At the 2018 China 'Internet+' Digital Economy Summit held yesterday, Liu Qiangdong, Chairman and CEO of JD.com, set a goal to open 1,000 JD convenience stores daily by the end of this year. Two years ago, JD proposed a convenience store plan. As of March this year, JD convenience stores were opening 1,000-1,200 new stores weekly, receiving 50,000 applications daily. Liu Qiangdong stated that before the end of this year, JD convenience stores should open 1,000 new stores daily. Through a franchise model, there should be a JD convenience store every 300 meters on a street. In such stores, there are no counterfeit goods, JD Finance provides loans, and store owners only need to find a location with foot traffic to ensure a monthly income of around 8,000 yuan. "In the future, while opening various formats of small stores, JD will also empower large supermarkets. There are over 2,800 districts and counties in China that can be entered, with huge potential," Liu Qiangdong said. Additionally, Liu Qiangdong explained why he is committed to building his own logistics: "JD launched its direct sales mall in 2003, with no intermediate channels, achieving the lowest prices, controllable quality, and high supply chain efficiency. In 2004, JD proposed using technology to build a supply chain service company, which is why JD has been investing in logistics." According to him, JD's self-operated retail comprehensive expense rate is currently less than 10%, with 500 logistics centers, 5 million products in stock, and inventory turnover days of over 30 days. In the future, this number will drop to 20 days. "JD proposed 'Boundaryless Retail' last year because JD found that relying solely on JD's self-operated sales cannot further improve supply chain efficiency. It is necessary to introduce numerous partners to share the supply chain, making it larger and more efficient. It's not about making money from each other, but about reducing inefficient supply chain losses and improving supply chain efficiency," Liu Qiangdong explained. He cited an example: The small supermarket on the Yangtze River Golden 7 cruise ship in Chongqing had high prices, causing consumer complaints, but in fact, the store was not profitable. When docking briefly, it had to order from dozens of suppliers, making its supply chain costs very high. Although the Golden 7 had absolute traffic, traffic does not mean supply chain efficiency. After cooperating with JD, JD's supply chain helped it deliver goods accurately within 15 minutes, with prices as affordable as JD.com, and the store became profitable. Liu Qiangdong's Speech Transcript: Dear leaders, friends, ladies and gentlemen, good morning! Today, I will share how we empower our partners with open and shared 'Boundaryless Retail.' Speaking of today's sharing, I must go back to the first day of JD's entrepreneurship and our thinking. As you all know, I started by setting up a stall in Zhongguancun. When I was at the stall, I noticed that a hard drive, a motherboard, and a monitor could be moved back and forth three or four times within a market. At that time, I realized that such frequent movement of goods had no value; it did not create any value for the industry, users, or brand owners. It was just speculation. So I thought that such worthless movement and business activities would eventually disappear. You must build a supply chain system that brings value to consumers and partners. In 2003, JD launched JD.com, emphasizing the word 'direct sales.' We sourced everything directly from manufacturers, selling to consumers without intermediate channels, thus achieving the lowest prices, controllable quality, and the highest supply chain efficiency. In 2004, we internally decided what kind of company JD.com, our e-commerce business, would become and how we would win. At that time, we said internally that we are not an e-commerce company; we are a company that uses technology to build supply chain services, providing supply chain services to brand owners with technology. That is why we spent over ten years investing in building our logistics system. What is JD's supply chain today? I can share a set of numbers. Our entire supply chain, the entire retail part, JD's self-operated retail comprehensive expense rate is less than 10%. What does this mean? Currently, only a few companies worldwide can achieve a comprehensive expense rate of 10%, one of which is Costco in the US, with an expense rate of less than 10% and a gross margin of 11-12% to achieve good profits. Most retailers in China and worldwide need over 20% to be profitable, meaning costs are between 15% and 20%. How do we measure supply chain efficiency? It's inventory turnover days. Today, JD manages over 500 logistics centers in China alone, with nearly 5 million product types in stock, while traditional retailers generally manage 150,000 SKUs. The difficulty of managing 5 million SKUs is not 30 times but possibly 300 times that of 150,000; it's not linear but geometric exponential growth. Our inventory turnover days are just over 30 days, and our future goal is to make it shorter. How can we make our supply chain more efficient in the future? This is what we've been thinking about in the past two years. In recent years, the entire retail industry has undergone