---
title: "Liu Qiangdong: The Fourth Retail Revolution Will Surpass the Internet"
description: "The retail industry has recognized three revolutions: department stores, chain stores, and supermarkets. The fourth retail revolution, built on the foundation of internet e-commerce but surpassing it, will usher humanity into the era of intelligent commerce. The essence of retail remains cost, efficiency, and experience, but the ways of creating and realizing value will inevitably change."
author: "刘强东"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2017-07-10"
language: "en"
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# Liu Qiangdong: The Fourth Retail Revolution Will Surpass the Internet

> The retail industry has recognized three revolutions: department stores, chain stores, and supermarkets. The fourth retail revolution, built on the foundation of internet e-commerce but surpassing it, will usher humanity into the era of intelligent commerce. The essence of retail remains cost, efficiency, and experience, but the ways of creating and realizing value will inevitably change.

The retail industry has recognized three revolutions: department stores, chain stores, and supermarkets. The fourth retail revolution, built on the foundation of internet e-commerce but surpassing it, will usher humanity into the era of intelligent commerce.
The essence of retail remains cost, efficiency, and experience, but the ways of creating and realizing value will inevitably change. Photo/VCG
New technologies are having a huge impact on all industries, pushing retail to the forefront. Today, new terms, labels, concepts, and models related to retail are constantly emerging in the market. A clear consensus is that the retail industry is on the eve of transformation.
After a storm, the entire industry will be renewed: bringing new opportunities while also subverting some old models. But it must be recognized that for retail, change and innovation are constant. From the history of retail, the changes we face today are no different from those in the past. The application of technology has never fundamentally changed the essence of retail. Therefore, we do not need to constantly use new vocabulary to define an industry. **The essence of retail remains unchanged: cost, efficiency, and experience.** Grasping this, we can clearly see the future opportunities in the industry.
The essence of retail remains unchanged: cost, efficiency, and experience. So what is changing? In fact, many current discussions are still stuck in the internet era. The internet over the past 20 years has only been a "prologue" to the digitalization of retail. The internet changed the transaction side, but its impact on the supply side is still small. The next act of digitalization—**the Internet of Things and intelligence**—will bring more profound and thorough changes to the industry. In the intelligent era we are about to enter, the ways to achieve cost, efficiency, and experience will be completely different. This is also the opportunity for innovation and value creation in the future retail industry.
Where will retail go? I hope to share with you how JD.com thinks about the future of retail: In the next 10 to 20 years, the retail industry will usher in the fourth retail revolution. This revolution will not change retail itself, but the infrastructure of retail. Retail infrastructure will become extremely plastic, intelligent, and collaborative, promoting the arrival of the era of "boundaryless retail" and achieving upgrades in cost, efficiency, and experience.
The essence of retail has not changed
There is no new or old retail. The essence of retail has always been cost, efficiency, and experience, and this has never changed. Reviewing the history of retail, we can clearly see this.
**The first retail revolution: department stores.** The world's first department store appeared in 1852, breaking the small workshop model of "front store, back factory." Department stores brought two changes: on the production side, they supported mass production and lowered product prices. On the consumption side, department stores displayed goods like museums, reducing the need for shoppers to travel, making shopping an entertainment and enjoyment. By balancing cost and experience, department stores became a classic retail format that continues to this day.
**The second retail revolution: chain stores.** Chain stores, which began to peak after 1859, are also a classic format. Chain stores established a system of unified management and large-scale operation, improving store operational efficiency and reducing costs. At the same time, chain stores had wider distribution and were located close to residential communities, making shopping very convenient.
**The third retail revolution: supermarkets.** Supermarkets began to take shape around 1930. Supermarkets pioneered the open-shelf, self-service model, creating a new experience. In addition, supermarkets introduced modern IT systems (cash register systems, ordering systems, accounting systems, etc.), further improving the speed of goods circulation and turnover efficiency.
**The prologue to the fourth retail revolution.** Around the 1990s, e-commerce began to spread. Due to the lack of physical space constraints, the range of product choices expanded dramatically, giving consumers more options. E-commerce subverted the traditional multi-level distribution system, reduced distribution costs, and further lowered product prices.
