Marbridge Consulting – China Telecom, Mobile and Internet Research

Marbridge Consulting – China Telecom, Mobile and Internet Research

JD.com, 6/19/20

Chinese B2C e-commerce platform operator and retail infrastructure service provider JD.com (Nasdaq: JD) announced today that transaction volume on the platform during the company’s 618 Grand Promotion anniversary sale (held June 1-18) exceeded RMB 269.2 bln, up 33.6% YoY.

As the first major shopping event in the midst of the global COVID-19 pandemic, JD’s 618 performance has demonstrated the resilience of the Chinese economy and the opportunity that remains for international brands, even under uncertainty.

COVID-19

From the beginning of the epidemic, JD has played a key role in ensuring livelihoods and supporting the economy. COVID-19 has turned aspects of the food supply chain on their heads, especially in terms of grocery shopping in brick and mortar stores. From January 20-28, the company delivered 220 mln products including 290,000 tons of rice, grains, meat and vegetables to its consumers. Many consumers, including those who were more accustomed to shopping for their groceries offline, turned to JD during COVID-19 and have continued to do so. From June 1-18, fresh food sold online and offline increased 100% YoY. Sales of over 1,000 fresh produce brands increased 100% YoY. Sales of vegetables increased 160% and meat increased 174%, among which sales of pork increased 229%, chicken increased 115%, and mutton increased 202%, all YoY.

The epidemic also helped drive people to embrace Internet hospital. From late January when it first launched free online medical consultation to June 18, JD has received nearly 16 mln medical consultations. Public awareness of JD Health and its services has greatly increased and the general public has started to pay more attention to health management, which is a key focus of JD Health’s future development. With the outbreak of COVID-19, disease prevention, health care, online consultation and purchase of drugs as well as medical equipment are top of mind for consumers. Professional medical service and health management services that can guarantee quality are welcomed enthusiastically by consumers.

From June 1-18, the number of medical and healthcare products sold increased 173% YoY, while online medical consultation volume increased 404% YoY. Sales of drugs for chronic diseases sold from JD Pharmacy increased by 270% YoY and cross-border drug sales increased by 20 times YoY. Sales of omnichannel medicine delivery service by JD Pharmacy was 492 times YoY. Sales of imported health products increased by more than 100% YoY. The number of JD Health Traditional Chinese Medicine (TCM) inquiries increased by 157% compared with the previous month. Sales of health services have also increased dramatically on JD Health, including a 269% YoY increase in sales of the health check-up category, a 35x increase in sales of the maternity service category and a 45.8x increase in sales of the vaccine category.

International brands and JD’s increasing global reach

The sudden outbreak of the epidemic at the beginning of the year has put significant pressure on brands around the world. JD Retail CEO XU Lei shared in an interview with Bloomberg that this 618, no matter if you look at domestic or imported brands, is an important sales opportunity, and, as a result, compared with prior years, participation by brands this year has been even more enthusiastic. During this 618, transaction volume of 187 brands, international and domestic, each surpassed RMB 100 mln.

The most popular imported categories across the platform include electric shavers, luxury products, building blocks for children, music and entertainment and coffee machines. Best-selling brands include Apple, Sony, Siemens, Philips and Panasonic. The proportion of imported product purchases made by female users is 21.2% higher than that of the platform overall, while the average age of buyers of imported products is three years lower than the platform average. Top countries for imported brands include the U.S., Japan, Germany, the Netherlands and Italy.

On June 18, sales of JD Worldwide, JD’s platform for imported products, increased over 110% YoY. Sales of imported beauty products and pet products both increased over 400% YoY. Best-selling brands include Estee Lauder, A2, Aptamil, Swisse, Nintendo. During this 618, 82% of merchants used JD’s cross-border warehouse and delivery service. On June 18, 80% of orders of JD Worldwide were sent out on the same day they were placed.

During the ongoing pandemic globally, overseas consumers have also turned to JD’s outbound e-commerce platform for supply of daily necessities. JD Global Sales, which runs the outbound business, witnessed 271% growth in transaction volume during the 18-day campaign. The top five best-selling markets are Hong Kong, Taipei, the United States, Japan, and Singapore. The five most popular products are computers, smartphones, books, electronics products and small home appliances. In term of user growth, the total user base in Hong Kong jumped 260%.

E-commerce Livestreaming

E-commerce livestreaming, which became a phenomenon early on in the COVID-19 outbreak, served as a key new focus area for JD during this 618. During the sales promotion, JD hosted over 300,000 livestreaming sessions. Sales of 31 brands’ livestreaming rooms surpassed RMB 100 mln and sales of 167 brands’ livestreaming rooms surpassed RMB 10 mln. JD’s partnership with popular short video platform Kuaishou announced just before the Grand Promotion, officially kicked off on June 16. On the day, sales generated from livestreams on the Kuaishou platform reached RMB 1.4 bln. Over 25 mln users visited Chinese actress Zhang Yuqi’s and Kuaishou KOL Xinba’s livestreaming rooms. The Kuaishou partnership is a good example of how JD can leverage its supply chain capabilities to provide partners with top-notch products and services.

Lower-tier cities

Lower-tier cities remain a key source of new user growth. During this 618, over 71% of new users came from lower tier cities. Top categories for a first order bought by lower-tier consumers include tissue boxes, t-shirts, cookies and cakes, recreational shoes and milk and dairy products. Top provinces with comparatively more new users in lower-tier markets include Henan, Sichuan, Yunnan, Anhui and Shandong.

