In June, JD had its 20 year anniversary. Although, it was technically the anniversary for JD.com, not the original physical store chain named Jingdong Multimedia which Richard (Qiangdong) Liu founded in 1998. And, actually, the online store was called 360buy for a long-time.

But you get the point. It’s been 20 years and JD has made some major announcements about what they are planning for the next twenty years.

I thought I would summarize the new plan and summarize some of their important past strategic moves.

But, first, let’s put this in context first. There are three things to keep in mind:

• Richard Liu has a long history of making pretty big and bold strategic moves. I’ll detail some of these. But he is a pretty daring executive. Something to keep in mind when you think about the new stated goals for JD.
• JD is no longer the resource constrained, scrappy competitor it was for much of the past twenty years. It is now a very large company with tremendous resources (capital, people, talent, customers, nationwide operations, etc.).
• Richard is now in his prime as a tech leader. He is a seasoned veteran (and victor) of the world’s most competitive ecommerce market. Think Jeff Bezos today versus twenty years ago.

I am pretty excited about the current state of JD. Richard is back. The company appears to be re-focusing on its core businesses. And it’s going for growth.

I have now been writing about JD for about tent years. I’ve been using the service for about 15 years. And my old boss Alwaleed was actually one of the major D investors, back when the company was called 360buy. You can find tons of articles on JD at jefftowson.com. And I talked about JD a lot in my Moats and Marathons books.

With that context, let’s first review four of the big past strategic moves of JD.

Past Big Move #1: JD Went Online and Closed the Physical Stores

In 2003-2004, during a different pandemic, JD began selling online. The company had been building and running physical stores in China for +5 years and was doing fairly well in a fairly difficult business. They had effectively differentiated themselves early on by only selling quality goods (i.e., no fakes). And by not haggling and playing games with customers. Mostly in electronics and computers. This approach to retail was a stark contrast to the Wild West behavior of China retail back them. A sector swamped in fake goods, poor customer services and lots of dodgy behavior. It was common for electronics to be taken out of the box and shown to work when plugged in when you bought them. There was little trust and JD had an effective customer value proposition.

When JD moved online during the pandemic, it wasn’t a particularly bold move. You had to do something to keep sales going when customers and employees couldn’t come into the stores.

The bold move was when Richard later shut down the physical stores. Online retail was clearly a better business. But exiting the physical stores was some bold strategy. Good strategy often means saying no to things and closing doors. It’s about staying focused on only the best opportunities. JD closing their core of the business was gutsy. And I like the idea of burning your boats behind you.

Past Big Move #2: JD Moved Logistics In-House

This story is fairly well-known as well.

JD has remained steadfast in its focus on quality goods and service for consumers. That is why they offer a smaller selection of products. That is why they have tons of customer service representatives available for returns and issues. And Chinese customers today still strongly associated JD with quality.

Back in 2008, JD had three main touchpoints with its customers: its website / apps, its customer service representatives, and its last-mile delivery people.

The story goes that delivery was the biggest source of complaints. And I completely believe this. Still today, contracted delivery drivers race around Chinese cities (often on sidewalks). Most have dumpy delivery vehicles. They often sort their packages in piles on random sidewalks. It is historically the least professional aspect of Chinese commerce.

When Richard decided to bring logistics in-house back in 2008, it was a big move. It cost a ton of money, with billions of dollars each year in investment into logistics. And it meant growing the company to hundreds of thousands of employees.

Bringing logistics in-house was the opposite of the asset-lite operating model of Alibaba and most ecommerce companies. And keep in mind, JD was not the leading ecommerce company back then. In 2008, it had less than 5% of the employees it has today. It was massive commitment.

But it paid off. In any China city today, you can easily spot the JD delivery people. They wear professional bright red uniforms. Their scooters, carts and trucks are clean and well-maintained. And they make a very good impression that really stands out.

And +10 years later, the smart logistics network JD has built across China is one of their biggest competitive strengths. It is next to impossible to replicate.

Past Big Move #3: Going From Retailer to Marketplace

JD was a physical and then online retailer. That means it had very different economics than a typical marketplace model like Alibaba, eBay, or Shopee. They actually buy and sell goods. They have to manage their inventory turns. And much of your competitive advantage comes from purchasing economies and economies of scale in logistics – not from network effects (like Alibaba).