It can be seen that from department stores, chain stores, supermarkets, to e-commerce, the development of retail history has always revolved around "cost, efficiency, and experience." Each new format has innovated in at least one aspect. Formats that stand the test of time often meet the requirements of upgrading cost, efficiency, and experience simultaneously.
So the essence of retail is unchanged. In the future, retail may evolve into more new formats beyond today's imagination. But no matter how it develops, it will still closely revolve around "cost, efficiency, and experience."
It was so in the past, it is so now, and we firmly believe it will be so in the future.
The change of retail infrastructure
The essence of retail has not changed, so what is changing? We believe: **it is the retail infrastructure that has been continuously upgrading, constantly changing the way "cost, efficiency, and experience" create and capture value.**
To be precise, the concept of "retail infrastructure" was proposed by JD.com; it did not exist before. Why did JD.com propose "retail infrastructure"? In fact, the evolution of the entire retail system is ultimately the upgrade of the efficiency of information, goods, and capital flows. In this process, we have noticed a trend: the providers of information, goods, and capital services are gradually becoming socialized and specialized.
In the most traditional "front store, back factory" small workshop model, there was no public infrastructure. What to produce, how much to produce (information), how to transport raw materials to the store (goods), and who to borrow money from when funds were insufficient (capital)—these problems were usually solved by the shop owner alone.
**With the development of modern commerce, the flow of information, goods, and capital began to gradually shift to external parties, with third-party companies providing professional services.** For example, innovations in the financial system solved part of the capital problem. By borrowing from banks, rather than relying on personal connections or "face," capital flow became more efficient. After the emergence of internet finance, procedures were further simplified and borrowing thresholds were lowered.
In terms of information flow, Walmart's Retail Link is an important milestone. In the 1990s, Walmart established a **retail data sharing platform** (Retail Link) shared with tens of thousands of suppliers, sharing sales, inventory, store data, etc., with partner suppliers to help them optimize a series of activities such as production, distribution, pricing, and promotion.
This marked that retail data was no longer a proprietary asset of a single enterprise, but a public resource that everyone could share and jointly utilize.
In terms of goods flow, logistics is also moving from self-owned to public services. In the early days, many manufacturers and distribution companies built their own warehousing facilities and configured their own vehicles and drivers. **After the emergence of third-party logistics companies, not only was economies of scale and professionalism achieved, but also professional division of labor was promoted**—production and sales companies could outsource logistics and focus more on creating core value. The same trend exists in e-commerce logistics: Amazon's FBA (Fulfillment by Amazon) service and JD.com's open logistics both extend professional third-party logistics services to customers, achieving economies of scale and efficiency improvements.
From this, we can see a clear trend: **behind the improvement in the efficiency of information, goods, and capital flows is an increasingly socialized and specialized service system.** Socialization is the foundation of specialization. Through socialization, economies of scale and network effects can be better achieved, improving the level of specialization. Ultimately, services for information, goods, and capital flows will become public infrastructure like water, electricity, and coal, pushing the cost, efficiency, and experience of retail to new levels.
Therefore, JD.com believes: **the change in retail is actually the change in the retail infrastructure behind it.** In the future, retail formats can take many new forms, but the infrastructure behind them will become increasingly socialized and specialized. The retail industry will evolve into an interconnected, shared ecosystem. Seeing this, we can understand the upcoming fourth retail revolution.
The fourth retail revolution
JD.com's judgment is that the fourth retail revolution is coming.
The retail industry has recognized three revolutions: department stores, chain stores, and supermarkets. Although the e-commerce wave that began in the 1990s changed many aspects of the retail industry, it cannot yet be considered a retail revolution because e-commerce has not thoroughly upgraded experience, cost, and efficiency. In terms of experience, the display in a purely virtual space has limitations; in terms of cost and efficiency, although e-commerce can eliminate layers of distribution, fulfillment costs are not low.
**The fourth retail revolution is built on the foundation of internet e-commerce but surpasses the internet.**
The popularity of the internet over the past 20 years has laid a solid foundation for the digitalization of retail, accumulating a large amount of data. Coupled with the leap in computing power and breakthroughs in intelligent algorithms in recent years, mature conditions have been provided for the intelligent commercialization of retail.
