A few years ago, I spent an afternoon with some JD delivery guys in Beijing. It turned out to be really helpful. Just in terms of seeing how the last mile works (and doesn’t).

Full disclosure. I wrote that headline before my visit to a JD delivery station. And upon arriving, it was clear that me helping would just slow everyone down. So I stepped aside. This article should probably be titled “6 Things I Learned Hanging Out with JD Delivery Guys.”

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I visited a JD delivery station in west Beijing. It was a small facility consisting of a storefront, a bunch of delivery karts lined up outside and space for trucks to pull up. That’s pretty standard. You can find similar delivery spots literally everywhere in China. In every city. And in every neighborhood.

As I arrived, the delivery station staff and the JD delivery drivers were already there waiting for trucks to come for the afternoon sort. They do three sorts per day and this was the last of the day. So they basically spend their time zipping around their assigned neighborhoods. And then they all converge on the delivery station at 3 set times.

Over the next couple hours, I basically observed, asked a bunch questions and tried to stay out of the way. Here’s what I learned.

Lesson 1: Grocery Delivery Wasn’t the Big Challenge I Thought It Would Be

“Ecommerce meets groceries” have been a big new frontier.

• Amazon bought Whole Foods.
• JD and Alibaba both moved into supermarkets in a major way.
• Small players like Miss Fresh have emerged, specializing in fresh food delivery.

So one of my questions was how difficult is groceries in terms of logistics? Could JD use the same infrastructure it had been building for almost a decade? Or did it require specialized logistics, with refrigerated trucks and such. Moving fresh seafood and fruits does seem different than moving laptops and dishwashers.

However, the station I visited was for small and medium items (large items go direct from warehouse to customer). And lots of grocery items were coming through the station, without issue. In the trucks and karts, there were special boxes for the food items that kept them cold and fresh. It turns out that if you have a really efficient logistics system and really fast delivery, keeping food items fresh is not that hard. They just aren’t in transit for very long.

It looks like a lot of JD’s food and grocery last mile delivery is being handled by the Small and Medium Package division. And it doesn’t seem to be much of a problem. I’m sure things are more complicated in the warehouses, distribution centers and supply chain.

Note: This station delivers to a radius of about 5km, which is a bit larger than delivery stations deeper in the city. That struck me as interesting because a lot of the talk around “new retail” supermarkets is how they can also function as logistics hubs. And most cite a 2-3 km radius for delivery.

Lesson 2: The JD Team Are Professional. They Dress Well and Have Nice Delivery Vehicles. Not Unimportant.

Take a look at how nice the JD karts are. And how well dressed the delivery team is.

Now next time you’re on the street in China look at any of the others delivery vehicles.

One of the reasons bike-sharing took off was because the brightly colored bikes were a particularly powerful form of marketing. You saw thousands of them every day. Appearance matters. And the JD delivery people (and their karts) are the most visible part of JD in the real world. And JD looks pretty good on the streets.

CEO Richard Liu has often said that JD only has three touchpoints with its customers. The app, customer service, and the delivery team. As a company positioned for quality, the appearance and behavior of the delivery team is important.

Lesson 3: The Point of Delivery is the Next Inefficiency to Fix in Last Mile

It was pretty amazing to watch the trucks come in. The team rapidly unloaded the packages, scanned and sorted them. And then rapidly put them on the right delivery karts, which then took off into the neighborhoods. Everything happens fast. If there are inefficiencies in the last mile, it’s not at the delivery stations.

It seems that the biggest remaining issue for last mile is the point of actual delivery. Do you leave the package with the doorman? What if nobody is home? Do you take it back to the delivery station? What about returns?

There’s a lot of tech going after this problem. In the USA, we hear about “trunk delivery” (i.e., they leave the package in your car) and porch theft.

But in China (and most countries), it’s about smart kiosks (basically lockers outside your apt) and coordinating with staff at condo complexes. Cainiao has small post offices around the country where packages are left for pickup.

China will probably lead in tech for point of delivery. They just have greater volume. And these hardware + software solutions can then be rolled out to other countries.  

