At this year's conference, the global expansion of Chinese companies was mentioned many times as an important issue. In the agenda of the first day of the afternoon, "Fortune" invited JD.com founder Liu Qiangdong as a guest to talk with executive editor-in-chief Adam Lashinsky.
In the dialogue, Liu Qiangdong talked about Jingdong's determination to develop "Unbounded Retail" in surprisingly fluent English, and he understood the new shopping model combining social and online shopping. He also did not shy away from talking about the competition with Pinduoduo relationship. With regard to the globalization of JD.com that Fortune is concerned about, JD.com will enter the US market through cooperation with US companies. Although China and the US are deeply in the shadow of the trade war, Liu Qiangdong believes that JD will not be affected by the trade war.
The following is the full text of the conversation between Fortune magazine executive editor Adam Lashinsky and Liu Qiangdong during the Fortune event, organized by Geek Park.
(F: Adam Lashinsky; L: Liu Qiangdong)
F: Thank you Mr. Liu Qiangdong for participating in this dialogue. You are from China. You are the farthest from the United States among all the guests. Thank you for coming.
L: You're welcome. First of all, I want to ask, Adam, can you speak Chinese?
F: I would like to answer "yes", but unfortunately, I can't even say a word.
L: No problem. My English is worse than yours. I will try to be clear.
Customer experience, cost and efficiency are equally important
F: Thank you for being here in person and participating in this conversation in our language. I am also honored.
Guests may not know much about JD. There may be only a few of you who have had shopping experience on JD. So here I will first share some data with you. JD has 300 million active customers each year, more than the total population of the United States, and also has 515 warehouses. In 2017, its operating income reached 56 billion US dollars, maintaining an annual growth rate of more than 40%, with a market value of 56 billion US dollars.
When you founded JD.com, you regarded JD.com as a platform for selling computers and electronic products through the Internet. Can you share with us how JD.com has grown from a small website in the past to the scale of today?
L: Actually, I don't care much about the data mentioned by Adam just now. In my opinion, there is only one thing that is important, and that is the customer shopping experience. From the very first day of JD's entry into the retail industry, JD.com has established three concurrently important principles of customer experience, cost, and efficiency. "Customer experience" is the key to business's external success; "Cost" and "Efficiency" are the keys to internal operations.
We reduced operating costs by creating an online sales platform, and improved our operational efficiency, so customers have a great shopping experience. As you said just now, we have built a huge warehouse network that can cover almost the whole of China.
F: China is a fairly large country.
L: That's right, it took us almost ten years to build a warehouse network of this scale. But to this day, the most important thing for us is the customer shopping experience.
F: In addition to having a large warehousing and distribution network, JD.com also wants to use drones for distribution. Why do you make such a large-scale investment in this area?
L: If you look at Jingdong's financial report data, you will find that our operating costs only account for about 10% of our annual revenue. We managed more than 3 million SKUs by the end of last year, but our inventory turnaround days were approximately 30-40 days. Our operating network is now very efficient, but for future development, we must bring better shopping experience to our customers, and continue to reduce operating costs and improve service efficiency. Only by using the latest technology can we do this.
We have invested a lot of time and money in the development and application of technology, including fully automated storage systems, self-driving distribution trucks, human-free distribution stations, drones and "last mile" logistics robots. It's all about providing customers with the best shopping experience, not only today, but also in the future.
F: Although we do not want to compare Chinese companies with American companies, because only Americans may be interested in these, Chinese people may not be very interested. But what Jingdong is doing is very similar to Amazon. It is directly sold after purchasing from the e-commerce platform. Of course, there are similarities with eBay. Jingdong provides a sales platform to merchants. In addition, Jingdong attaches importance to technology to these two companies. very similar. So, will JD refer to the practices of foreign companies in the development process? Or will it develop a development strategy based on its own situation?
L: To be honest, when I first founded JD.com, I didn't know about Amazon's existence and knew almost nothing about the Internet. It was because of the sudden outbreak of SARS in Beijing that we were forced to start online sales. China is a very special market, and Chinese consumers are also very special. Everything is different from other countries. A new system needs to be established to meet the needs of Chinese consumers. This is our core principle.
It is difficult to provide satisfactory services to Chinese consumers. For example, if you buy a product through JD.com for $ 10 in China, not only is shipping free, we also need to deliver the product to customers within 24 hours. This is very different from the situation in the United States. When shopping online in the United States, customers first need to purchase Amazon Prime members for about $ 100 to get the service delivered within two days. But if you put it in China for two days, it is quite slow, and it can even be said to be a disaster.
E-commerce must take advantage of social, online must be integrated offline
F: I think what you just said has made everyone understand how fierce the competition in the Chinese e-commerce market. JD currently has a very special partner. Tencent's shareholding has reached 18%, Wal-Mart has about 12% of the share, and now 1% of the shares are sold to Google. What will Tencent's WeChat do to help JD's operations? ? E-commerce needs to leverage social, online must be integrated offline
L: We and all these partners share common core values. This is very important. If we want to cooperate with other companies, the values of each other are different, and the results can be disastrous.