Unlike the previous three revolutions, the fourth retail revolution will be disruptive. Department stores, chain stores, and supermarkets had strong impact, wide influence, and long duration, but in terms of the nature of innovation, they were merely incremental innovations around "cost, efficiency, and experience." In the end, the problems they solved were nothing more than: first, can product prices be cheaper (cost, efficiency)? Second, can customers shop more conveniently (experience)?
But today, consumers expect more than just low prices and convenience. For example, the dilemma consumers face today may not be a shortage of goods, but an excess of choices; not high prices, but uneven quality; not poor performance, but lack of personality. If we follow the old thinking and blindly control prices and expand territory, we cannot solve today's consumer pain points. Today, "cost, efficiency, and experience" must be redefined.
**The development of retail over the past 100 years has been quite stable. The upcoming fourth retail revolution will break this inertia and bring the industry into a period of turbulence. This will be a big wave, not a small ripple. The rules of the game in retail need to be rewritten.**
Today, we can already vaguely feel such turbulence. We see various new things emerging: apps that allow product search and shopping by taking photos, AR and VR technologies that create immersive shopping experiences, unmanned supermarkets that support automatic checkout and face-scanning payment, smart refrigerators that can automatically order fresh food... Everyone is exploring new standards for future retail. So, where will retail go in the future? What will the new standards and paradigms be? What impact will they have on today's retail enterprises?
JD.com has been deeply involved in the retail industry for more than ten years and has formed some insights and judgments. We are very willing to share our thoughts on this with you.
The driving forces of the fourth retail revolution
To judge trends, we must first analyze the driving factors behind them. Historically, each retail revolution has been the result of two forces working together. The first force is **changes in consumption**, and the second is **technological updates**.
**The impact of consumption changes on retail formats is obvious:** urbanization promoted the aggregation of consumers and the concentration of purchasing power, giving rise to the prosperity of department stores; under the background of increased work pressure and accelerated pace of life, consumers put forward higher requirements for low prices and convenience, leading to the rise of chain stores; with the awakening of consumers' self-service awareness, the open-shelf sales model of supermarkets was welcomed.
**Similarly, technological updates are closely related to changes in retail formats.** Behind department stores is the mature application of mass production and the separation of production and sales; chain stores rely on a retail organization method of unified management and standardized operation; supermarkets cannot do without the support of modern information systems (cash register, ordering, accounting systems, etc.).
The first three retail revolutions all had the shadow of consumption and technology. They worked together to drive the trajectory of retail business development. So, what are the factors driving the fourth retail revolution today?
**Changes in consumption:** The arrival of the era of consumer sovereignty. Demand for personalization means that consumers are increasingly paying attention to the expression of their own personality. Their focus shifts from common features such as cost-effectiveness and product function to individual features such as aesthetic design and value labels, which places higher demands on the adaptability of products and retail.
For example, in the future, each consumer may have a "personal information account" that records personal biological information including skin characteristics. Based on each person's different skin type, completely personalized beauty products can be generated and provided to consumers. **People's needs will become increasingly fragmented.** Scenario diversification means that consumption scenarios will become increasingly dispersed. The touchpoints between enterprises and consumers will no longer be limited to a single shopping mall, website, or other high-traffic entrances, but will become unprecedentedly rich. For example, in the future, consumers can use their smart refrigerator at home to automatically identify the remaining amount of regular foods such as eggs and milk, and place orders automatically; they can take photos of clothing styles they like in TV dramas, automatically identify the sales source, and make purchases; they can also chat with a virtual assistant while having it purchase fashion items that friends have recently followed as birthday gifts... **In the future, the role of traffic centers will weaken, and shopping scenarios will become extremely instant and fragmented.**
Value participation means that consumers are playing an increasingly active role, from passive acceptance and selection to active influence and creation. For example, consumers with similar hobbies, identities, and labels can easily gather together through the internet. They form communities and seize every opportunity to interact with brands: from content creation, design participation, decision-making consultation, experience sharing to brand communication... Ultimately, consumers will integrate into all aspects of the value chain and create value together with enterprises.
