MANAGEMENT INFORMATION SYSTEM

"JD.COM: LEVERAGING THE EDGE OF E-BUSINESS”

(INDIVIDUAL ASSESSMENT)

MGW3381

Wilbert (29233879)
 Table of Content

1.0 Introduction of JD.com 3

2.0 Analysis of JD.com

2.1 Strategies and Competitive Advantages 4

2.2 Exploitation of New Market for Future Development 5

2.3 Competition with Alibaba 6

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3.0 Discussion and Conclusion

3.1 Discussion 8

3.2 Conclusion 9

4.0 References 10

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 1. Introduction of JD.com

The current leading disruptive force in China’s retail industry, Jingdong (JD.com), started

their business by selling magneto-optical products in-stores in 1998 (Chan et al, 2018). In just 5

years, they have branched out to 12 stores with a total earning of more than 10 million yuan (Yang

& Ju, 2018). Unfortunately, SARS disease struck in 2003, leaving offline retail businesses at the

edge of bankruptcy as people were anxious to leave the house (Yang & Ju, 2018). This also marked

the beginning of the e-commerce industry (Yang & Ju, 2018). JD’s founder, Liu Qiangdong, who

adopted the customer-driven approach realized that the demand for the new trend -online

shopping- will unlikely to decrease after the pandemic and decided to shift JingDong to online

business, earning him the first mover advantage in this industry (Smith, 2018). This turns out to

be a great decision as JD.com is even commonly known as “the Amazon of China” these days.

Besides his great ability to spot the changes in trends, Liu also able to envision a better

future. After its shift to online business, JD.com experienced a 50% dropped in sales in the first

year (Griffiths, 2014). Believing that the online industry is more efficient, JD.com stayed put and

for the coming 5 years, their sales growth was 300% per year on average (Griffiths, 2014). Unlike

companies such as Nokia and Blackberry who refused to see the changes in the market and did not

try any vertical expansions, JD.com’s strategy was to follow the market and adapt accordingly,

which in this case, digitalized their business.

JD.com has grown enormously since then, having one of the most key resources in e-

commerce industry namely: online marketplace, fulfilment centers, warehouses, nationwide

logistic network, autonomous trucks, largest delivery system in China, etc allowing them to expand

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and tap into new market more efficient and effective than any other player in the market. Also,

with their value propositions such as fast and reliable delivery service, access to wide variety of

products including international brands, supply chain financing services, authentic product etc, the

company has earned trusts from customers, partners, and suppliers.

2. Analysis

Strategies and Competitive Advantages

One of the strong pillars that create JD’s success is the trust in the teams (Dutt, 2018).

JD.com believes that the success and failure of the company are the results of the team and has

nothing to do with the competitors. Thus, JD.com heavily invested in their executives to earn

MBAs, recruit management trainees, training new managers, etc (Dutt, 2018). Managers and teams

are even allowed to decide for the company as they directly involve with the market and thus,

know the best for the customers.

Also, with the shift towards online shopping, people expect faster shipping and delivery.

However, the supply chain infrastructure to serve these expectations is expensive. Doing

something that Alibaba is reluctant to do, JD.com invested more than $55 million and comes with

its automated warehouse processing where it can cut down logistics costs and speed up delivery

time and accuracy with the help of robots, drones, and driverless cars delivery (Shane, 2017).

Although back in 2015, Jack Ma criticized this business model as “a tragedy and unprofitable” as

it burns too much cash (Tian, 2015), the writer believes it is an anti-crisis business model and has

a very sustainable long-term approach. For instance, due to the current outbreak of Covid-19 in

China, Alibaba and other competitors -whom deliveries rely on the third party- were heavily

damaged as logistics companies have failed to fully operate, thus leading to late delivery

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(McMorrow, 2020). Nonetheless, JD.com, who owns a complete logistic system, can settle supply

chain and logistics in-house which heavily benefiting China which was in crisis. They also

provided jobs to the market to help out with the inventories as a lot of people lost their job in this

crisis (McMorrow, 2020); an act that aligns with SDG8 -Decent work and economic growth-.

Moreover, they predicted the development of the pandemic and changes in the supply chain in

real-time basis based on data integration model (Hu, 2020), allowing them to allocate inventory

properly so that necessity products such as face mask and disinfectant can be adequately

distributed in each area; something that all the competitors cannot do.

Subsequently, another key pillar to JD.com’s success is their great customer service (Getele

et al, 2018). Unlike Alibaba who just facilitates the transaction between individuals and businesses,

JD.com works closely with the supplier to select only quality and authentic products to be stored

in their warehouse. They also offer a replacement on any defect product; an act which sacrifices

profit for better customer satisfaction (Getele et al, 2018). From the perspective of system

development, this is an inverted triangle model where it starts from a good team to establish a good

system for effectiveness and efficiency and as a result, great user experience. This model, which

has been executed by JD successfully has created a huge economic moat to its competitors.