Lesson 4: Speed of Delivery Across Big China is a Big Competitive Barrier

If two online retailers both offer the same product (say a Huawei phone) at the same price, but one can deliver in 2-3 days and the other the same day (or the next morning), consumers usually go for the faster delivery. Why not? But it doesn’t feel like a massive distinction between when buying.

However, behind the scenes it is a big deal.

JD offers 11-11 delivery to a massive geography. Hundreds of cities with thousands of neighborhoods. Order by 11am in the morning and get it that day. Order by 11pm at night and get it the next morning. Across a huge geography.

To actually fulfill that promise requires a massive operational footprint. As I watched hundreds of packages move quickly through the delivery station, I was thinking about this same process happening in thousands of similar stations across China. And that this process happens three times every day.

Guaranteeing rapid delivery across Mainland China is a massive operation. It’s really impressive. And if you’re an online retailer trying to replicate that (and match JD) in terms of speed and reach of delivery (i.e. number of cities), good luck with that.

I am also starting to think that this sort of rapid, flexible delivery is a unique China advantage. Or at least an Asia advantage. The delivery people racing around on their karts creates a really flexible system. They can stop almost anywhere. Compare that to doing package deliveries in San Francisco or New York, where there are only cars and trucks (no karts and scooters). And there are pretty rigid rules for parking. And labor is much more expensive. 

Delivery in China (and Asia) is fast and flexible. And we can see this in e-commerce, food delivery, bike-sharing and other services.

Lesson 5: You Can’t be a Quality Online Retailer without Quality Delivery

JD has way more physical assets, when compared with other e-commerce companies. They own their own warehouses and have their own in-house delivery service. Plus, as a retailer, they own much of their own inventory. That is an interesting approach (similar to Amazon). But for JD, it originally followed from their focus on quality.

From literally day one of operations, JD positioned itself as a quality (i.e., trusted) alternative to much of China retail. Even when JD was just a booth in Zhongguancun selling computers and other parts, they didn’t sell fakes. They didn’t haggle. They were the shop that guaranteed quality.

As JD moved online and grew across China (and now internationally somewhat), they have kept their customer-first and quality-focused strategy. And while lots of companies say this, that kind of commitment is actually pretty hard to maintain. It can be really expensive.

If you are going to be known for “quality”, that plays out in several places. It means fewer SKUs offered. It means guaranteed quality (i.e., no fakes and easy returns). It means fewer merchants in your marketplace. It means you have to provide good customer service. And it means you have to provide really good delivery (and returns). 

So you have to give CEO Richard Liu credit. Everyone says they are quality-focused but he really put his money where his mouth is. A decade ago when it became clear that their biggest source of customer complaints was in delivery, he brought the entire process in-house and spent a staggering amount of money building out a national infrastructure for logistics and delivery. This commitment to quality (and other things) took JD from a company with +10,000 employees to one with +150,000 people. Most of that operational growth has been in logistics and delivery.

Lesson 6: The JD Delivery Guys Are Awesome

Approximately 18 people worked at this delivery station. They staff the station and drivers fan outward in their karts to deliver to their assigned neighborhoods. And as there are three sorts per day, they all come back to the station three times a day to reload. And to chat, smoke and hang out a bit.

And they’re just really good guys (this station was all men, but there are women at other stations). They are super friendly. They are fun to hang out with. And they look like they’re having fun, chatting with each other while they move the packages.

This speaks to an important question about the power of platforms businesses. How they can both enable and exploit. You can read about how hard it is to be a delivery driver for Amazon Flex in the USA. You sign up as an independent contractor and use your own car. The pay is apparently low. Delivering downtown is a difficult because you have to find parking.

There are serious questions being raised about the increasing number of people working for platform business models. Delivery guys. Merchants. Restaurants. Content creators. And this can be a great thing and a bad thing, depending on the situation.

Literally the first new government rule during the China “tech crackdown” was about limiting the power of platforms over small workers. No more exclusive contracts. No more unilateral changes to their contracts and terms of service.

JD employs its own delivery people and they are not paid per package delivered. And watching them chat and laugh was nice to see. I’m sure there are issues (there are for every type of employment) but this appears to be a reasonable model for delivery.

Anyways, those were my main take-aways.

Thanks for reading, jeff

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I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

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