Wednesday, September 24, 2014

Self-Supporting, New Trend?



In recent years, people are getting interested in online shopping more than ever. China’s total B2C e-commerce sales now is experiencing an explosive speed of increase, and is slated to be worth $177billion this year, with 270million Chinese citizens being active e-shoppers.(1) 

To satisfy customer’s needs and reduce complaints, B2C e-commerce companies have to pay attention on every detail to achieving the goals of expanding market share and continuous profits. Among various kinds of customer’s needs, the on-time delivery seems to be the most obviously required section except the product quality. China’s largest Amazon-like e-store, JD (shorten for Jingdong ), is now working on its way both in supplier side and customer delivery side. 


  • Suppliers⇒JD
To ensure a constant and dependable supply chain, in 2013, Jingdong announced a new financing service called “Jing Bao Bei” for its suppliers, which promises a financing approval process that takes less than three minutes. Jingdong is hoping its suppliers to get their hands on funds speedily to grow their business, ensuring the efficiency of its supply chain. So far “Jing Bao Bei” has been warmly received. The first day it was put online, a loan agreement worth about $50,000 was signed, while more than 50 other suppliers have shown interest.(2)

  • JD⇒Customers

Jingdong operates its own network of couriers and warehouses to ensure timely and efficient delivery. It has over 10000-strong feet of couriers to deliver packages to major locations across China within 24 hours, and has 1400 warehouses nationwide to supply a customer base that accounts for more than a sixth of China’s 591 million registered Internet users. (3) The self-supported delivering system also attracts more higher value purchases than that of Taobao or Tmall, for Jingdong will take the responsibility, giving consumers a serial services. As of March 31, 2014, the self-owned delivery system has covered 495 cities, accounting for nearly 75% the number of Chinese cities. Among the covered areas, there are second-tier cities, villages and towns are in-depth China. The outreach in rural areas helps Jingdong's personal-care products grew significantly, far exceeding the industry growth rate in the first half year of 2014.

  • Upgrading delivery
Based on the large amount of warehouses and couriers around the country, Jingdong now has rolled-out two new supercharged delivery options in six major cities, which include Beijing, Shanghai, Chengdu, Wuhan, Shenyang and Guangzhou. (4) The night delivery option means that office workers can buy online up to 3p.m.and have the items arrive at their home between 7p.m. to 10p.m., with extra fees applied. Even quicker than that of the new three-hour delivery service. The courier network of vans and e-bikes enable items are taken from its city warehouses direct to the door of buyers, without relying on third-party couriers, which have lower flexibility. On November 11, 2013, Jingdong saw $1.6billion worth of sales on its website as Chinese shoppers flocked online for Single’s Day, the biggest shopping day of the year.


Questions:
  1. How to control the risks of operating loans to suppliers? Is it worthy lending loans to a supplier that stays the same even though it receives the funds? 
  2. With the rapid development of the professional delivery industry, how does the Self-Supporting delivery system maintain its long-term competitiveness ?


Reference: 

(4)http://www.techinasia.com/china-jingdong-begins-3-hour-delivery/

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