JD Goes International in Increasingly Smart Logistics. (4 of 4) (Tech Strategy – Daily Article)

Posted on December 28, 2023 by Prof Jeff

I’ve been writing about JD Logistics for a long time. I really like this business. Smart, automated logistics networks at scale are a new type of business model that is just being created. It is a new digital animal.

These are global networks that can move packages and other items around the world. And they are rapidly becoming intelligent and automated.

They can already handle a complexity far beyond what humans can manage. They can predict demand and move billions of parcels around the world to optimize against it.
They are also increasingly autonomous, with robots and IoT devices running new smart warehouses. And autonomous delivery vehicles and robo-trucks starting to appear on the streets and highways.

The more I think about smart, automated logistics networks, the more I think this is almost a new type of operating system. But an operating system for the physical world. And it’s going to be global, with only a few big winners.

My short list for big potential winners in smart logistics at scale is JD Logistics, Amazon Logistics, and Cainiao. These are the three smartest ecommerce-to-logistics giants in the space. And they are all making big strategic bets in this area. DHL and FedEx are certainly in this business, but I think the ecommerce companies are the ones to watch. Who is going to be better in AI long-term? DHL or Amazon?

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In Part 2 and Part 3, I talked about JD’s big growth initiatives. Management has said they are going to create three 1T RMB businesses. Domestic ecommerce is their #1 engine for this. And their low-price strategy is their big growth initiative. I think going international with their smart logistics network is their #2 growth engine (at this time).

I been writing about JD Logistics for years. Especially after they went public, and we got a good look at their numbers. We have not seen great numbers for Amazon or Cainiao. Although I’m hoping Cainiao will go public soon.

Here are some past articles on JD Logistics if you’re curious. I suspect I have written more about this business than literally anyone else at this point.

Here is the two picture summary of JD Logistics.

How JD Logistics Is Going International

At JD’s 20-year celebratory event in 2023, Sandy Xu, now CEO of JD.com, said they are focusing on three things:

The development of lower-tier markets for domestic ecommerce.
Advancements in technology and services.
The expansion of their international business.

That third one really got my attention. Because that is mostly logistics. And we have been seeing indications of this for a while. Although it’s been a bit confusing.

JD has built smart warehouses in the US, Europe, and Asia. They are doing logistics services for local companies.
But JD has also closed its two international ecommerce projects (Thailand and Indonesia).
And currently, there are rumors about JD maybe acquiring a big UK retailer.

A bit confusing.

Fortunately, JD issued some press releases a few months back with what appears to be their roadmap for international logistics. Here is what they have said they are doing.

“Expanding Our Warehouse Network Across Europe.”
“Empowering Brands with Next-Gen Automated Warehouse Solutions”
“Elevating Delivery Services Through Strategic Partnerships”
Being a “Trusted and Reliable Gateway to the Chinese Market”

Below is what I think that means in practice.

1. They Are Expanding Their International Warehouse Network. Especially in Europe.

From JD press releases:

In Europe, JD Logistics operates warehouses in Germany, Poland, the Netherlands, France, the UK, and Spain.
Outside of London, JD Property operates a logistics distribution center. JD says this facility serves the supply chain for John Lewis, the UK’s largest department store. It’s also a strategic location that puts them within a 4.5-hour drive of 85% of the UK population. JD Property has 11 similar warehouse projects across Europe.
Globally, JD now operates nearly 90 bonded warehouses, overseas warehouses, and direct mail warehouses.

They are clearly building a warehouse network across the UK and Europe.

The situation in the USA is less clear to me. JD Logistics United States has announced the opening of a third self-operating warehouse and distribution center in California. But they have much less of a network at this point.

Here is a model of their smart warehouse in China.

2. They Are Providing Smart Warehouse Solutions to Merchants, Brands and Retailers.

By virtue of its China business, JD Logistics has a big edge in logistics technology. That means greater efficiency and lower costs for customers of their smart warehouse solutions.

And such technologies can be a big lever in European logistics, given the labor costs of Europe. JD cites operational cost decreases and efficiency improvements of over 300% compared to traditional warehouses. Their target customers appear to be local retailers and brands in Europe. Clients include lingerie retailer Hunkemöller and Poland’s largest retail chain Biedronka.

And their solutions will increasingly include automation. Think of the impact of automation technologies like AGVs (Automated Guided Vehicles), robotic arms, and sophisticated logistics management systems.

Here are some photos of their tech stuff in China.

3. They Are Doing Strategic Partnerships in Delivery Services to Create Door-to-Door Service

The big partnership JD Logistics talks about is with Geopost, Europe’s largest international parcel delivery network based in France. Their partnership with Geopost adds local delivery to their growing overseas warehouse network.

The goal appears to be end-to-end, one-day delivery, which they say is now possible in Germany, the Netherlands, France, the UK, Spain, and Poland. An integrated door-to-door services will also improve their international express services between China and Europe.

4. They Are Connecting European Brands and Merchants with the China Market

Finally, JD states that “hundreds of European brands have chosen JD.com as their first partner when entering the Chinese market.” They are positioned as a trusted and reliable partner for entering the China market.

They also have their “National Pavilion” program, which is a channel for introducing a country’s products and cultures to Chinese consumers. The United Kingdom, France, Germany, Denmark, Finland, Spain, Portugal, Russia, Italy, Czech Republic, Serbia, Romania, and Georgia have used this platform.

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That’s all interesting. Here’s how I view their strategy.

They Are Leveraging JD’s Scale Advantages in Tech and Chinese Customers in Select International Situations

My standard question to businesses looking to go into another country is “what is your advantage?”.

And it needs to be super obvious. Being smart, working hard, and having money is usually not enough. You need to have a big, obvious advantage. Especially if you are going against entrenched incumbents. Or if you are going into China.

JD has a solid answer to this question. They have big advantages in:

Logistics tech. In current capabilities. And in future spending and innovation.
Their huge Chinese consumer base.
Their global merchant and brand network.

I think most of their new international logistics initiatives are based on #1. That’s why they’re building a network of smart warehouses. And according to JD, their warehouses in Europe, North America, and other regions have deployed “nearly one thousand pieces of automation equipment, including Automated Guided Vehicles (AGVs), Container Transport Units (CTUs), sorting robots, and sorting conveyor equipment.”

Logistics is mostly a competition in cost and speed. It’s an efficiency competition. And JD is using their tech to significantly increase logistics speed and efficiency in Europe. According to Tian He, Chief Technology Officer at JD Logistics (including Europe), “JD Logistics’ advanced automation and intelligent strategies are transforming the global logistics ecosystem…Our cutting-edge solutions are markedly reducing international fulfillment times, which is essential for elevating consumer satisfaction.”

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Ok. That’s most of what I wanted to talk about. I’m looking forward to their new international numbers.

Just for fun, here are some photos taken of posters and such in JD’s smart warehouses in China.

Cheers, Jeff

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Jeffrey Towson 陶迅

Consultant and keynote speaker on digital and AI strategy, transformation and disruption