DC Velocity - March 2018

BY MARK B. SOLOMON, EXECUTIVE EDITOR – NEWS
RETAIL FULFILLMENT
Strategy

IT’S EASY FOR BRANDS TO HAVE THEIR STORIES obscured by the mountain of press given to behemoths like Amazon.com Inc., UPS Inc., FedEx Corp., Walmart Inc., and Alibaba. But there’s a company not especially well known outside its home market that appears to have put everything together in such a way that it may come to dominate everyone.

Its name is JD.com. Based in Beijing, it has, in the 14 years since it launched its e-commerce site, developed and executed such a formidable model that it could easily threaten the market share of any rival it chooses to take on. For now, JD remains China-centric, although it is expanding into Thailand, Indonesia, and Vietnam. It has no plans at this time to take on Amazon or anyone else in the domestic U.S. market. Most of its shares are in public hands, though Chinese company Tencent, which runs the ubiquitous “WeChat” Chinese messaging platform, owns 20 percent, and Walmart owns 10 percent.

JD currently has U.S. locations in Los Angeles, New York,
and Silicon Valley. The first two facilities support export
business to China, while the Silicon Valley facility focuses
on research and development activities. Later this year, it
may expand its U.S. presence—probably in Los Angeles—
to handle U.S. imports from the Middle Kingdom. It does
operate a U.S. e-commerce site, but the site is relatively
primitive and would need to be exponentially upgraded
should JD decide to build a major U.S. presence.

WAVE OF THE FUTURE?

Like Amazon in the U.S., JD works with Chinese compa-
nies to market their products, manage their inventory, and
arrange for deliveries. But that’s where the similarities end.

JD has 335 fulfillment centers across China, compared with Amazon’s 121 or so in the U.S. JD makes at least 95 percent of its own deliveries across China, while Amazon controls about 5 to 7 percent of its deliveries in the U.S.; the vast majority of Amazon’s deliveries are still made by third parties. JD has opened a completely automated fulfillment center in Shanghai (as in no human labor on the floor), something Amazon or any other company in the U.S. has yet to do.

While Amazon and others are experimenting with the
use of commercial drones, JD has them in the air each day.
Smaller drones transport packages to remote rural villages,

China’s JD.com has a larger

fulfillment footprint than Amazon, runs a broader delivery network than UPS, and is forcing Alibaba to rethink its model. It may be coming your way—but not yet.