It can be foreseen that **the result of consumption changes is that customer needs, consumption scenarios, and product output will become extremely dispersed.** This will bring great challenges to retail activities: how can these scattered points be connected and coordinated in an orderly manner? This can be achieved through newer technologies.
Technological updates: The arrival of the era of technology empowerment
The upcoming era of intelligent commerce gives us new capabilities to transform retail and retail infrastructure. It must be emphasized that we are talking about technologies that go beyond the internet era. **The internet can effectively connect dispersed customers, products, and consumption scenarios, but it is difficult to achieve collaboration.** The collaboration of intelligent commerce is based on the "3 I's": Instrumented, Interconnected, and Intelligent.
Instrumented refers to the increasing ability of intelligent technology to sense scenarios, ultimately enabling scenarios to be digitized and retaining valuable data resources. For example, JD.com's Dingdong speaker can sense and recognize user voices, understand user needs, and digitize them; JD.com's smart refrigerator can use built-in high-definition cameras to achieve image recognition and door-to-box comparison, allowing users to receive proactive expiration reminders for different categories of food such as fruits, vegetables, fresh food, eggs, and milk without manually entering names. Sensing and digitization are the foundation for gaining insights into customer needs.
Interconnected refers to connecting data from different scenarios, maximizing data sharing, and thereby creating higher collaborative value. For example, JD.com's Dingdong speaker is not just a speaker; it is connected to 150 third-party services such as Himalaya FM, E袋洗, and JD.com Mall, and can flexibly call different applications, thus creating a huge intelligent life ecosystem. Behind the smart refrigerator is also an ecosystem. For example, by connecting with supermarkets, the refrigerator can automatically order daily goods such as eggs and milk to ensure these foods are never out of stock.
Intelligent refers to the continuous improvement and optimization of the intelligence level of the entire retail system. For example, future retail will achieve more accurate sales forecasts, higher conversion product recommendations, more reasonable delivery route planning, and more demand-based inventory planning. With the improvement of data and the iteration of algorithms, the production, recommendation, and delivery of products will become increasingly precise, and the combination of various modules will become extremely flexible.
Consumption and technology are like the double helix structure of DNA, interconnected and coordinated. Changes on the consumption side represent the direction of the fourth retail revolution. But without the support of intelligent technology, all this is empty talk. The update on the technology side provides support for the fourth retail revolution. The two forces of consumption and technology are intertwined, bringing about the fourth retail revolution.
The future retail landscape
So what will the future retail landscape look like? The changes on the consumption side (3 P's) combined with the updates on the technology side (3 I's) cross-combine to yield two keywords: **boundaryless and precise.**
**Boundaryless means going from "N→1" to "1→∞."** The past internet era was centralized (N→1): N netizens went to the same webpage, making the webpage the center of traffic. In the future, we will move to the era of 1→∞, where one person will face countless screens, countless scenarios, and countless entrances. Today's traffic centers will become unimportant; what truly matters is being customer-centric. For retail, the future must be boundaryless—ubiquitous and always available.
When shopping entrances become extremely dispersed and changeable, retailers who stick to a single platform will be very fragile. New, digital retail infrastructure becomes very important, through which we can serve diverse and changing scenarios more efficiently.
**Precise means going from "mass market" to "market of one."** In the past, retail and production activities were managed by category and market, targeting the mass market and providing batch products, which made it difficult to meet each person's unique needs. **In the future, sensing technology will give us the ability to perceive each consumer's personalized needs, and we can flexibly realize personalized needs by connecting external resources, and we can also make interactions and deliveries more efficient through intelligent algorithms.** That is to say, future retail will become increasingly precise; otherwise, it cannot achieve "cost, efficiency, and experience" and will be eliminated.
Boundaryless represents width. Precise represents depth. In this future retail landscape, how can retail enterprises balance widening and deepening? They must rely on digital, intelligent retail infrastructure. In the end, only innovative technology applications can continuously break through the retail productivity frontier and achieve simultaneous upgrades in experience, cost, and efficiency.
