Interview with Mr Wang Zhenhui, Chief Executive Officer, JD Logistics
Despite the thriving landscape however, the Chinese market stays predominantly in the hands of its local companies. Even American heavyweight Amazon has a less than one per cent market share in China. In fact, there is a new kid on the block that not only keeps out challenges from overseas, but is also quickly threatening the position of one of the world’s largest e-commerce companies that generates more gross merchandise volume than Amazon and eBay combined.
In this special feature, Supply Chain Asia had a chat with Mr Wang Zhenhui, CEO of JD Logistics, to discuss the rise of JD.com, the official formation of its logistics unit, as well as the exciting local and global e-commerce landscape.
Analysing the different big league boys
Everyone knows Amazon and Tmall.com by Alibaba. But what about JD.com? It may not be quite a global household name yet, but it is quickly getting there. The statistics below speak for itself:
The name Alibaba easily comes to mind once someone mentions e-commerce in China. However, Alibaba’s revenue only comes out to less than US$23bn compared to JD.com’s US$37.5bn. With Amazon’s revenue in China only equating to US$3.6bn, when it comes to revenue and market share, JD.com is the obvious winner. In 2016, JD.com entered the Fortune 500 list, making it the first Chinese internet company to make the list. As the list is based on revenues achieved, China’s other top internet companies, such as Alibaba, Tencent, and Baidu, missed the mark. Obviously, this is quite a feat for a young company that was relatively unknown until just a couple of years ago.
“We spent the first 10 years building our own nationwide fulfilment and logistics network that today covers 98 per cent of the Chinese population. The reason why we had to create everything ourselves was because 10 years ago, the industry did not have the robust logistics solutions available that could support JD.com’s rapid business growth at that time. At a time when Chinese consumers do not trust buying online due to high possibility of counterfeits and third-party logistics providers taking a long time to deliver parcels, we took the challenge into our own hands and invested in our own logistics network from scratch in order to have better control over fulfilment and timely deliveries to our customers,” explains Mr Wang, who oversees JD.com’s comprehensive logistics solutions, including warehousing, transportation, delivery, and after-sales services, as well as the smart logistics and cross-border logistics.
Alibaba and JD.com operate two very different business models. Alibaba operates similarly to eBay by offering several e-commerce platforms, including Alibaba.com, Tmall.com, and Taobao.com, that third-party consumers and businesses can use to buy and sell products. Thus, Alibaba does not own any warehouse space, unlike JD.com that builds and owns its own warehouses.
JD.com, however, has a similar business model to Amazon by selling carefully vetted merchandise directly to consumers from warehouses across China and from dozens of countries around the world. JD.com’s strong nationwide logistics network means that it can offer same- or next-day delivery as standard. This level of service makes it difficult for even the likes of Amazon to effectively penetrate the market at this stage.
The importance of logistics
JD.com has recently created a new business group, JD Logistics, further cementing the importance of its delivery and warehouse infrastructure. Establishing this business unit also allows the company to speed up the development of its infrastructure, and leverage its advanced technology and logistics expertise to explore business opportunities. JD Logistics will offer integrated supply chain solutions, like warehousing, transportation, delivery and after-sale services, to e-commerce sellers and other companies.
“While we may choose to continue to rely on our partners for air freight related deliveries, we will continue to develop our last-mile capability in China. We are dedicated to ensuring that all our customers receive their purchases within the timeframe they expect,” says the CEO of JD Logistics, who first joined JD.com in April 2010 as General Manager of the company’s North China region.
Talent recruitment and development are a strong component for JD.com, with the company setting up an office in Silicon Valley to recruit local talents. With 122,405 full-time employees (including warehouse workers, deliverymen and customer service staff), the company is dedicated to maintaining its manpower strength to ensure smooth daily operations of its end-to-end logistics network.
Unrivalled delivery network
With Amazon’s Prime Air still yet to get off the ground due to federal regulations on commercial drone use, JD.com already has a fleet of drones carrying out thousands of deliveries in the outskirts of Beijing and other provinces. JD.com is also researching in heavy-load drones that can carry a payload weighing more than a ton.
But JD.com’s drones function differently from Amazon’s. Instead of delivering straight to each individual customer, JD.com’s drones fly along fixed routes from a major delivery station to special landing zones in the respective villages. From there, a local contractor (also known as village promoter) will pick up the goods from the drones and deliver the packages right to the customers’ doorsteps.
Drones are not the only factor putting JD.com ahead of its rivals. By building its own entire logistics network, including warehouses, technologies and its own fleet of delivery vehicles, the company is able to make speed another of its differentiating factor. JD.com’s focus on developing their own proprietary technologies further reaffirms the company’s aggressive investment in innovation.
“We already offer same-day delivery on most orders, where someone can buy an item in the morning and have it delivered by that same afternoon. We want to continue enhancing our technology and the efficiency of our logistics network, and building our sophisticated data-driven delivery approach, to continue enhancing this level of service,” explains Mr Wang, who, prior to joining the company, held senior executive roles at the Lenovo Group and Eternal Asia Supply Chain Company.
Mr Wang’s dedication to the supply and logistics industry shows that JD Logistics is in good hands. After all, only someone with enormous passion will keep coming back to the same industry.
“I used to golf, but now all my free time is dedicated to my two sons. I don’t need any other hobbies to be honest. I’m having fun at my job and enjoying my work, and that is really all I need,” says the 42-year-old father.