Based on data during 618, lower-tier city consumers on JD trend younger, with the average age being 32.8 years old, and roughly 55% are female. These consumers also make up 61.5% of the group that pays attention to big promotions and roughly 82% of the group that pays attention to customer reviews.

High quality consumption in lower-tier markets doesn’t seem to be going away any time soon. During 618, the number of ice cream makers sold increased a whopping 2,500% YoY. Transaction volume of renovation and design-related products increased 716% YoY. The number of milk frothers sold increased nearly 700% YoY, and the number of gaming tables and air fryers sold both increased 376% YoY. According to LU Fei, Senior Data Analyst at JD’s Big Data Research Institute, water is one of the products where consumers in lower-tier cities prefer more premium brands as compared with their first- and second-tier city counterparts. For example, lower-tier cities’ consumers have a preference for Evian over more common water brands.

At the same time, in part thanks to initiatives by JD, local agricultural products from across China are reaching China’s largest and most developed cities. The top 5 cities buying the most agricultural products this 618 are Beijing, Shanghai, Guangzhou, Suzhou and Shenzhen.

New products

A few years ago, JD was an early mover in launching its consumer-to-manufacturer (C2M) initiative. The goal was to help brands and manufacturers better understand consumer preferences and use consumer insights to drive product creation. It turns out that only 12% of consumers know what C2M is, but it doesn’t matter. Separately, nearly 90% of consumers are satisfied or highly satisfied with C2M products, indicating the value of this initiative not just for manufacturers and consumers but all beneficiaries in the supply chain. This year’s 618 data also reflects this. The average daily sales of a smart TV, a C2M product by JD and Huawei, grew over five times during the 618 campaign, compared with the number during its launch period. A C2M refrigerator between JD and Midea, saw an almost 4-time growth in average daily sales, compared with May. A C2M washing machine between JD and Little Swan saw its average daily sales up over three times.

Logistics

On June 8, JD Logistics announced the upgrade of its lower-tier markets program to provide 24-hour delivery service in over a thousand counties and tens of thousands of townships in China, in order to provide a superior experience for local customers. JD Logistics will either expand or newly construct 13 local warehouses and transfer centers. The new infrastructure will focus on second-to-fifth tier cities. In addition, it will operate more Asia No. 1 highly automated logistics parks, which traditionally have focused mainly on first- and second-tier cities, in lower-tier cities. After putting three additional Asia No. 1 logistics parks into operation just before 618, JD now has a total of 28 of these parks.

JD’s external logistics business saw increasing demand during 618, a testament to the success of the company’s strategy to open up its resources to partners in and outside of the JD ecosystem. Revenue increased 80% YoY. JD’s parcel delivery service, bulky supply chain, service+ and cold chain warehouse outbound inventory increased 311%, 230%, 309% and 110% respectively.

On June 16, JD announced the deployment of a fully-integrated Beidou Smart and Flexible Production Logistics Park in Tianjin’s Wuqing District, which is the first of its kind in Asia, and all R&D is developed in-house by JD. The warehouse is most suitable for fulfilling and managing orders spanning multiple categories at a large scale.

This June 18, in its continuous focus on sustainable development, JD built the first demonstrative park for trash sorting in JD’s Asia No.1 logistics park in Beijing. In total, during the 618 Grand Promotion, JD Logistics has prevented 42,000 tons of delivery waste via recyclable packaging program, using slimmer tape, and going paperless.

Omnichannel integration

The integration of online and offline has deepened during this year’s 618 promotion. Based on JD’s data, offline stores achieved record high sales. 12,000 home appliance stores simultaneously did livestreaming on JD, achieving 240% YoY growth in total transaction volume. Transaction volume based on livestreaming grew by 230%, compared with the same period of last month. More than 250 computer and digital product stores joined the 618 campaign. JD’s offline mobile stores saw over 130% YoY growth in transaction volume, while mega experience store JD E-Space saw transaction volume grow by 200%, compared with the same period of last month. The transaction volume of JD’s Five Star Appliance Stores grew ten times, compared with the same period of last year.

JD’s Omnichannel Fulfillment program is also a bright spot of this year’s 618. During this 618, sales through the program grew 30 times compared with the same period April, and more customers are now able to enjoy the one-hour delivery service. JD’s Life Services business which offers consumers the chance to buy many services online and enjoy them offline, also was in demand during the period. 80% of online tire buyers chose in-store installment service. JD also saw nine times growth in sales of travel and daily life services. Orders for door-to-door laundry service grew 150 times, compared with the same period of last year.

Technology

As JD is undergoing its transformation to a supply-chain based technology and services provider, opening up technology to parties beyond JD remains a focus. During this 618, JD’s technology ensured comprehensive, steady and secure support to guarantee another record-breaking sales promotion. The number of inquiries for JD’s NeuHub open AI platform surpassed 70 bln. Smart customer service, smart content review, AI writing robot and AI calling system have been used comprehensively during 618. 90% of customer service inquiries were handled by JD’s AI-powered smart customer service, and AI customer service responded over 380 mln times.

Keywords:
online healthcare
mobile healthcare
m-commerce
wireless
marketing
JD Health
video shopping
Lu Fei
Xu Lei
e-commerce
Internet
B2C
logistics
fresh food
GMV
JD.com
JD
JD Pharmacy
JD Logistics
JD Worldwide
JD E-Space

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