Driven by an excellent performance from its logistics operation and continued focus on customers, JD.com recently reported strong third-quarter earnings for the period ending September 30.
Net revenue hit RMB174.2 billion (US$25.7 billion), a 29.2 percent increase from the same period in 2019. Net service revenue increased by 42.7 percent over a year ago to RMB22.8 billion (US$3.4 billion) and net revenue from the sales of general merchandise climbed 34.8 percent to RMB58.1 billion (US$8.6 billion).
The e-commerce site reported 446.1 million active customers.
Business Principles Strengthen Relationships with Partners and Employees
Richard Liu, company founder, and CEO has put forward the “35-Cents Theory.” For each $1 in profit, 30 cents is reserved for its business partners, 35 cents for its employees and 35 cents goes towards JD.com’s future growth.
During the COVID-19 pandemic, the company put in place several measures designed to help businesses on the JD.com platform, in keeping with the company’s “win-win” philosophy with upstream and downstream partners.
During the 2020 Single’s Day grand promotion, 15,532 brands increased sales by more than 300 percent. The transaction growth rate doubled compared to 2019 for third-party merchants.
JD.com’s employee base exceeded 320,000 as of September 30 (284,000 when excluding part-time staff and interns). In the first three quarters of the year, the company hired 60,000 new employees and estimated it had generated 18 million job opportunities throughout its business ecosystem.
Logistics Focus a Key Driver
Company leaders pointed to several factors driving growth. Excellent performance by JD Logistics, the company’s logistics arm, was a key driver. Recent advancements have driven growth in JD Logistics, which as of September 30 had more than 800 warehouses in operation covering an aggregate gross floor area of about 20 million square meters (21.5 million square feet).
In 2017, JD Logistics opened its service to third parties, providing more customer-centric and supply chain solutions for customers and partners alike. The company now manages millions of SKUs and has reduced its turnover days to 34.3.
Smart technology has driven many of these advances. For example, in September, JD Logistics and Nestlé, the world’s leading food and beverage company, opened a smart storage and distribution center in Tianjin. JD Logistics supply chain expertise means the new facility can identify products and loads planned for delivery to Nestlé customers, identify geographic locations, and use artificial intelligence to manage loads for different provinces.
In October, the company hosted the fifth Global Smart Supply Chain Summit. There, the company launched JDL Technology, whose purpose is to deliver smart supply chain products and services using the Internet of Things, data science and robotics.
Emphasizing the Consumer Experience
Delivering to consumers with experiences that delight and amaze continues to be a primary focus throughout the company. The 441.6 million active customers represents a 32 percent increase from 2019, the company’s highest annual growth rate in three years. The company also reported 24 million net additional customers, with 8 percent of those customers coming from lower-tier c markets.
The company’s paid membership program, JD PLUS, reached 20 million in October. JD PLUS, which was China’s first paid e-commerce membership program, offers participants an app, 24-hour customer service, free-shipping coupons, rebates and a partnership with more than 600 brands. The program provides uses with special privileges in travel, hotels, movie tickets, education, dining and entertainment.
In the third quarter, several notable luxury and fashion brands launched stores on JD.com, including 3.1 Phillip Lim, Ahkah, Ami Paris, Balmain, Golden Goose Deluxe, Juun J, Manu Atelier, Rimowa, Seletti, Yohji Yamamoto and Zegna.
The company also announced a partnership with Trip.com, China’s largest online travel agency, to use JD.com’s user and traffic resources to improve marketing and operations. JD.com gains access to Trip.com‘s service supply chain of accommodation reservations, ticketing and tour packages.
Fresh Produce Fuels Growth
Fresh produce continues to be an important component of the JD.com business, with five business models: B2B, B2C, SEVEN FRESH (offline supermarkets), social e-commerce group sales and the forward warehouse (putting the most frequently purchased inventory closest to consumers). During Single’s, new SEVEN FRESH markets opened in Beijing and Wuhan.
Company officials noted that fresh produce continues to be a top priority, despite challenges due to low ticket size and high loss ratios in production and fulfillment.
Other notable highlights from the ratings report were:
- The company won the Sustainable Retailing Initiative of the Year award for its Green Stream Initiative, which promotes environmentally friendly practices such as using recyclable parcels, paperless systems and the use of new-energy vehicles.
- The launch of the JD Family Doctor brand, providing one-stop services to provide families with family doctor teams, unlimited specialist consultations, referrals, and 24/7 health management services.
- JD Cloud & AI was named the official technology service provider for the 2020 China International Fair for Trade in Services.