Richard Liu’s JD.com Ends 4th Quarter and Fiscal Year on a Strong Note Despite Unique Challenges of 2020
Suffice to say, 2020 did not go the way anybody expected it to. It has been a little over a year since the World Health Organization declared the novel coronavirus to be a pandemic, accelerating some changes to the global market that may have previously taken years to appear and bringing about others that may have never occurred at all. Despite the uncertainty and subsequent challenges, Richard Liu’s JD.com managed to have a solid year in which revenue increased by 29.3 percent from 2019 and annual active customers increased 30.3 percent year over year.
Although the company has been called “the Amazon of China” in the past and is the largest retailer in the country, Richard Liu has always bucked such a comparison, instead preferring for the company to be seen for its technological innovations focused on supply chain and services. In the second quarter of 2020, Liu announced a new mission statement for JD.com, “powered by technology for a more productive and sustainable world” that better aligned with their strategic positioning as a supply chain-based technology and service company. Some may have considered such a shift during a tumultuous time too risky, but Liu has always sought to be forward-thinking, even when it may be foggy ahead.
The history of JD.com
Growing up in a rural village in northern China, Liu and his family often struggled to make end’s meet. The village lacked running water, roads, and even electricity, and meat was only served on very special occasions with the family subsisting for the rest of the time on various forms of sweet potato or corn. However, he was able to excel in school, and after earning high marks on the National College Entrance Examination he was accepted to Renmin University of China. Liu’s family was unable to afford the $75 it would take to purchase a train ticket in Beijing, but his entire village pitched in and raised enough money, with those who did not have any money to spare giving him eggs to eat instead.
Liu pursued a degree in sociology thinking that he would enter into politics, but eventually found that entrepreneurship was his true calling. A few years after graduating from the university, he had saved up enough money to rent and stock a small booth in an electronics bazaar in Zhongguancun, selling magneto-optical drives in the technological hub of Beijing. Amidst the barterers and counterfeit items of the other stalls, Liu sought to establish his business as one that could be trusted for its focus on quality and authenticity – meaning that while the price was as marked and there was no room for haggling, he would also give his personal guarantee that the items in his stall were of top-quality and 100% authentic. This business model would prove to be the strong foundation on which JD.com was eventually built, but prior to becoming an e-commerce giant Liu first had his sights set on brick-and-mortar. Within five years of initially opening the stall in Zhongguancun, he expanded his business to carry a wide variety of electronics, and opened up 12 retail locations across Beijing, Shanghai, and Shenyang.
Just as the coronavirus pandemic has changed the course of trajectory for many businesses this past year, there is a possibility that Liu would have continued to grow his chain of electronics stores had it not been for the SARS epidemic of 2003. Echoing the sentiment of early 2020, many people were afraid to leave their homes for fear of catching the virus, and as a result Liu was forced to temporarily close all the locations for his business. Rather than simply wait for the chance to open up his stores again, he began posting his products to online bulletin boards to drive revenue and move products and found that the option was able to help him survive the temporary closures. When he reopened his retail locations, he decided to dedicate one full-time employee to continue selling their products online, and after a year of selling both in-store and online he analyzed the data and made the decision to transition his company completely online.
Liu’s business model has always been one that has been customer-focused, and by 2007 had already rejected a $2.5 million offer to be purchased and was operating successfully in the e-commerce electronics business. However, it was also this year that Liu sought to gain further control over customer experience by investing heavily in developing an independent logistical network, a move that would be the first indicator that JD.com would be more than just a retail website. From warehouse storage to shipping, he sought to manage every step of the supply chain from the warehouse to the customer’s doorstep, which also meant that the company was now in control of exactly who they wanted their customer to be, and for Liu that was including the previously untapped markets of third and fourth tier cities.
Optimizing organizational structure
Today, JD.com is a trustworthy online source for consumers as they expanded beyond electronics into all aspects of retail. In March 2013 the company officially became JD.com and in May 2014 the company debuted on the United States stock market with stock prices rising 15% on the day of their IPO. In addition to Liu’s business tenets of quality products and a solid logistical foundation, the company in recent years has begun heavily investing in developing technological innovations in the information sector such as drones, AI, and big data. By focusing on these core business tenets rather than boxing themselves in as simply an e-commerce company, Liu and JD.com have managed to consistently pave the way for entering new markets. Expanding well beyond retail, much of the focus for Liu and JD.com in 2020 was in optimizing the organizational structure for their increasingly diversified sources of revenues.
In the fourth quarter of 2020 net revenues for JD.com were $134.4 billion, an increase of 31.4 percent from the fourth quarter of 2019, showing strong and consistent growth. JD Retail also received multiple prestigious awards from influential advertising organizations for its innovation and contribution in supporting brands in their marketing strategies, including the Effie Awards, the Modern Advertising Awards, and the ROI awards.
Additionally, the fourth quarter saw JD Logistics become the first Chinese logistics company to join the Science Based Targets initiative (SBTi), committing to reducing its carbon emissions by 50 percent by the year 2030. A partnership between Carbon Disclosure Project, the United Nations Global Compact, World Resources Institute, and the World Wide Fund for Nature, SBTi seeks to drive ambitious climate action in the private sector by enabling companies to set science-based emissions reduction targets. With a massive logistical network and as one of China’s largest retailers with a same-day delivery rate of 90 percent, JD Logistics has the potential to make a huge impact by reducing its carbon footprint. To achieve this goal, they have dedicated to employing more new energy vehicles, promoting renewable energies and environmentally friendly materials, and enabling partners to implement environmentally friendly practices.
Also in the fourth quarter of 2020, JD Health made its debut on the Hong Kong Stock Exchange. The healthcare arm of Liu’s company, JD Health proved to help millions of people weather the pandemic through its medical and health e-commerce, internet-based medical service, intelligent hospital solutions, and consumer healthcare services, and listed with a global offering of 439,185,000 new shares. With gross proceedings amounting to approximately $4 billion, the company became the first of JD.com’s subsidiaries to be publicly traded. Bolstered by a growing need both in China and globally for telehealth services, JD Health is a technology-driven platform centered on the supply chain of pharmaceutical and healthcare products.
Thanks to a continued focus on adaptation and growth even in times of uncertainty, JD.com has managed to turn a distressing and difficult year into a continued success story for its brand. In addition to JD Health’s IPO, JD.com completed a secondary listing on the Hong Kong Stock Exchange, and JD Logistics is poised to do so as well in 2021. With over 900 warehouses covering 21 million square miles, 310,000 employees, 471.9 million active customers, and the world slowly but surely recovering from the coronavirus pandemic, 2021 should prove to be another fruitful year for Richard Liu and JD.com.