Recently, this public account has been flooded with JD news, with new headlines every few days. Please bear with us, because what JD is doing may truly rewrite the supply and distribution landscape of China's FMCG industry. This is a major event for every practitioner in the FMCG sector. Today, I will analyze JD's New Channel operating model and its impact on manufacturers and distributors.
First, let's review the specifics from the JD New Channel press conference the day before yesterday. If you're already familiar, feel free to skip ahead.
JD believes selling products to millions of small and medium-sized offline stores is meaningful and feasible, though they acknowledge it's challenging due to the many vested interests involved. Nevertheless, the New Channel team is highly confident.
The New Channel business unit comprises experts who have managed tens of billions in JD's production and sales system, elites from traditional FMCG and retail, and veterans from the traditional distribution system. Their combat effectiveness and execution capability are formidable.
JD New Channel's Strategy and Business Model:
JD defines its team as service-oriented, serving two ends: brand manufacturers and small/medium terminal stores, delivering products directly to retail terminals by bypassing intermediate layers. They identify customer pain points and provide solutions to implement their strategy.
Pain Points JD New Channel Sees for Manufacturers and Retail Customers:
For manufacturers: Sales growth hits bottlenecks, profits decline, expenses are intercepted at various channel levels, and they lack real terminal data.
For terminal stores: They struggle to find products that sell well; if they sell genuine goods, margins are razor-thin (buying and selling at the same price); they have low brand awareness; and they desperately need detailed, professional operational guidance from manufacturers.
JD New Channel attributes these pain points primarily to excessive intermediate layers that are costly and inefficient.
New Channel's Solution: For brand manufacturers, advanced IT and a well-established warehousing and distribution network can save significant costs. These savings can then be reinvested in brand promotion and product development, creating a virtuous cycle. Simultaneously, cost savings allow for better margins for small and medium stores, enabling them to profit from selling genuine products, thereby reducing the appeal of counterfeit and imitation goods and better serving local consumers.
JD New Channel will deploy a ground team called "Ground Service Brothers" (地勤小哥), full-time employees who serve terminal stores, providing purchase consultation, marketing support, after-sales handling, and more. They will relay accurate information between enterprises and terminals and uncover sales opportunities.
Their future goal is to distribute products, posters, and advertisements nationwide within three days or less, reaching every small store—more efficiently, with better service, and with precise targeting than traditional channels.
Based on these two solutions, New Channel will build two teams: a buyer team and a terminal business team.
Buyer Team: Two "No's" and One "Only" (No category limits, no brand limits, only high-quality products):
The buyer team is not restricted by category—food, beverages, 3C, home appliances,百货, furniture—if customers need it, JD will source it. Currently, the focus is on FMCG. There's no brand restriction; both well-known and emerging local brands can participate. However, buyers strictly control quality, selecting premium single items for online sales. The reason for curation is that offline shelf space is limited, unlike e-commerce with millions of SKUs. So, companies wishing to partner with JD must ensure their proposed products are highly competitive.
Products partnering with JD are stored separately, contracted separately, and managed separately for inventory. JD's existing C-end logistics are highly efficient, and they are planning B-end logistics tailored to serve small and medium stores more effectively.
Target stores include physical consumer terminals—traditional small and medium retailers and emerging retail formats.
JD New Channel segments channels by checkout counter count:
- Small/medium stores: 0-2 checkouts
- Medium stores: 3-5 checkouts
- Non-retail formats: hotels, restaurants, cinemas
- Emerging retail formats: O2O supermarkets, experiential convenience stores
New Channel has developed the Zhanggui Bao (掌柜宝) app for store purchasing, along with a WeChat mall and PC mall. The app is still in beta; we'll add a WeChat mall entry on our public account, allowing customers to place orders there.
Customers must register to purchase, providing store address, name, phone, business license, etc. A ground service brother will verify the information on-site, after which they can see prices and selling prices.
JD states: "Our goal is mutual benefit with our partners. We also aim for lean entrepreneurship, which is about learning by doing and doing by learning. We will iterate continuously and never give up, ultimately building a standardized, transparent, efficient, and controllable new channel."
The above details JD New Channel's business model and strategy. In short:
Direct cooperation with enterprises, bypassing channel intermediaries, delivering product information directly to retail terminals via the app, and leveraging JD's own logistics for fast delivery.
