Consultant Insight: JD.com’s plan for JD Logistics

Beijing-based e-commerce and logistics provider JD.com raised over $3 billion in a spinoff of its logistics group this week. [caption id="attachment_69752" align="alignright" width="298"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo World columnist[/caption] In February, when the company first announced the spinoff, it noted that it would continue to indirectly hold more than 50% of JD Logistics, which would remain a subsidiary of JD.com. JD Logistics originally focused only on JD Group’s logistics and last-mile delivery needs. However, since 2017, JD Logistics has also served external customers in a relationship similar to Target’s Shipt subsidiary, which provides last-mile delivery services on behalf of Target and other retailers. Increased competition with such companies as Alibaba’s Cainiao logistics subsidiary and SF Express, as well as e-commerce growth, both domestically and internationally, are driving the JD Logistics spinoff as a means to upgrade JD.com’s network and develop technologies for use in its supply chain and logistics services. During the company’s first quarter, JD Logistics’ revenue increased 64% compared to the first quarter of 2020. The logistics group’s revenue has experienced a 48% two-year compound annual growth rate. “Similar to the largest e-commerce platform in the U.S. and other industry peers, the logistics capacity needs to be expanded periodically to support the growth of transaction volume,” said Sandy Xu, JD.com’s chief financial officer, during the company’s first-quarter earnings call on May 19. “Our JD Logistics is not only building infrastructure to support our first-party businesses, but also expanding its service capabilities for external customers, where the external revenues actually grew much faster compared to internal revenue.” JD Logistics operates over 1,000 warehouses with an aggregate gross floor area of more than 21 million square meters, according to its latest earnings report. The logistics provider plans to pay close attention to omnichannel trends and will work with customers to provide these capabilities through its warehousing solutions, technology and last-mile capabilities. “In terms of our omnichannel businesses, the leveraging of our strong capacities in the supply chain, our digitalization capacities, and our integrated marketing capacities, we will put all of these capacities … to support our merchants and partners, to help them to adapt to the changing market environments and to help them to achieve all kinds of shopping scenarios to satisfy the needs of the customers, anytime and anywhere,” Xu said. JD Logistics will also utilize air cargo to help speed up last-mile deliveries. According to Cargo Facts , JD.com chartered at least three flights within China last year. “The use of an all-cargo aircraft is more reliable and flexible than the common alternative of bellyhold capacity on civil passenger airlines because flight times can be adjusted according to industry demand,” JD.com said in a statement. Competition According to market research firm eMarketer , $5 trillion in global e-commerce sales are expected this year. To keep up, Alibaba’s Cainiao logistics subsidiary and SF Express are expanding their e-commerce and omnichannel capabilities globally, along with other logistics providers, integrators and freight forwarders. UAE-based express and logistics provider Aramex, for example, reported revenue for its international express group, which includes its cross-border e-commerce service Shop & Ship, increased 35% during the first quarter. The growth was attributed to cross-border activities in the U.S., U.K., Hong Kong and other Asia-Pacific markets. Total international and domestic express volume increased 26% year over year during the quarter. As more businesses incorporate omnichannel solutions, a lack of logistics providers will not be an issue; instead, the issue will be identifying the right service provider — and at the right price.

Consultant Insight: JD.com’s plan for JD Logistics

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