JD’s customer value proposition is captured in its company logo (above), which contains 4 characters: more, fast, good, save. In short, JD\u00a0seeks to provide a more enjoyable online shopping experience by providing a broad array of high quality goods at attractive prices that can be easily and speedily found, purchased, and delivered to the user. In order to best deliver this value proposition, JD owns each step of the purchase experience. In addition to owning its website and smartphone app, JD purchases and takes inventory of its products to ensure quality, builds and owns its nationwide distribution and last-mile delivery infrastructure to ensure speedy and accurate logistics, controls its back-end technology, offers its own online and in-person payment system to increase convenience and lower adoption barriers, and manages its own fully-integrated customer service organization staffed by its own employees to ensure customer satisfaction.<\/p>\n
All this can be understood in contrast to Alibaba, owner of China\u2019s leading e-commerce platforms, which owns websites and apps that facilitate transactions between third-party buyers and sellers of products never owned by Alibaba and delivers orders using third-party fulfillment and delivery companies. JD\u2019s vertical-integration\u00a0allows it to ensure a more consistent level of quality more easily, which is particularly important in an economy like China\u2019s in which counterfeit and low-quality products and services can be a concern\u00a0and in an industry like retail in which customer experience is a\u00a0key driver of customer loyalty. Successful execution of JD\u2019s strategy should drive scale economies that form significant competitive advantages.<\/p>\n
Operating Model<\/strong><\/p>\n JD\u2019s operating model is aligned with its business model, as owning more steps in the value delivery process allows JD to provide a superior customer experience.<\/p>\n Its website and app<\/u><\/strong> are colorful, full of content, and easy to use, serving 132 million annual active customer accounts and fulfilling 330 million orders in the last quarter. From its roots in electronics and appliances, JD has expanded into general merchandise, apparel, food, media, and groceries. To help\u00a0consumers make good purchase decisions, JD provides the ability to give product reviews (>518M at 12\/31\/2014) and provides product recommendations based on past purchase and viewing history. To drive customer traffic, it also has a partnership with Tencent, China\u2019s communications and social media leader,\u00a0which advertises JD through its dominant Weixin and Mobile QQ\u00a0messaging\u00a0platforms. In addition, JD also owns B2C and C2C\u00a0marketplaces akin to Alibaba’s through which third-party sellers can distribute through JD\u2019s logistics infrastructure.<\/p>\n To provide high-quality and accurate logistics, JD owns its proprietary\u00a0<\/span>fulfillment and delivery infrastructure<\/u><\/strong>.\u00a0JD operates 196 warehouses in 46 cities and 4,760 delivery and pickup stations across 2,266 counties and districts as of 9\/30\/2015 and continues to expand this infrastructure at a rapid pace. Its “211 program” allows for same-day and next-day delivery for no extra charge such that over 85% of direct sales orders in the third quarter were delivered on the same day as – or the day after – they were placed. JD will even deliver within 3 hours in certain major cities for an extra charge.<\/p>\n In order to facilitate this complex infrastructure, JD controls its back-end technology<\/strong><\/span> which includes systems for suppliers, customer relationship management, supply chain, warehouse management, delivery management, transaction processing, and business intelligence, backed by 156 Chinese computer software copyrights and 30 Chinese patents (with hundreds more pending).<\/p>\n As part of adapting to local consumer habits, JD built out the capability to accept cash or credit card on delivery in addition to payments through the website and app<\/span><\/strong>, a service that is used approximately 1\/3 of the time.<\/p>\n In the video below,\u00a0JD’s VP of Retail Shi Tao (formerly of Amazon China) shares\u00a0more color.<\/p>\n![\"JD](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/JD-Website1.png\")
<\/a>![\"JD](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/JD-App.png\")
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