opted to launch his own business and Jingdong was born. The company has grown to become China’s largest retailer. Under the leadership of Quingdong, Jingdong has experienced enormous growth in recent years. Current annual revenues are reported at $68 billion.

Jingdong is well-known for partnering with some of the world’s most high-profile and premier brands, including foreign entities, such as Italy’s Prada Group, the Swiss multinational food giant, Nestlé S.A., a2 Milk of Australia/New Zealand and many more.