The limitations of this model (versus pure marketplace platforms) are:

• Fewer products available to customers.
• Slower and more expensive growth.
• No network effects.

However, the benefit of the model is greater control of the consumer experience. You control which products are actually sold. Most marketplaces don’t really know what is being sold. They are intermediaries. But online retailers (like JD) control what is listed and don’t have lots of fakes and scams. You also don’t have bad merchant behavior. This approach is consistent with JD’s focus on quality products and the customer experience.

However, in 2010-2011, JD did launch a limited marketplace platform. About half of their business was an online retailer (i.e., 1P) and half was as a marketplace (i.e., 3P). This mixed model is similar to the approach taken by Amazon. It is a reasonable balance that expands into a long-tail of products that JD does not want to manage itself. But it keeps control over the core products. This mixed approach also results in additional scale in logistics. However, it also meant giving up some degree of control.

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Outside of these three strategic moves, there have been lots of other stuff. They also launched JD finance, JD Health, and other initiatives. They have been consistently experimenting with new retail business models. They have a partnership with Walmart and Google. And they externalized logistics as its own business.

But really the other big move that mattered (in my opinion) was the strategic partnership with WeChat / Tencent. This partnership got JD tremendous traffic and JD, along with Meituan and Pinduoduo, worked with Tencent as a counterweight to Alibaba in ecommerce. Although WeChat’s recent moves in mini programs changes this dynamic somewhat.

Ok. Those are what I consider to be the big moves.

That said, let me summarize their recently announced 20-year plan for going forward.

JD’s “37511 Vision” Is Mostly About Growth

In a recent letter its employees, JD announced its “35711 Vision,” which outlines “a path for sustained growth over the next two decades”.

• The “3” in 35711 is their goal of establishing three businesses with over 1T RMB in revenue (and 70B RMB in net profits).
• The “5” is their goal of having five JD businesses on the Fortune Global 500 list.
• The “7” is their goal of having 7 publicly listed businesses that started from zero and achieved a market value of 100B RMB.

The 11 stands for goals in taxes and jobs. But it’s the 357 that got my attention.

So, this is about long-term growth. About getting a lot bigger. Their new 20-year vision is mostly about specific financial milestones.

That’s cool. But I would use different language to describe. I would describe the vision as the following:

1. Grow their 2 core engines to 1T RMB in revenue each. We already known the two core engines of JD are going to be domestic ecommerce and global logistics.
2. Turn one revenue adjacency into a new core engine of 1T RMB in revenue. This is more speculative. JD is going to have to build another core engine, which means capturing a large revenue opportunity adjacent to their current business. That could be cloud. Keep in mind, Alibaba identifies its big growth engines as domestic ecommerce, logistics and cloud. Alibaba is ahead in cloud, but JD is ahead in logistics. Or it could be something like business and technology services (similar to Ant Group).
3. “Explore and exploit” to create 5 medium sized businesses. To have 5 businesses that are on the Fortune 500 list, they are going to have to place lots of bets. That means doing some M&A, some seed investments, and some growth investments. But to get five medium sized businesses they are going to have to make lots of plays and then quickly cull businesses that don’t have product market fit or are not growing (that is the “explore” phase). Those few that achieve product market fit and show growth will be fueled (that is “exploit”). That is how you get to 5 businesses on the Fortune Global 500 list. I would start with their new retail projects. Especially in supermarkets, where JD already has a presence. I would also consider setting this up as a separate entity. It’s a different skill set that 1 and 2.

At the celebratory event, Sandy Xu, CEO of JD.com, focused on three key areas: the development of lower-tier markets, advancements in technology and services, and the expansion of international business.

I think we can currently see JD making big moves in domestic ecommerce and international logistics (i.e., Point 1 above). I will write about this in Parts 2 and 3.

Cheers, Jeff

• JD’s Is Making a Big Strategic Move into the Low-Cost Market (2 of 3) (Tech Strategy – Daily Article)

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• JD’s Emerging Competitive Advantages? (Jeff’s Asia Tech Class – Daily Lesson / Update)

From the Concept Library, concepts for this article are:

• N/A

From the Company Library, companies for this article are:

• JD Logistics
• JD

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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.

My book series Moats and Marathons is one-of-a-kind framework for building and measuring competitive advantages in digital businesses.

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