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Case Details |
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Case Code: LDEN119
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| Case Length: 18 Pages |
| Period: 2004-2016 |
| Pub Date: 2017 |
| Teaching Note: Available |
| Price: Rs.500 |
| Organization : JD.com. |
Industry : Online Retail
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| Countries : China |
| Themes: - |
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Liu Qiangdong – Making of the Chinese Online Retail Tycoon |
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China had the record of substandard third-party logistics services. The services way back in the early 2000s were not adequate to meet the needs of e-commerce companies. They fell short of the expected standards with reference to aspects like shipping cost, efficiency, and service standards. The service providers were not equipped to offer the shipping service throughout the nation. The long distance shipping capacity of the third-party logistics companies was limited and this led to challenges like frequent overstocking, lack of standardized services, loss of packages, and pilferage. The result was a rapid rise in the number of customer complaints.
JD.com was not an exception to the poor delivery service. As the online initiative was new, the delivery services were way below the expected standards. There was a surge in customer complaints. Orders arrived late or were delivered in a damaged condition. Repeated complaints over the timelines and the quality of delivery posed a major challenge to Liu.
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| Technology was Liu’s strong bet. Liu firmly believed that the future of competition revolved around existing and ‘yet-to-emerge’ technologies. JD.com’s technology laboratory, X Labs, was the company’s strategic unit that was dedicated to developing and executing cutting edge technology in logistics and delivery. XLabs had more than 100 patents to its credit and was well equipped to experiment with emerging technologies like Virtual Reality, Artificial Intelligence, Cloud Computing etc. In 2014, JD.com launched operations for the initial phase of its automated warehouse, located in Shanghai, with a total floor space of 100,000 sq. mt. The warehouse leveraged highly advanced and extremely-automated technology. The technology could organize up to 16,000 packages in an hour with an accuracy of 99.99 per cent .By 2015, with its seven indigenous logistics centers, 209 large-scale warehouses across China, and a massive customer base with 1.26 billion orders, JD.com was all equipped to take on the competition and grab the lion’s share of online shoppers. ..... |
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| Liu had learned his lesson from his failure in the restaurant business, and he used this in building JD.com. Liu gave the utmost importance to organizational values. JD.com’s core value, as postulated by Liu, was to instill a customer-centric attitude in each and every personnel at JD.com, including the suppliers and sellers.(Refer to Table I for JD.com’s Vison, Mission and Values)... |
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| Liu, who arrived at the office every day at 8:30 a.m., once came across a report of an unhappy customer at an executive meeting in late 2015. That customer had ordered ice cream on JD.com’s online portal and, to his dismay, it had arrived in a melted condition . The incident was unacceptable to Liu as it violated JD.com’s core values. The rest of the meeting revolved around the ice-cream issue, going into all the details. Finally, Liu declared that there would be no further expansion of the company's new grocery- product line, until the problem was fixed.... |
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| In just 12 months between 2015 and 2016, the number of JD.com’s active customer accounts surged by 65%.This gave JD.com a major impetus to catch up with its arch-rival, Alibaba. In the year 2015-16, gross sales over JD's retail platforms in China surged by 84% as compared to the previous year’s $68.9 billion, while the increase at Alibaba was only by 27%. Liu boosted JD.com’s growth through strategic alliances with brands and other online marketplaces (Refer to Exhibit III for JD.com’s Strategic Alliances). He was on the lookout for global virtual business platforms that could offer the much needed leverage in taking JD.com to global consumers. In April 2015, JD.com announced a partnership with eBay , as it had brought with it a large range of guaranteed authentic products and trusted merchants. .. |
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| Liu had been moving ahead swiftly, increasing the global reach of JD.com, as the competition from Alibaba was fierce in China. In August 2013, JD.com had expanded its frontiers to Singapore, in partnership with the Singaporean e-commerce platform iKnow .The strong demand in Singapore for Chinese products convinced Liu that the country was a promising business destination for JD.com... |
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| Liu’s vision of logistics was not confined to technological advancements. He was also conscious about the need to be environmentally responsible. On April 21, 2016, JD.com’s logistics was recognized as the Benchmarking Enterprise for China Green Warehousing and Distribution at the International Green Warehousing and Distribution Conference. .. |
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| Unmanned Logistics Systems still posed several challenges to JD.com. One of the challenges was to maintain accuracy in the crunching of massive amounts of data. The critical algorithms that drove artificial intelligence like the commodity layout had their share of challenges. Accuracy in data mining analysis was essential in ensuring efficiency, and a zero error on each job. Each commodity distribution generated the data related to the volume of commodity chosen, storage area, configuration area, picking area, etc. Any deviation had the risk of sending the wrong order, leading to a decline in the operational efficiency. .. |
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Exhibit I: JD.com – Fulfillment Process
Exhibit II: JD.COM – Core Philosophy
Exhibit III: JD.com’s Strategic Alliances
Exhibit IV: JD.com Selected Financial Data
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