On March 20, JD New Channel held an unbounded retail industry summit during the糖酒会, known as the "world's first conference" in the industry. At the conference, JD New Channel announced two major pieces of news: First, it will build its fourth logistics network—the B2B logistics network—and launch a joint warehouse and distribution system, co-building it with brand owners, small and medium-sized distributors, and wholesalers. Second, it officially announced its entry into the food service B2B sector. In addition to providing an efficient and transparent "back kitchen" supply chain system for food service outlets, it also launched a food service solution integrating ingredient certification, dish development, and store services. JD New Channel was established at the end of 2015. After two years of development, it previously served 6 million traditional retail stores. Now, why has it also included small and medium-sized food service outlets in its target scope? These two announcements are significant—what is the underlying business logic? JD New Channel exhibited at the Spring Sugar Fair, initiating recruitment for joint warehouse and distribution and food service projects. First, why is JD New Channel doing joint warehouse and distribution? Combining high-frequency and low-frequency product orders to achieve the best balance between warehousing costs and turnover efficiency. Terminal outlets' procurement can be broadly divided into two categories: high-frequency products (such as beverages and dairy) and low-frequency products (such as snacks and daily chemicals). High-frequency products are unplanned; stores have high requirements for timeliness and purchase them frequently. If goods are shipped from a central warehouse to retail terminals, the delivery radius is too long, logistics costs remain high, and the central warehouse is extremely uneconomical. By cooperating with regional small and medium-sized distributors and wholesalers to establish joint warehouse and distribution, JD New Channel can significantly improve delivery efficiency and optimize warehouse and distribution costs. For example, a distribution terminal places an order on JD's Zhangguibao APP for 5 cases of mineral water and 3 boxes of biscuits. When the order reaches JD's backend, based on system recognition, the "high-frequency" mineral water order enters the regional distributor's warehouse system, while the "low-frequency" biscuit order enters JD's self-operated central warehouse. The central warehouse ships to the joint warehouse, where they are consolidated and delivered to small and medium-sized stores. JD New Channel cooperates with small and medium-sized distributors and wholesalers, sharing warehouse and distribution resources. Regional joint warehouses handle high-frequency, frontline, seasonal, and high-turnover products, while JD's self-operated warehouses handle long-tail, low-frequency, slow-moving, and seasonal products. Through the combination of joint warehouses and central warehouses, the effective combination of high-frequency and low-frequency products achieves the best balance between warehousing costs and turnover efficiency. What does this openness mean for regional small and medium-sized distributors and wholesalers? In the past, there was an adversarial relationship between channel distributors and B2B platforms. Local channel distributors held agency rights for many high-frequency, well-known brand products, while B2B platforms, whether sourcing from distributors or transferring goods from other regions, inevitably conflicted with them to some extent. According to the latest disclosure, by the end of 2017, JD Zhangguibao had over 500,000 users. After more than two years of operation, New Channel, relying on its team's efforts, developed a sustainable model and built relatively complete "water, electricity, and coal" infrastructure (platform, ground promotion, products, warehouse and distribution). Once the model and infrastructure are complete, opening the platform naturally follows, just like the opening of JD's logistics business... As a self-operated platform, JD has always made traditional channel distributors uneasy; "revolutionizing channel distributors" has always been a concern for self-operated platforms. Now, New Channel's launch of the joint warehouse and distribution system clearly indicates that New Channel recognizes the value of channel distributors and the significance of the traditional trading system. Thus, it is not difficult to understand that New Channel's past self-operation was actually for better "joint" cooperation now. For regional small and medium-sized distributors and wholesalers, covering more small stores is their business goal, but due to various financial, material, and human constraints, they often cannot achieve it. By cooperating with JD New Channel, small and medium-sized distributors and wholesalers can increase sales opportunities through the platform. In terms of product resources, they can leverage the vast product resources on JD Zhangguibao to develop more stores and meet stores' one-stop procurement needs. At the same time, JD's warehouse and distribution management, technology, and operational experience can be exported to these channel distributors, helping them improve warehouse and distribution management capabilities and operational efficiency, and even successfully transform into "internet-style" distributors. The launch of joint warehouse and distribution is undoubtedly a win-win situation for JD and small and medium-sized distributors and wholesalers. Next, why is JD New Channel entering the food service B2B sector? According to public data, in 2017, national food service revenue reached 3.9644 trillion yuan, a year-on-year increase of 10.7%. It is expected that in 2018, the food service industry will maintain a growth rate of around 10%, with total scale reaching 4.3 trillion yuan. Behind the "prosperity" of the food service industry is a huge demand for ingredient procurement, with sufficient market capacity and steady growth. Although the front end of the food service industry is prosperous, the back end still maintains a traditional supply chain model, much like the traditional distribution terminal supply chain. Local food ingredient supply mostly consists of individual or wholesale suppliers, and the complex procurement process and diverse procurement channels of small and medium-sized food service outlets result in uneven quality of ingredients. Neither the quality nor the stability of procurement can be guaranteed. The huge market capacity, coupled with the "immature" ingredient supply, strictly speaking, makes this a sufficiently attractive cake. New Channel, covering 500,000 retail stores, has the capability to serve offline outlets. At the same time, with the establishment of the "joint warehouse and distribution" system, it is reasonable for New Channel to enter food service B2B. In entering food service B2B, New Channel has the following advantages: • Backed by JD Group's (JD.com) massive product resources and product organization capabilities, it can continuously provide stable, high-quality, and diverse products to small and medium-sized food service outlets; • The establishment of the joint warehouse and distribution system makes small and medium-sized distributors and wholesalers "members" of New Channel, providing basic logistics support for the products and services of food service outlets in various regions; • Two years of market operation experience, coupled with a nationwide ground promotion team, ensures the implementation of market promotion and services. The construction and improvement of the three basic elements of "people, goods, and warehouses" give New Channel more confidence in entering the food service B2B sector. Of course, JD New Channel's goal is not just to stay at the supply level. It is reported that New Channel will provide one-stop food service solutions for small and medium-sized food service outlets, including ingredient supply, ingredient certification, store services, and dish development. New Channel not only aims to improve the supply efficiency of small and medium-sized food service outlets and ensure ingredient safety, but also to enhance their operational capabilities. Overall, whether it is joint warehouse and distribution or food service B2B, the function JD Group has assigned to New Channel seems more ambitious. New Channel, with smooth paths, may be JD's biggest ambition in offline layout. -END-