In the "boundaryless retail" landscape defined by the fourth retail revolution, the upgrade of experience is not just "convenience," but also understanding of consumer needs (knowing you better than you know yourself), connection (anywhere, anytime), and realization (see it, get it). Ultimately, consumers can satisfy their desires anytime, anywhere. The upgrade of cost and efficiency will also rely more on intelligent technology and cross enterprise boundaries, achieving continuous optimization of capital, goods, and information flows within the entire retail system.
Future retail infrastructure
Retail infrastructure plays a very important role in the future "boundaryless retail" landscape. This is because it is an important carrier that connects consumption changes and technological updates. In the future, consumer needs and scenarios will become extremely diverse and dispersed. Retail enterprises need a new support system covering information, goods, and capital flows. When this system is a public basic service, it can more effectively achieve unified coordination of resources and maximize shared value.
For example, every retail enterprise now attaches great importance to consumer research and creates user profiles. But the information enterprises get now is fragmented because each has only part of the information and cannot piece together a complete picture, so our understanding of users is very limited. Through data collaboration (one of the retail infrastructures), we can cover a customer around the clock, understand their preferences and consumption scenarios, and user profiles will become very accurate. This is the value of public infrastructure.
To better achieve unified coordination of resources, JD.com believes that first-class retail infrastructure in the future should have three major characteristics: Scalable, Smart, and Synergetic.
**Scalable** means that retail infrastructure has strong adaptability to meet the different needs of different partners—for example, it can meet the supply chain management needs of large comprehensive e-commerce platforms and also adapt to the e-commerce business of individual micro-businesses/internet celebrities. This means that infrastructure service providers must have an open mind and flexible organization, and most importantly, they must have the appeal to formulate and implement service standards.
JD Logistics, based on years of operation, opens to society. It is not just output; it also connects socialized logistics to provide diversified services; it is not just connection; it also outputs logistics service standards, ultimately contributing to reducing the total social logistics cost together with the whole society.
**Smart** means that retail infrastructure should rely on data and data-based algorithms to output intelligent solutions and continuously improve the overall efficiency of the retail system. Intelligence is all-encompassing, with huge improvement and service space from procurement, logistics, consumption, to service. This means that first-class retail infrastructure services need to cover data across the entire chain and possess professional knowledge in the retail field to empower externally more effectively. JD.com has more than ten years of experience in self-operated mall operations, accumulating rich professional knowledge in all aspects from procurement, sales, logistics, marketing, to after-sales service, and has actively and effectively explored the intelligence of the entire retail process. In the future, JD.com will further output these capabilities and share and grow with retail partners.
**Synergetic** means that the combination of information, goods, and capital flow services can reinforce each other and form a synergy. For example, data + finance = lower bad debt rate; logistics + finance = seamless supply chain financial services; data + logistics = faster turnover and lower inventory. The combination of different services can bring additional added value. This shows that first-class retail infrastructure service providers in the future will inevitably move towards "soft-hard combination": they must be able to reach the sky—connecting data and finance—and also be down-to-earth—doing the hard, dirty, and tiring work of logistics. JD.com has made significant investments in the logistics field, established competitive barriers, and at the same time is rapidly developing in the finance and data fields. In the future, it will share more collaborative value with society.
With the improvement of scalable, smart, and synergetic retail infrastructure, the future retail ecosystem will be completely transformed and reconstructed. Retail infrastructure must be open and empowering. It does not eliminate many of today's retail formats but integrates with them and develops together. It affects not only the consumption field but also the circulation field, ultimately bringing earth-shaking changes to the entire supply chain (from order to production, to terminal, to consumption).
Conclusion
What is the essence of future retail? I think it should still be cost, efficiency, and experience. But the ways of creating and realizing value will inevitably change.
In the upcoming fourth retail revolution, intelligent technology will drive the continuous optimization of capital, goods, and information flows in the entire retail system, improving efficiency and reducing costs on the supply side, and achieving the experience upgrade of "knowing you better than you know yourself," "anywhere, anytime," and "see it, get it" on the demand side. Future retail infrastructure will become extremely scalable, smart, and synergetic.
This is the future of retail as seen by JD.com.
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