As online retailing in China loses steam, giant players are exploring opportunities in offline stores and rural areas. With new goals set for its xintonglu department, JD.com is going a step further in this phase trial for the new retail.
JD.com has made new moves to support its online-offline business integration. The Chinese retail giant, which just nailed over CNY 200 billion (USD 28.6 billion) GMV in its Singles’ Day sales jamboree, is trying to gain more clout in the new retail battlefield.
On December 16, Zheng Hongyan (郑宏彦), Vice President of JD.com and President of JD.com’s Xintonglu department (新通路事业部, an omnichannel retail business department), announced that the company would assemble 10,000 ‘six-in-one’ stores in 2020. The ‘six-in-one’ store is an upgraded convenience store that unifies six aspects to cater to multiple scenarios, including a store’s brand identification, store-level management, facilities and equipment, service standards, procurement and logistics. The new approach is the extension of JD xintonglu’s original goal -- to use the company’s accumulated online users, big data, logistics and technological capabilities to reshape traditional retail and create a better experience for consumers.
The strategy applied by JD.com is to respond to the different demands and pain points of brand merchants, distributors and retailers, adopting different cooperation strategies.
For brand merchants, JD xintonglu will build a precise and transparent digital distribution system (JD.com and WeChat), based on its online-offline resources, to boost their business in lower-tier cities and increase customer loyalty and save distribution costs.
Dealing with distributors is actually a sensitive matter. JD xintongllu is not set to replace or crowd them out but wants to cooperate with them to form an integrated logistics and distribution system (with JD Daojia and JD chain stores), creating a more efficient and value-saving model.
For retailers, the strategy is to build a platform (ZGB platform) and increase efficiency. On the one hand, it enables omnichannel supply for retailers; on the other hand, JD xintonglu itself is continually upgraded, from product suppliers to solution providers. Based on its strong supply chain, it can export services in branding, technology outsources, operation management, logistics and other value-added services.
However, the concept of JD xintonglu being promoted has faced obstacles from the very beginning. In December 2016, Richard Liu (刘强东), the CEO of JD.com, raised the goal for the department to cover 500,000 offline stores with JD’s ERP system and to open 1 million new convenience stores within five years. The rapid expansion plan posed challenges to the management team and has caused changes at the senior executive level.
Moreover, as the new stores grow in numbers, management and quality control issues will arise. Especially for those brick-and-mortar stores, it’s tough to guarantee that the source of goods is authentic and safe. In the end, this will harm the brand of JD’s offline chains.