In-depth: Technology Transforms Traditional Retail

by Rachel Liu

JD is China's largest retailer. But now it has grown to be so much more. 'JD Retail has transformed from just a retailer to a digital and intelligent company based on supply chain,' said Lei Xu, CEO of JD Retail, during the 2020 JD Discovery (JDD) conference, the annual technology summit that gathers industry experts from all areas of technology held on November 25^thin Beijing.

'In the past years the retail industry has achieved fast growth relying on the bonus of population-but as this wave of expansion recedes, the industry players need to find new paths for growth, especially when there are many uncertainties,' said Xu.

'One of the paths is to realize growth through digital and intelligent transformation in retail industry,' he added. 'In the upcoming five to ten years, achieving digital transformation across the industry and leveraging technology will be the main way to achieve growth.'

As an industry leader, JD Retail has been exploring digital transformation, and how to open its technology ability to partners to help them achieve digital transformation. Digitalized retail can bring industry growth from two aspects: the first is to improve the efficiency on production, distribution and service. Take JD's Omnichannel Fulfillment program for example: when customers place an order on JD, the smart fulfillment system can choose the most effective fulfillment channel to finish the order and deliver the products to customers' hands in as fast as 15 minutes.

The second is to create more demand. Digitalization can certainly bring more demand from lower-tier markets, elderly consumers, social group consumption and on-demand consumption. JD will not only take the chance to improve its own technology capabilities, but also open up the capabilities to partners. Below are a few examples of JD retail's practices on digital transformation and helping traditional retail players enjoy the fruits of digitalization.

Open capability of digital transformation

Paul Yan, chair of JD Retail Technology Committee, believes that digitalization and intelligent technology can bring major benefits to the industry, especially combined with JD's years of experience in retail: it can accelerate the launching of projects, and it can be applied in different scenarios with a flexible fundamental system, saving companies from duplicating work. With this goal, JD Retail launched the technology service ecosystem specifically designed for the retail industry, JD Retail Cloud.

JD Retail Cloud is an ecosystem that connects JD's strength in technology, business, data and users leveraging its experience in the retail industry, and opening these capabilities to external partners, expanding JD's ecosystem and providing enterprises and institutions with integrated end-to-end services. Its fundamental product is the JD Polaris Operating System, a replicable system that improves the efficiency of the daily operations of the business.

'The system integrates three key capabilities of JD Retail and can be opened to our partners: the first is business operations capabilities, such as payment, supplier management, transaction and more. The second is customer management capability. We can help brands find targeted customers, introduce new customers and improve the penetration of their brand. The third is data capability, including data analysis, data asset management and more. We believe the system is highly valuable to the retail industry,' said Yan.

The system has been proven effective for empowering JD's own business. The time needed to deliver the demands from JD Retail has shortened by 50% after using the system when compared with before.

Seeing the result, the team decided to open the ability to outside partners. A leading Chinese auto company applied the system for its own digital transformation. JD Retail identified that the priority for the company is to rebuild its relations with its customers, and decided that the first period of the transformation should be the digitalization of the customer management system, and then move to the digitalization of marketing and supply chain. JD helped the company build an ecommerce platform and generated detailed customer profiles. In the future, the platform will be able to provide digitalized services for marketing, sales and service.

'With JD Retail Cloud as the engine, we can provide technology service for companies on data, customer management, marketing and more, and continue to open JD's own ecosystem to our partners to create more value,' said Yan.

From C2M and more

C2M is one of the most important practices of JD's intelligent supply chain. The C2M intelligent platform that JD built can connect brands and customers on customer insights, online circulation, product design, and it has become a leading platform in the industry that can be applied to different kinds of products.

'In the first half of 2020, the demands that JD's C2M platform received increased 10 times YOY, and the C2M products that JD cultivated also increased nearly 10 times. Before, partners from the electronics and digital products industry are the ones that mostly welcome C2M. But this year, partners from liquors, health supplements, home furnishing, and auto industry are also looking for cooperation on C2M,' said Chen Lin, head of JD's ecosystem business.

Customer demands have become the key driving force for new product development. 'C2M will largely improve the efficiency of the industry through optimizing supply chain,' Lin said. 'To do this, we need to achieve digitalization in all aspects from customer analysis, designing, manufacture to product distribution.'

The OMEN series gaming laptop is an iconic C2M product that JD designed with HP. JD first worked with HP in 2015 and jointly launched HP's first gaming laptop globally, as JD found that many customers were looking for laptops with gaming function. Since then, the OMEN series has been updated every year to meet customers' demands. As of this year, sales of the series have surpassed RMB 20 billion yuan.

When updating the product this year, JD found that more customers want thinner laptops, as 20% of the customers are students, who not only use the laptop to play games, but also need to carry them to classrooms. What's more, as many university dormitories in China would stop providing electricity from 11pm, many customers want the batteries to last longer. 'I prefer to call C2M as CJM, because JD is playing such an important part in connecting customers with manufacturers. So often we found that even customers don't know exactly what kinds of products they want, JD had already used their data and knowledge on the market to help us find out,' said Zijun Fan, vice president of HP China.

'For me C2M is about finding the best solution on cost, efficiency and customer experience while putting customers' demands at the center. Through analyzing sales data, customer searches and reviews, we can lower the risk of launching new products and make the sales result more predictable,' said Tao Ren, head of JD Computer and Digital Products.

In the consumer goods category, young customers in their 20s are rising, and they have more passion on customized products that can express their personalities. COVID-19 has also made the industry more competitive, and more brands want to launch hot-selling products in shorter time. Since this year, JD and P&G has launched nearly 50 C2M products, including with Pampers, Head & Shoulders, and sales have surpassed RMB 1 billion yuan. Over 50% of consumer goods brands on JD have C2M products.

'Digitalized supply chain is very important in C2M,' said Xuejun Ouyang, vice president of omnichannel retail, P&G Greater China. 'With digitalization, we can optimize not just a product, but also achieve intelligent production on the whole supply chain. Now P&G doesn't just work with JD on new product design, but also leverages JD's data to do procurement, production and inventory management. This is how C2M can provide more value to our business.'

Digitalization can also help brands customize their marketing campaigns. On a marketing campaign for P&G's SK-II brand, JD's big data and customer analysis tool found that many SK-II customer are male customers who like to buy premium fresh food and electronics. With this insight, P&G was able to promote the campaign to high potential customers and improve the ROI.

Xiande Zhao, head of CEIBS-GLP Center for Innovation in Supply Chains and Services, commented,'The key of C2M is to connect consumption Internet with industry Internet. On the one side, C2M can get to know customers' demands and answer them quickly; on the other side, it can connect the complicated processes inside a company and digitalize them to improve efficiency.'

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