The role of WeChat is very important to us. So far, among all the newly acquired customers, WeChat has brought us a quarter of new customers. We are trying to combine people's social and online shopping to form a shopping cycle. There are still many interesting attempts like this.
F: Americans are also interested in these, because there is no such practice in the United States.
L: You also have a lot of social platforms like Facebook, Instagram, etc.
F: Yes, but these platforms have not yet combined similarly with e-commerce, just as JD.com and WeChat tried in China.
L: I think that if these companies come to China to take a look, there may be some changes in the thinking of development.
F: Is JD interested in entering the US market? In fact, I want to say whether JD intends to develop markets outside China, but what I am most interested in is whether JD wants to enter the US market?
L: At present, JD.com is developing the "Unlimited Retail" development model. If we look at the situation in the US market, we can see that in the United States, e-commerce is e-commerce and offline is offline. The two have obvious differences Barriers and boundaries, but in China we are combining the two and calling it "Unbounded Retail."
F: When I first met Mr. Liu Qiangdong, the word "Boundaryless" was always inaccurate. Congratulations to Liu Qiangdong for being able to say the word twice clearly.
L: If it was easy to say "Unlimited Retail" in Chinese, if I knew it was so verbal in English, I would change it to another name. Anyway, what I want to say is that JD.com is not just a pure e-commerce company, nor will it become an offline chain store. I think there will be many opportunities for online and offline retail integration in the United States.
F: In other words, we can also try the development model of Chinese enterprises in the US market, combining online and offline sales. How does JD.com combine online and offline?
L: Our main advantage lies in the strong supply chain management system. We have a huge logistics distribution network in China, which can make consumers easily discover the existence of JD whenever and wherever possible. No matter which city or street you are in, you will find Jingdong Convenience Store and Jingdong House nearby, as well as our 7Fresh Fresh Supermarket nearby. Some stores may not have JD.com's logo on the door. In fact, JD.com supplies and distributes fresh and alcoholic products. Even in a small barber shop, the shampoo in it may be from JD.com.
On the Internet, today ’s headlines and Didi taxis on Chinese users ’phones can be used for shopping without even leaving the app itself. In the future, consumers do not need to download a dedicated shopping app. Any app can be used for shopping, and it is very convenient, just a click. Behind such a convenient shopping experience is the support of JD.com's strong supply chain management and logistics system.
JD will be cautious about globalization and not worried about competition
F: In the future, JD.com will directly use these scientific and technological achievements to provide services in the US market, or will it achieve them through cooperation with Google and Wal-Mart?
L: We will enter the market from cooperation with American companies, and then use these technological achievements to provide services to American customers.
F: You have said before that you want to enter the US market in 2018, but now you have slowed down this plan. When will it be realized?
L: We already have our own operating team in the United States, but the United States is a brand new market for us. It is completely different from China. We need to be very careful in our development. We hope that we can move forward every step here. They are all right decisions, because we don't want to go the wrong way or go back, so it will take time for the specific plan to develop.
F: What I want to know is how is Amazon's operation in China?
L: Unfortunately, it should not be particularly ideal.
F: Should this be a good thing for you?
L: China's market is huge, and it is not something that an e-commerce giant can occupy. It can be developed by several companies together.
F: There is another emerging e-commerce company in China called Pinduoduo. Is my pronunciation correct?
L: Your pronunciation is standard.
F: Thanks for the praise, Pinduoduo is focusing on developing small and medium cities in China. Do you think they will be JD's competitors?
L: There have been many changes in the retail industry today, but three things will never change: customers always focus on the quality of goods, prices and services provided by merchants. The only thing I value is the shopping experience provided by JD. If you shop in China several times, three times should be enough and you will make your own judgment.
Hate trade war, but JD will not be affected
F: Your answer is too euphemistic. Then I will ask you a little more sensitive question. What impact do you think the new US tariffs on Chinese products will have on JD?
L: Tariffs? (Tariffs refers to the new US tariffs on China).
F: "Oh" is an answer to any question (laughs)
L: As far as my business is concerned, my answer is that there will be no problems.
L: Because we focus on customer choice. Last year, we imported US $ 2.3 billion of beef and other meat products from the United States. If there is a trade friction between China and the United States, we may not be able to import these meat products from the United States, but we can import from Europe and other countries. We can also import imported goods from Europe or Japan, Korea, and even Southeast Asia, so there will be no problem for JD.
But I hate wars, even trade wars. War is always bad and will never benefit either party.
F: I understand what you mean. Jingdong will not transfer the price increase caused by tariffs to consumers, but will import the same goods from countries outside the United States.
L: We will let consumers make their own choices. If they can accept the increase in the price of American goods, we will continue to provide American goods to consumers; if consumers think that things in the United States are too expensive, we will also provide other select.
F: Thank you again for being able to come here. As a representative of a Chinese company, we have brought us many unique insights. On behalf of the audience, I would like to say "Thank you".
L: You are welcome.
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