This means JD's New Channel division is indeed building a "new channel" for consumer goods supply and distribution.
From yesterday to today, my B-end exchange group has been buzzing about JD, with everyone analyzing the problems and opportunities of JD's New Channel. ▼
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Let's analyze the model's strengths and weaknesses:
Strengths:
Brand advantage: JD's years of brand image provide endorsement for many emerging brands, reducing retail customers' difficulty in product selection.
Product advantage: Strict selection emphasizing quality will allow many innovative, creative, and product-strong items to stand out.
Efficiency advantage: Self-built logistics ensure same-day/next-day delivery, and promotional spending is precise and efficient without waste—impossible in traditional channels.
Profit advantage: Bypassing channel intermediaries reduces channel exploitation, saving enterprise costs and increasing profits for retailers and enterprises.
Data advantage: JD shares sales data with supplier partners, enabling manufacturers to make informed marketing decisions based on precise data.
Financial advantage: JD Baitiao (JD's credit service) perfectly solves the capital shortage problem for small and medium terminal stores when stocking up.
Weaknesses:
- Enterprises may be unwilling to partner for well-known legacy products already distributed through existing channels.
- Online purchasing without brand recognition or peer recommendations may make customers cautious about newly launched products or categories they haven't sold before.
- Installation and payment require extensive training and guidance.
How Should Manufacturers View JD New Channel?
From my perspective, JD New Channel offers these benefits to first-tier brands:
Traditionally, enterprises favored promoting big single SKUs nationwide due to channel cost considerations. Multi-spec, personalized niche products were only used to expand the main product line, with little attention to segmented audiences and personalized consumer needs.
With recent consumption upgrades, higher-end, diverse, and fragmented demand is emerging. Original multi-tier channels struggle to promote such products. Enterprises trying to sell high-end or personalized items on C-end malls often find results unsatisfactory because FMCG characteristics dictate that such products must go through terminal retail channels. New Channel's emergence provides new opportunities and fertile ground to meet these consumer needs.
Before partnering, first-tier enterprises should consider:
- Does JD represent incremental or existing business for my company?
- How are competitors responding?
- Can our resources meet JD's cooperation conditions?
For regional or non-first-tier brands, which typically survive by imitating bestsellers from first-tier brands in market gaps, even innovative personalized products face prohibitive channel and promotion costs for national expansion. Now, with New Channel's model, they can quickly expand to millions of stores nationwide—an irresistible temptation for any enterprise. For companies with R&D/innovation capabilities, this is indeed springtime.
Additionally, data sharing, efficient promotions, and low-cost operations are hard to resist.
However, we also note that the model of delivering goods before payment shifts the account period pressure onto manufacturers. Costs for acquiring traffic, and potential product delisting due to violations or uncertain reasons, are factors enterprises must consider.
Impact on Distributors and Response Strategies:
Internet development in recent years has sent chills through many distributors. New Channel will certainly impact distributors. Once enterprises taste success with online distribution, they'll accelerate their internet transition and abandon inefficient, high-cost distributors—it's only a matter of time. Traditional distributors relying on selling goods will gradually be marginalized, like the old supply and marketing cooperatives or wholesale markets. This trend is irreversible; distributors must either wait to die or switch industries. If you want to stay in this industry, you must learn to embrace the internet.
New Channel's emergence doesn't mean distributors have no opportunities or way out. Any new model takes time to mature, and that period is a precious breathing space for distributors to survive or transform.
How Should Distributors Transform?
My advice: Instead of waiting to die, quickly transform and embrace it. Use speed to counter scale, and localization to counter platformization.
Quickly transform and embrace; use speed to counter scale
JD's strengths are professionalism and scale; distributors' strengths are business flexibility and deep local roots. Since the trend toward internet transformation is irreversible, and not all enterprises can partner with JD, why don't distributors themselves participate in or build national or local platforms?
Join forces with local distributor peers to form or join domestic B2B platforms, shift to platform-based operations, aggregate purchasing and distribution to reduce logistics costs, and build core competitive advantages through local relationships and market knowledge, gradually moving toward the internet.
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China's FMCG market is a trillion-yuan market; JD alone can't do all the business. But JD's arrival has indeed brought new thinking and impact to China's FMCG industry. Since you don't want to wait to die, fight back with all your might.
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