Exploitation of New Market for Future Development

JD.com partnered up with three international giants, namely: Google, Tencent, and

Walmart for more expansions. Firstly, through the partnership with Google, JD will gain access to

Google’s AI and technological capabilities to strengthen retail infrastructure such as personalized

and frictionless shopping experiences (Bloomberg, 2018). JD.com will also have their products

listed in Google Shopping and Google Assistant which will definitely improve JD’s exposure to

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overseas market, especially after Alibaba’s Taobao was placed on US House of Representatives’

blacklist of “notorious” marketplaces for counterfeiters (Financial Times, 2018). Secondly,

through its partnership with Tencent, JD Mall is integrated into WeChat and QQ -the most popular

messaging platform in China with over 1.1 billion monthly active users- to let JD.com to leverage

the huge volume of traffic from WeChat shopping entry point (Getele et al, 2018). Lastly, through

the strategic partnership with Walmart, customers can pick their products up at Walmart stores and

have their groceries being delivered through JD logistics services which heavily benefiting both

parties (Russell, 2017).

Moreover, JD.com also has offered their logistics services to other retailers and as of 2017,

the company’s drones delivery can delivery up to 30kg and travel approximately 100km before

recharging (Meredith, 2017). The company also is testing drones which can carry as much as

1000kg (Meredith, 2017). Combining their lots of drop-off point for the parcel collection , database

from Google Maps for route efficiency, and heavy-lift drones for carrying more range of products,

JD Logistics will help to shape the future of delivery services in China and around the world.

Subsequently, JD has started to help villagers to build brand for their agriculture products

and assisting the design in the packaging to command for higher price to be sold in JD.com’s

marketplace (Dutt, 2018). To ease the deliveries, JD.com also builds a lot of drones airports

surrounding rural areas. The goal is to provide the same business opportunities to villages and at

the same time, providing better quality foods to the market.

Competition with Alibaba

As shown by Iresearch China (2017) in the figures below, in just 6 months, JD.com has

increased its coverage of China’s B2C e-commerce market by around 3% while Alibaba’s Tmall

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just increases by 0.1%. Although JD.com still has some ways to go before able to compete with

Alibaba which has 56.7% of China’s B2C market shares , it is undoubtedly a company on the rise.

Figure 1.0. Market Shares of China B2C Online Shopping Market. Retrieved from
http://www.iresearchchina.com/content/details7_30708.html

Figure 2.0. Market Shares of China B2C Online Shopping Market. Retrieved from
http://www.iresearchchina.com/content/details7_38214.html

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 One key factor behind this increase is because of China’s maturing e-commerce market.

Traditionally in the China market, e-commerce competition was driven primarily by price, with

service and quality came second and third respectively. Right now, as said by Josh Gartner,

JD.com’s ex-Vice President of International Corporate Affairs, the reversal has started to occur

where quality and authenticity of the products are the priority, followed up by service and price

(Freedman, 2020). This benefited JD.com immensely as the company has been focusing on the

authenticity of the products since the beginning and with the clear distinction of anti-counterfeit

positioning in the market, gives a significant advantage over Alibaba (Freedman, 2020). Although

Alibaba has recently invested in quality management and big data to eliminate counterfeit goods

and vendors, its reputation is already negatively labeled in the industry (Forbes, 2017). Therefore,

unless Alibaba follows JD.com to heavily invest in warehouses and to have full control of

monitoring the quality, Alibaba’s quality management will not be efficient and effective as the

data obtained by not holding the products are limited.

Moreover, another thing that will make JD.com stand apart from the competitors is the

personal touch. Unlike Alibaba who relies on third party delivery service, JD.com, who has full

control of its logistics requires their courier to phone customers in advance before delivery. All of

their drivers also have to wear a uniform and have their bikes branded. Although it sounds simple,

this customer-centric service strategy creates bonds and trust with the customers. In the writer’s

opinion, these anti-counterfeit positioning and bonds and trusts with the customers will take over

Alibaba in the long term to become the largest player in the market as more similar products are

available in the market, authenticity and good services will be determinant.

3. Discussion and Conclusion

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 3.1 Discussion

Whilst more people are starting to pay attention to product quality, the majority of the

market are still price-sensitive customers. Even worse, although JD.com have greatly been

benefited with their in-house logistics system due to them able to fully operated during China’s

lockdown in early 2020, the purchasing power in China and the world will drop significantly for

the coming months or even years and people will shy away from buying more expensive items.

Resultantly, this will benefit JD.com’s competitors such as Alibaba and Pinduoduo more as they

both have a steeper price and discount prices. Therefore, JD.com needs to stimulate its products

demand or adjust to a cheaper price to be able to compete with the competitors post lockdown

although, adjusting price will be very tough because compare to its competitors, JD.com has a

lower profit margin due to their business models that carry inventory risks.

Secondly, unlike Alibaba who directly leverage the sellers’ products, JD.com filter and

store in their warehouses. Thus, there are a lot of gaps in their product range and this lack of choice

can give a foothold for their competitors. This also is another issue that JD.com encounters as they

will need bigger warehouses which will cause them lots of money or they will need to reduce their

criteria of filtering products to allow more sellers to be the partners which could affect the whole

company’s core value.

3.2 Conclusion

In conclusion, although JD.com has built great foundations such as having strong teams,

owning a logistic system, and filtering only authentic and quality products to be sold, with the post

effect after Covid-19, they will need to compete in price with their competitors, find a way

stimulate their demand and increase their product ranges. Otherwise, it will be rough years ahead.

Words count: 1902.

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 References

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China’s Online Shopping GMV Approached 5 Trillion Yuan in 2016 (2017). Iresearch Global.

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Dutt, A. (2018). JD’s founder reveals the 6 pillars of the company’s strategic model. Tech in

Asia. Retrieved from https://www.techinasia.com/6-points-jdcoms-strategic-model

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