tremendous changes, from the consumption environment to consumption preferences to the emergence of various new formats. No matter how the front-end formats change, the back-end supply chain has never changed; a supply chain system is still needed. How can JD's supply chain be more efficient? Last year, we proposed 'Boundaryless Retail.' What is the core? We must introduce more partners through openness, let everyone share this system, and through scale advantages, make the supply chain more efficient and costs lower. This achieves that all partners do not compete with each other but jointly seek efficiency and profits from the supply chain. Our country's socialized supply chain cost accounts for about 18% of GDP, based on 2016 data, while Europe and the US are only about 7-8%, and Japan can achieve 5-6%. Our country has a huge manufacturing industry and numerous brand owners. They work hard, produce good quality products, and have high gross margins, but in the end, they don't make money because it's wasted and lost by inefficient supply chains. So we must unite and jointly seek efficiency from the supply chain. Let me give an example: There is a small shop on the Yangtze River Golden 7 cruise ship in Chongqing. In the past, it stocked goods itself, with relatively high prices, but it still wasn't profitable. Why? Think about it: a small shop stocking instant noodles and mineral water has to deal with dozens of suppliers, and the ship often docks for only an hour or 15 minutes before leaving. You must deliver to the dock within 15 minutes, making the supply chain costs very high. There is a common misconception on the internet today: people think that with traffic, you can make money online. With traffic, you can do e-commerce; with traffic, you can do retail. But that's not true. The small shop on the Golden 7 has no competition; it has absolute traffic. If you want to buy instant noodles or mineral water, you must go to that shop, but it still doesn't make money because the supply chain is poor. However, since JD cooperated with it, when it docks at Chongqing, Fuling, and Yichang, JD's precise supply chain can deliver goods quickly. Moreover, in the past, it sold common goods; now half of its products are imported. The key is that all prices are as cheap and affordable as JD.com. Consumers don't need to spend an extra cent on the Golden 7 to buy the same high-quality, low-priced goods as online, and the shop also makes money. This achieves a win-win for consumers, store owners, and JD's supply chain. Another example: Two years ago, we proposed the 'JD Convenience Store' plan. As of last month, JD was opening 1,000 JD convenience stores weekly in China. Our goal is to open 1,000 JD convenience stores daily by the end of this year, and almost all stores are franchised. Countless young people and migrant workers are excited by this news. We receive 50,000 applications daily, mostly from workers who want to return to their villages, towns, or small counties. Our goal is to have a JD convenience store every 300 meters, with JD's brand and products, no counterfeit goods, guaranteed quality, JD's precise supply chain, and JD Finance providing loans. They only need to spend a little money to find a location with foot traffic to open a JD convenience store, and they can earn over 8,000 yuan per month. What other value does the supply chain have? Besides various small stores, it can be applied to other formats. For example, if you open a barbershop, you need shampoo and conditioner. If you go to purchase, you might contact P&G, but P&G won't respond because there are four or five layers in between. JD can empower you. If you open a barbershop, you might only need one or three bottles of shampoo a month; that's fine, JD will deliver. For offline restaurants, why do they often run out of fish one day, beef the next, and wine the day after? It's because their supply chain is poor. A small store can't build a complete supply chain, but JD can empower you. Large supermarkets can also be empowered. Today, there are over 2,800 districts and counties in China, and Yonghui hasn't entered every one. But Yonghui has a very strong supply chain. Using JD's supply chain system, Yonghui can sell its high-quality, distinctive, and advantageous products to districts and counties where Yonghui hasn't even opened stores. You can still gain economic benefits without opening stores. Some might say, 'Liu Qiangdong, if you do this, I think your ambition is too big. Are you trying to strip a layer of skin from the industry and make money from everyone?' No, what we want is not to make money from anyone, but for countless partners to work together, jointly seeking efficiency and benefits from the supply chain. It's not about competing with any partner, customer, or brand owner, nor about conflicts of interest among partners. Instead, we jointly integrate all supply chains. The supply chain is an industry where the larger the scale, the better the efficiency. Supply chain is the industry with the most obvious scale efficiency in the world, so supply chain must have scale. I want to summarize a few words: I hope JD's 'Boundaryless Retail' becomes an open, symbiotic, regenerative, and mutually generative community. Thank you all! Source: Phoenix Technology -END-