JD.com boosts offline reach and beauty sector presence with an eye on overtaking Alibaba
JD.com, the second-largest e-commerce company in China, is upping its game in the consumer market. Offline, it is opening a large omnichannel physical store, and online, it is focusing on shortening the last mile time with same-day delivery. The company is also focusing on the beauty field, including a partnership with Sephora in logistics and omnichannel infrastructure, and active investment in the cosmetics specialty store, THE COLORIST.
Almost cashless 42,000-square-meter “JD MALL”
JD.com opened its first “JD MALL” store in Xi’an, Shaanxi Province on September 30, 2021. The five-story store offers more than 200,000 products in a variety of genres, from home appliances, digital devices, smartphones, furniture, and interior design to cosmetics, toys, smart health, and automotive products.
For a fully immersive experience, JD MALL is equipped with VR facilities, virtual distribution rooms, smart robots, and other technological devices. In addition to 11 themed experience zones such as beauty salons and e-sports, there are 29 product interactive (trial) experience areas where visitors can try out hair irons, beauty equipment, and cosmetics.
Despite the store’s sprawling sales floor area of 42,000 square meters, there are only two cash registers. The mini-application for Tencent’s WeChat messaging app allows customers to read the QR codes attached to the products and pay on the spot. All products are managed with electronic price tags, and prices are automatically changed in conjunction with EC prices to ensure consistency between store and EC sales prices.
The store also offers home delivery of purchased items. Regular items will be delivered within two hours if they are within 5 kilometers of the store, and items that require installation work will be delivered within 24 hours. According to reports, the total value of transactions during the National Day holiday week from the opening to October 7 exceeded US$23 million.
JD.com has already opened JD E-Space in Chongqing in 2019, an experiential store specializing in electronics. JD MALL is positioned as an upgraded version of JD E-Space, aiming to expand its genre beyond home appliances.
JD.com Group Company Partners with Sephora
In addition to real stores, JD.com is focusing on the last mile in logistics. In August 2021, the company announced a partnership between JD Daojia, its own group delivery service, and Sephora, a cosmetics specialty store under the LVMH umbrella. First of all, 70 Sephora stores in Shanghai, Beijing and other first- and second-line cities have launched on the JD Daojia app, and a system has been established to deliver products to users within one hour from each store. The company plans to have all stores open by the end of this year.
JD Daojia will also utilize the resources of Jingdong Cosmetics, a division of JD.com’s EC platform, Jingdong Mall, to help Sephora with product management, digital marketing, targeted user operations, order processing optimization, and other aspects of integrated store and EC management. To top things off, the company also provides OMO (Online Merges Offline) infrastructure.
JD Daojia focuses on the beauty sector, and has partnerships with Watsons, THE COLORIST, an emerging Chinese cosmetics store, and many other brands such as Perfect Diary, with over 3,400 beauty stores. During “618,” the second-largest online sale event after Double Eleven, sales of beauty products at JD Daoji more than doubled from the previous year.
Speedy delivery through DADA Group Tie-up
In delivery services, JD.com announced a new service, “One Hour Purchase,” on October 12, one month before Double Eleven 2021. The idea is to deliver some products within one hour only within 3 to 5 kilometers of a store opening in Jingdong Centre. According to the company, more than 100,000 stores are covered by the service.
JD.com’s goal is to create an “on-demand retail” environment where consumers can get products as soon as they want them, with the actual delivery being handled by the DADA Group, a leading home delivery service that operates the Dada Now instant delivery platform. It uses so-called gig workers like Uber Eats as delivery personnel, a business model that is also being used by JD Daoji.
JD Daoji is currently run jointly by the DADA Group and JD.com. JD Daoji was launched in 2014 by JD.com, which merged with the DADA Group in 2016. The operating company, Shanghai Jingdong Jiaoyu Heng Electronic Commerce Information Technology, is a wholly-owned subsidiary of a DADA Group company.
According to DADA Group’s SEC filings, JD.com’s shareholding was diluted to 48% when DADA was listed on the NASDAQ market in June 2020. However, JD.com’s shareholding increased to 51% after it subscribed to a new share issue for US$800 million in March 2021.
Besides the collaboration with DADA Group, JD.com has been focusing on logistics to compete with the leading Alibaba Group, developing its own logistics network since 2007 and establishing JDL in 2017. The company has 1,200 logistics warehouses in China, covering a total area of over 23 million square meters. The large logistics warehouses are fully automated and also use piece-picking robots from Mujin, a Japanese startup that develops intelligent robot controllers.
JDL was listed on the Hong Kong Stock Exchange in May 2021 and has a current market capitalization of US$22.8 billion. Alibaba also has a logistics company, CAINIAO, under its umbrella, but it is not listed on the stock exchange, and JDL boasts higher sales figures.
Investment in THE COLORIST
KK Group, which operates general merchandise stores such as KK House and THE COLORIST, raised US$300 million in July 2021. The investment was led by JD.com, whose stores are popular among “90-hou” (people born after 1990), and especially THE COLORIST, which sells a shopping experience. This investment shows JD.com’s emphasis on the beauty sector and offline.
Alibaba Group, the leader in the industry, is also developing real stores, such as the acquisition of Yintai Department Store, but JD.com’s investment in offline is more targeted. This is because JD.com focuses not only on acquiring customer data but also on UX (customer experience). The company’s insistence on shortening delivery time is one of the factors that improve UX.
The Chinese government’s tightening of regulations on tech companies has caused stock prices of major tech companies to slide across the board, with Alibaba Group falling nearly 50% in the past year. On the other hand, JD.com’s stock price is virtually unchanged from a year ago, and investors’ expectations are still high. How far will JD.com catch up with Alibaba? The results of the Double Eleven retail sales in 2021 will tell.
Text: Ching Li Tor
Original text (Japanese): Team Roboteer
