The 2020 (3rd) China FMCG Conference, hosted by New Distribution, was grandly held from August 24-26 at Shanghai Fuyue Hotel. The event attracted 3,000 industry practitioners, including distributors, manufacturers, and internet companies from across the country, filling the venue to capacity. The following is the speech delivered by Mr. Zheng Hongyan, Vice President of JD Group and President of the New Channel Division under JD Retail Group's Supermarket & Omnichannel Business Group, organized and published for our readers. Dear guests, good morning! Today, I bring you a topic: "Reshaping Value, Building an Ecosystem Together." ▲ Zheng Hongyan, Vice President of JD Group and President of New Channel Division, JD Retail Group's Supermarket & Omnichannel Business Group

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Starting from Value Creation Contributing Value to Users, Industry, and Society

Over the past four-plus years, New Channel has been creating value for society, the industry, and users. We are confident that through New Channel's fulfillment and distribution systems, we can bring quality products and services to all consumers in China's 1st to 6th tier cities.

Some friends may say New Channel is B2B, so why do we want to do 2C? Because we see that whether in first-tier cities or remote villages, there is significant room for improvement in product authenticity and real-time fulfillment services. So New Channel is considering whether we can use physical stores as a carrier to enhance product quality and service quality. To achieve this, New Channel must create more upgraded value within the industry's existing distribution system. For example, what can we do in brand manufacturers' collective win-win and transformation? How can we coexist and win with brand owners and distributors? Can New Channel empower and add value to each other? New Channel's primary store sources are independent stores. New Channel aims to use stores as the core carrier to do these things: while creating a future growth path together, we must also make them trust New Channel and perceive the intelligence of New Channel's services. That is our pursuit. To achieve this goal, what efforts have we made recently? First is full-chain digitalization. Whether for brand owners, channel partners, salespeople, stores, or consumers, New Channel has been developing corresponding products and building infrastructure to ensure that brand owners, whether for traffic products or new products, can quickly reach stores and consumers. New products' distribution challenges in traditional channels have found spring in the e-commerce era. Today, new products can reach consumers quickly and at low cost through e-commerce platforms. But we also see that many new products do not achieve long-term sustained sales through e-commerce's rapid reach, because the real place for "mowing grass" is still offline. After brand owners form consumer awareness and loyalty online, if they cannot go offline, they will soon hit bottlenecks because online sales growth is limited. For example, Three Squirrels, after online success, still needs to go offline; offline stores remain crucial for these new products. How to enable products to be sold online through digitalization while also having strong fulfillment capabilities is what we have been working on. To this end, New Channel has formed four major networks covering six-tier markets, and seven cooperation models developed in collaboration with brand owners, all based on the fulfillment system. New Channel can cooperate directly with brand owners, or with distributors and joint warehouses, so we have strong complementary relationships in people, warehouses, vehicles, and cash flow. This way, goods can be listed online and also fulfilled to reach stores. These two models provide the premise and foundation for refined scenario operations. We can provide services consumers need in mother-and-baby stores, convenience stores, and famous liquor stores, and connect online and offline in real time. This year, JD Group underwent organizational upgrades with the establishment of the Supermarket & Omnichannel Business Group. In the future, with the support of JD Supermarket, New Channel's capabilities in reaching and controlling scenes, omnichannel supply and fulfillment, and omnichannel marketing will all be upgraded. In the early stages, New Channel independently drove B2B growth. With the establishment of the Supermarket Business Group, we can further form diversified complementarity. Brand owners can plant seeds on the main site and directly face consumers, while also conducting offline marketing through the low-cost fulfillment supply network built by New Channel. In the future, the Supermarket Business Group will provide more resources and environmental contributions.

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Professional and Digital Empowerment of Small Stores Earning Strongest Trust through Value Creation

In the past, when building the JD Convenience Store project, we always said we wanted to drive rapid store growth. Today, based on the above, we realize that while stores grow rapidly, we must also pursue higher quality.

As early as 2019, we began driving this. At the product level, the richness of in-store products can achieve "thousand stores, thousand faces"; while in store image and service quality, we hope to achieve "thousand stores, one face."

We have applied these six unified standards to JD Convenience Stores, JD Mother & Baby Living Halls, and JD Convenience Famous Liquor Stores, as well as our developed self-service mini-stores. In the future, JD Convenience Stores will strengthen store, product, and service quality. Previously we said "fast and good," now it's "good and fast."

First, in product selection, operational support, and traffic and customer acquisition resources, New Channel will create value for stores.

We have always emphasized: if you cannot create value for the industry or customers today, you cannot survive. Moreover, this value creation must be perceived and recognized by those served. This recognition and trust can form your core competitiveness.

