Q&A with Laura Xiong
Laura XiongChief Branding Officer
JD.com is China’s second largest e-commerce site, and ranks Number 14 in the BrandZ™ Top 100 Most Valuable Chinese Brands. Laura Xiong is the chief branding officer of JD.com. Prior to joining JD.com, she held several senior positions at P&G China.
Customer centricity drives brand strategy, requiring investment, but enhancing ROI
Rich trove of customer data helps optimize supply chain
JD.com has become a major brand in a short period time. How did that happen?
JD.com has been in existence only 13 or 14 years. But if you look at the brand in the context of the Internet industry, that is a long time. We are a B2C e-commerce platform. Our founder, Richard Liu, began as an offline retailer. But this was during the period of the SARS epidemic. Retail sales were hurt during that period because people, fearing the contagion, shopped less in stores. That gave him the insight to move the business from offline to online. We started small, selling only 3C products (cameras, computing, communications) and we have grown, benefiting both from China’s overall external growth, which helped the entire e-commerce sector grow dramatically, and from our own internal business model, our commitment to giving the customer a superior shopping experience.
When JD started, payment systems in China were much less developed than they are today. How did the company overcome this e-commerce infrastructure challenge?
That is one of the reasons that our founder decided to self-build the entire logistics fulfillment network. This did not happen overnight. And, over time, fulfillment speed accelerated. Today, 85-to- 90 percent of our orders are delivered the same day or the next day. Ten years ago, e-commerce delivery sometimes took so long, you were surprised when you receive the product because you forgot that you had ordered it.
What drives JD.com to invest so much time and money in fast delivery? Is it that consumers demand instant gratification?
When you ask Chinese consumers about their key consideration factors when shopping, they will constantly say, “I want a high-quality product.” They are saying that they want the genuine product, not a fake. This is a very important factor because counterfeiting, a global issue, has been a problem in China. Of course, customers also want one-stop shopping, with one platform supplying everything they need. Finally, when they’ve finished making the purchase, they want to receive it quickly. These are the core factors consumers are looking for from the shopping experience. Now that we have this delivery infrastructure, we need to make sure that it operates every day in a customer centric way consistent with our value system.
What do you to do to consistently ensure that the thousands of people who work for JD.com throughout China have a customer centric mentality?
First, customer centricity is embedded in our culture. Second it is reinforced by our founder and the leadership team. And third, our system, all the technologies, enables us to be customer centric. I can share a personal example. We have a daily morning meeting at JD.com for the leadership group. During the first week after I joined JD, I was in a morning meeting when Richard, our founder said, “Last night I bought ice cream on our platform. When it arrived at my home it was a bit melted. How could that happen?” He wanted to know why we did not have refrigeration systems for delivery. Richard focused on the ice cream for most of the meeting, saying we needed to fix this problem before we do any expansion. That is why in every corner of our office you smell this customer centric culture.
BRAND AND CUSTOMER
Is control of the entire supply chain a key brand differentiator?
Yes, in the early years we were questioned by a lot of investors because of the heavy operations investment. But to ensure quality products and provide rapid delivery we needed to build our own warehouses.
But isn’t that an expensive way to operate?
It is expensive, but because we have been able to rapidly deliver quality, authentic merchandise, we have become the preferred shopping platform of Chinese customers. That is why we are growing faster than our competitors. In the past couple of years our growth rate has been almost double the industry average. However, the e-commerce infrastructure has improved in China, which benefits both ourselves and our competition. So we must continuously find new ways to satisfy our customers and add core competencies to keep ourselves differentiated.
What about the emotional aspects of the brand?
If I summarize the emotional appeal in one word it would be, trustworthy. We have given customers reliable and superior products and service. Cumulatively, that’s built a strong trust relationship.
Is there a typical JD.com customer?
Our customers are middle class, meaning their household income is somewhat higher than the average e-commerce shopper. And 75 percent of our customers are 25-to-40 years old, and balanced roughly equally by gender. Our assortment, emphasizing 3C products and appliances, matches their family orientation.
How do you refine all your massive customer data and refine it for insights?
The quality of our data is very good. It’s purchase data. We have almost 200 million active customers. We can provide customized recommendations, which improves sales. We also use the data to optimize our supply chain to make sure that our SKUs are distributed most efficiently across our 200 warehouses. Our inventory is relatively lower, which means we have a high turnover rate and can generate a lot of cash.
As you’ve expanded the product assortment, what have you learned about the difference between delivering a computer, for example, compared with food?
The challenge with grocery is basket size. With 3C and appliances the product price is usually high enough to cover the fulfillment cost. The grocery basket price is less, so the fulfillment cost is a higher proportion of the order. We are not making money on groceries today, but we believe that we will. With big data analytics, we can combine the right products in a warehouse and optimize our operation. Strategically, grocery is an important category. It creates high frequency and loyalty.
You have a relationship with Walmart. Who’s learning from whom?
We learn from each other because we are based online and Walmart is based offline, as the largest retailer in the world, with a supply chain system and philosophy it has built for years. We can also learn about e-commerce cross-border business. We are exploring O2O (online and offline coordination).
How do you see the relationship between online and offline?
I don’t think in terms of O2O. We are customer centric as a retailer, and we need to think, where does the customer shop? Today, most customers shop in multiple channels. JD began online, but long-term we need to think about meeting the customer’s needs in the different channels. E-commerce is growing rapidly now. And someday there will be a balance physical and retail stores, but it is not clear where that balance will be.
Thinking about the future, you have been experimenting with drones for delivery to remote locations. What have you learned?
We have used drones to deliver certain items up to 25 kilograms (55 pounds), over a distance of 30 kilometers (18 miles). We are in the early stages, but encouraged. To solve a key problem of scheduling delivery when a customer is home, JD.com will phone the customer first and reschedule delivery when necessary.
How are you also looking at ways to place JD.com at the center of home technology?
About 70-to-80 percent of orders are placed with mobile devices today. But with the Internet of Things purchasing will change. At JD.com there are two devices we are looking at now: a mobile devise that facilitates ordering and has other services; and a refrigerator with sensors for reordering.
What is JD’s vision of globalization?
We look at globalization two ways. One is getting overseas products for Chinese consumers. This business, which we started about a year ago, is growing quickly on our worldwide channel. The other is exporting Chinese products to other markets. We are exploring that. We have two overseas markets: Russia and Indonesia, to which we particularly sell our core categories, 3C and home appliances.