Chinese online commerce provider JD.com made what Supply Chain Matters views as  a noteworthy announcement, namely that the E-commerce provider will leverage its own deployed logistics capabilities to offer parcel delivery services across select areas of China to a broader population of consumers and businesses.China's JD.com

According to the announcement, this new service will enable shippers in either Beijing, Guangzhou or Shanghai to ship intercity or mainland China bound parcels utilizing a JD.com mobile app and leveraging the provider’s existing supply chain management technology and logistics delivery network capabilities. Over time, delivery options are expected to include two-day or same-day delivery for certain types of goods among any two points in China.

The significance of the announcement is twofold.

First, it broadens the services options of its existing logistics and transportation network into a broader delivery network to compete with either existing domestic Chinese or global wide carriers such as DHL, FedEx or UPS. By some accounts, China’s parcel delivery market far surpasses other domestic markets including the U.S.

Because of complex, regionally based regulations, there are very few nationwide logistics providers. According to The Wall Street Journal, JD’s current capabilities include 15 logistics parks and more than 500 warehouse and upwards of a quarter million transportation and delivery vehicles.

We view this announcement as a bold move to upstage domestic rival Alibaba in capturing market interest. The announcement comes a mere few weeks before China’s largest online shopping holiday, that being the Singles Day event conducted on November 11th (11-11).

Second, it represents a move toward emulating Amazon’s strategic secret sauce, namely leveraging its built-out information technology, shopping platform and now leased logistics and last-mile delivery capabilities to broader populations to garner added scale and margins. As we have pointed out to our readers, the benchmark this strategy is Amazon Web Services (AWS) which not only supports all of Amazon’s own IT platform and application technology support needs, bot also serves as an available Cloud computing platform for other businesses in many industry sectors including supply chain management.

Domestic rival Alibaba has also been broadening its strategy of offering Cloud based computing services to China based businesses and will likely follow JD’s move in leveraging its owned Cainiao Network and external carrier network.

The differences in the Chinese vs, the Amazon strategy is that both Chinese E-Commerce providers have more direct investment in their logistics arms, and thus can both customize and leverage parcel delivery needs for China’s unique requirements that include either large density populated urban cities requiring innovative based logistics or rural locations requiring point-to-point or contract delivery.

A further consideration is the escalating trade and tariff tensions among China and the U.S. Uncontrolled, it could lead to favoring domestic logistics providers over U.S. headquartered providers.

China’s E-Commerce and existing contract logistics providers have been investing huge sums into logistics and material movement automation and shipper intelligence. Organizations doing business in China should remain tuned into these unfolding strategies since the goal is to leapfrog existing global providers.

 

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