Through the JD Store Manager intelligent store management system and professional store operation teams, we have achieved integrated management from products to stores to members to marketing, bringing value creation to stores.

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Leveraging JD Internal and External Traffic Continuously Optimizing Omnichannel Supply and Fulfillment

Through "Wujing Jingze" (a JD program), JD can help stores with LBS-based traffic distribution, whether from internal or external traffic sources. This helps traditional offline stores match products to consumers more precisely, meaning it can bring value to stores offline, with more precise category matching.

Stores can gain new growth through pre-sales on JD's main site. For example, if a store receives fresh food orders on the main site and forms pre-sales, the store will have fresh food products delivered the next day. This gives the store category growth on top of its original business. That's our fulfillment method.

Whether it's JD's traditional 211 method or our added 2-4 hour, 1-hour, or half-hour delivery options, we now have a same-city delivery system. Through the main site or our original strong-control methods, socialized fulfillment methods, or platform traffic cooperation, we form a "to-store + to-home" business model for our stores.

If originally only consumers coming to your store generated business, today we also help you form an online to-home business.

Besides helping offline stores gain more product category growth on JD's main site, we can also embed more service-type product categories.

As I mentioned earlier, with the establishment of the Supermarket Business Group, we can cross business units to obtain more service-type products from other JD business units. For example, we can get automotive services from the Life Services Group; home furnishing and housekeeping services. In the future, New Channel's cost to obtain these contents will be lower and faster.

With these products and services, we can help stores gain traffic and reduce customer acquisition costs. For example:

We are currently building a small store SaaS platform to help stores list on major O2O platforms, even JD's main site B2C platform, and also socialized platforms like Meituan.

What JD excels at today is opening up its centralized traffic operations to the outside. This open mindset gives us a good foundation for cooperation with many social traffic brands. Because our logic is not to bring all traffic back to JD's main site; it's decentralized.

What are the benefits? First, through this SaaS platform, stores can solve all online platform onboarding issues in one go, without needing to be proficient in each platform's operational rules or repeatedly listing products on each platform.

New Channel's one-stop solution can reduce stores' knowledge and operational costs. That's our advantage.

We not only provide these services but also provide products endorsed by JD. Not only in your store but also on all online platforms, consumers can see that these products are from JD's selection.

We look forward to bringing the product mindset consumers form on JD's main site, especially for sensitive categories like liquor and mother-and-baby, to offline. Consumers are more willing to buy products in stores that have the same quality and service guarantees as on JD's main site.

Using store empowerment, we bring products online and into these scenarios we've developed, monetizing traffic in these scenarios with your goods.

For brand owners, through this SaaS platform, they can do user reach for all strategic or traffic products within the online system formed by New Channel, issue coupons, perform verification, and promote product brands.

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Building a B2B2C Omnichannel Marketing System for Brand Owners Facilitating Precise Conversion

In the past, brand owners could only operate through centralized platforms and found it difficult to achieve controllable and visible product reach through independent stores. But today, this becomes possible.

Through the construction of this series of systems, New Channel not only respects brand owners' original offline distribution systems and pricing logic but also helps them build a controllable, visible, more efficient, and low-cost product reach model.

So, in fact, the process from brand owners' products to consumers becomes more efficient and lower cost, and all of it is incremental contribution on top of the original basis.

Ultimately, we form a store-centric B2B2C omnichannel marketing system built for brand owners, or jointly formed by our stores and channel partners.

At the beginning of 2019, I said that just doing B2B has no future, because the amount you actually sell to stores depends on sell-through. That's one point. Even if there is sell-through, if you cannot create value for them, they won't form long-term, sustained supply from you.

New Channel's business today, in one sentence, is to strengthen our B2B side through the capabilities of the end (2C side). That is, in omnichannel, we want to do supply business, and at the same time, we want to do selling business. Together with our small stores, we do to-store business models, help them build to-store business capabilities, and form brand education for consumers.

Whether it's brand owners' product brands or JD's brand, they are all brands that provide the same experience as shopping on JD's main site. Based on this concept, we can form a supply business and a selling business. Above is the online to-home business, and below is the offline to-store business, forming a three-dimensional combination.

Finally, through digital systems like JD's Shufang and Huiyan, brand owners can obtain more complete and three-dimensional data from JD.

So, New Channel's value reshaping and ecosystem co-building is actually about cultivating new consumers online and offline while consolidating traditional consumers. The online and offline B2B2C omnichannel marketing system helps us, together with brand owners, provide good products to small stores, help all our stores become good stores, and ultimately bring better experiences to consumers.