JD Logistics launches domestic rail freight pilot program

Yesterday we reported that JD.com, Inc. was selling a 19.6% share in its subsidiary JD Logistics, in a deal valued at US $2.5 billion. You can read about that here. In the post, we questioned if the new capital would enable JD to follow Amazon’s lead and build its own air network. Although a crystal ball has yet to surface, and we are still unable to answer that question with any degree of certainty, JD Logistics has confirmed to Cargo Facts a new type of collaboration with a competing mode of transportation. Together with the China Railway Corporation, JD is piloting a same-day, door-to-door white glove delivery service for high-end goods, utilizing domestic trains for long-distance transportation.

At present, the scale of operations is limited to domestic trains moving between Beijing and Shanghai, two of JD’s largest markets. In practice, JD transports parcels from a fulfillment center to the train station, where they are then loaded into a secured compartment of the train. Upon arrival at the destination station, a JD courier retrieves the parcel from the secured car, and delivers the parcel to the customer. For now, the program is limited to high-value items with lower rates of turnover – items that cannot easily be forward stocked in every warehouse, according to a JD spokesman. The spokesman added that in the future, the program could be expanded to other regions or product categories if the economics and lead-times justify doing so.

Domestic high-speed rail freight in China is perhaps most threatening to combination carriers which sell belly space on passenger flights. After all, most of China’s domestic passenger flights operate during daylight hours with scheduled departures similar to those of the rail. If passenger flights were not plagued with delays, they would still be a faster alternative to the train. However, due to air traffic control restrictions, and tight capacity at many of the nation’s major airports, on-time departures are not the norm. Trains, meanwhile, are punctual. China’s domestic freighter flights, in contrast, operate mostly overnight, when there are few passenger flights and virtually no high-speed trains. These flights also have vastly superior on-time departure records.

This situation could change, however, if the China Railway Corporation were to implement overnight highspeed freight trains. Doing so would require extensive cargo-focused infrastructure modifications at railway stations across China – the feasibility of which is often doubted. 

For now, given JD’s increasing merchandise turnover and the fact that it delivers approximately 92% of its orders either on the same day, or the day after an order is placed, the JD spokesman did not expect the use of domestic rail to impact the ratio of goods the company ships by air. Particularly when it comes to time-sensitive cross-border shipments, airfreight will likely continue as the dominant mode of transportation.  

Those interested in learning more about JD Logistics’ cross-border e-commerce logistics operations are invited to join us in Shanghai 23-25 April, where Han Liu, General Manager, International Logistics at JD Logistics will speak. For more information, or to check out this year’s exciting agenda, visit www.cargofactsasia.com/agenda2018.