JD teaming up with convenience stores

A JD.com Inc stand at a gifts and household items expo in Beijing. JD, one of the nation's leading e-commerce sites, has entered into partnerships with convenience stores in 15 cities in a move to develop its offline business. Provided to China Daily

JD.com Inc, the second-largest business-to-customer e-commerce business in China, teamed up with more than 10,000 convenience stores from 15 cities across the country to try to leverage its online experience in the offline world.

The Beijing-based company announced on Monday it is going to promote a new type of retail that not only allows its brick-and-mortar partners to set up an online presence on JD's e-platform but also helps deliver the purchases based on the company's unique strength in supply-chain management.

More than 10,000 convenience stores from franchise owners such as the Shanghai-based Liangyou Group and the Dongguan-based Miyijia in Guangdong province have joined JD in its new online-to-offline strategy.

"The collaboration aims to combine JD's online strength, such as its large pool of online customers, with convenience stores' offline advantages in service and warehousing," said Shen Haoyu, the chief operating officer of JD.

Despite the booming online retail market in China, Shen said at a news conference on Monday he has never thought that online platforms can replace offline brick-and-mortar stores.

"Rather than competing, online businesses and offline businesses complement each other. There are many offline retailers such as shopping malls and supermarkets we want to cooperate with. The reason we have chosen to team up with convenience stores first is that they are more close to customers because most of them are located in residential communities," he said.

JD, which is aiming for a US initial public offering to raise up to $1.5 billion, announced its online-to-offline strategy, known as O2O, three days after China's central bank halted barcode - based mobile payment services, a key concept that may sabotage the O2O strategies of China's Internet giants Alibaba Group Holding Ltd and Tencent Holdings Ltd.

Instead of using barcode - based mobile payments, which allow people to pay for their purchases via mobile devices when shopping at brick-and-mortal stores, JD helps customers to get their online purchases without leaving the home or office.

"Through helping convenience stores reorganize their resources and training their employees, we are going to build an integrated system that allows people to make online purchases from the nearest convenience stores and receive the deliveries within one hour after placing an order," said Hou Yi, who is in charge of logistics planning at JD, which owns the largest logistics and delivery operation among all e-commerce companies in China.

"We are working to optimize the system so people can receive their goods within 15 minutes after purchasing them online," he said.

According to Hou, by teaming up with convenience stores, JD can largely reduce logistics and delivery costs in future.

"For example, the cost of delivering frozen food is very high because it requires high-quality cold-chain logistics. If customers are not available to sign for the package, the frozen food can easily go off," he said.

"However, most convenience stores have freezers. So, in the future, we can deliver frozen products to our partner's convenience stores first and then ask them to deliver the goods to customers when they are available."

Lu Zhenwang, an independent Internet expert, said JD has strong advantages in logistics and delivery. "By using its strength in logistics, it can create tough competition for other e-commerce businesses that specialize in fresh and frozen food," he said.