JD.com's grocery venture
JD.com, the Chinese e-commerce giant, wanted to make a splash in physical retail to complement its online platform.
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The backstory: JD.com, the Chinese e-commerce giant, wanted to make a splash in physical retail to complement its online platform, just like Alibaba's premium grocery store Freshippo did. So JD.com opened its first 7Fresh store in Beijing in 2018 and has been on a mission to expand its services and reach.
But JD.com isn't the only player in town. It's facing fierce competition from various platforms in the Chinese e-commerce scene. Alibaba, its main rival, Pinduoduo by PDD Holdings and Douyin (which is like China's TikTok), owned by ByteDance, are all vying for the top spot.
More recently: In March, Alibaba announced it would split into six different business units, which could bring about more initial public offerings (IPOs). Alibaba CEO Daniel Zhang has called it the "most significant governance overhaul" in the company's history. Meanwhile, JD.com was gearing up to spin off its property and industrial units and list them on the Hong Kong stock exchange, with each deal estimated to be worth US$1 billion. In April, Alibaba reportedly considered taking Freshippo public through an IPO in Hong Kong. Its market value is around US$242 billion.
Last week, JD.com came up with a plan to establish not one, not two, but seven enterprises, each worth 100 billion yuan (US$14 billion). This follows a recent change in leadership as Sandy Ran Xu takes charge as the new CEO, replacing Xu Lei, who decided to step down after just a year for personal reasons.
The development: JD.com is looking to open retail grocery stores by merging its 7Fresh supermarket unit with other businesses, like Pinpin, which is all about group buying. A spokesperson confirmed this news, emphasizing JD.com's aim to explore fresh and creative retail models, not just ordinary stores.
According to insiders, Yan Xiaobing, the whiz who used to oversee JD.com's international division, will take charge of this new venture and report directly to new CEO Xu. JD.com is also calling this venture an "Innovative Retail" operation. It will bring together 7Fresh supermarkets, the Pinpin group-buying platform and on-demand services. It's similar to what Alibaba Group did with its Freshippo unit, also known as Hema.
Key comments:
“Transactions have surpassed 10,000 a day even during the trial operating period,” said Richard Liu Qiangdong, the founder and chief executive of JD.com, on social media platform Wei Toutiao. “Based on JD’s smart logistics system, 7Fresh supermarket will know your demand better [the more frequently a shopper visits].”
"The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready," wrote Daniel Zhang, CEO of Alibaba, in an email to employees, according to Alibaba's own Alizila news site.
"Physical stores serve an indispensable role during the consumer journey and should be enhanced through data-driven technology and personalized services in the digital economy," said Daniel Zhang, Alibaba CEO, at a press conference in Hong Kong in November.
"As technology pushes the boundaries of what is possible, JD.com and Walmart's global supply chain excellence offers complementary platforms and a commitment to customers that provides us with an enormous opportunity to define the future of retail in China," said Carol Fung, President of JD Fast Moving Consumer Goods in 2017.
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