Company Overview
In recent years, e-commerce industry has developed tremendously in China. Along with the continuous
innovation in Internet, this sector influence has increased. People consumptions behavior and patterns
are also gradually changing especially considering the government support e-commerce has received.
JD.com history
JD.com or formerly 360buy was founded by Liu Qiangdong (Richard) in 1998 as an offline retailer in
Beijing. It is only in 2003, during the SARS outbreak that Richard Liu saw the opportunity of online retail.
One year later, he closed his store and moved his business online.
JD.com mission and business model
JD.com is in the business of selling household items and electric devices to Chinese consumers through
its online retail platform.
The company main source of revenue is through the sales on their online platform, but it also generates
revenue with the advertising and logistics services to the third-party vendors. JD.com has about 100,000
third party merchant. JD.com generated 114.229 million of revenue in 2020, compared to 82,865 million
in 2019 (in dollars). On the other hand, the retailer also has high cost with 97.5 million from the cost of
revenue, 7.5 in fulfillment, 4 in marketing and 2.5 in R&D alongside some other minor cost leaving them
with 1.891 million in profits in 2020.
Portfolio of products
JD.com is renowned for its sales of electronics and home appliances products, this category represents
around 50% of their products. The next source of revenue is through the sales of general merchandises
products – 35% of their revenues. The next largest category of revenue is through their marketing
services and marketplace which amount for 15% of revenues. The last 5% of their revenues comes from
logistics as well as other services revenues.
Shareholders
JD.com has backing from well-known Chinese and International brands. The most influential include:
Tencent: 18% of the shares
Liu Qiangdong (founder) : 15.8% of the shares
Walmart: 10% of the shares
Ecosystem
Ecosystem of JD.com direct sales model
JD.com ecosystem differs from its competitors such as Tmall as their main market is based on a direct
sales model. They source/buy the products of their partners, and store them in their warehouse, then
deliver to their consumers. This allow JD to be in full control of the quality especially in term of delivery
time, return policy, and customer service. It also helps to control each partner as it is not uncommon to
find fake products in China E-commerce.
JD also have a “marketplace” that resemble Tmall as third-party merchant can sell without forming a
partnership with the platform owner. However, it is not their main source of revenue.
The product displayed on JD website are items already sourced from the suppliers and stored in the
warehouse and their logistics department. Companies can pay JD to have their products advertised on
the platform.
When an order is placed, the customers have the choice to pay directly or on delivery, the delivery is
ensured within the day thanks to this model.
As the e-Payment is well developed in China, it is necessary to form partnership with WeChat Pay and
Alipay and others.
Industry Environment: PEST
Political factors:
China’s e-commerce industry is based on continuous destructive innovation which makes it sensitive to
the national policy environment. Recently, the Chinese government has been actively supporting of the
e-commerce industry and created a favorable development environment allocating resources to help
improve logistics infrastructure, the level of opening up, and secure electronics. China is also
encouraging internet innovations.
This support can be seen with the issuance of laws and policies such as “Suggestions on Accelerating ECommerce Development” and “National Informatization Development Strategy 2006-2020”.
Furthermore, the 13th Five Year Plan stated that the information industry is listed as one of the seven
strategic emerging industries.
The government encourages the industry to strengthen cooperation between offline and online
enterprises and integrate market resources through various forms of strategic cooperation or mergers
and acquisition to improve social operations.
On the other hand, the government has imposed new regulations ("the electronic commerce of the
People's Republic of China law") and strengthened the management of e-commerce. It is supervising
cross border transactions more strictly. China is especially mindful Fakes, counterfeits, pirated products
and false publicity. This results in protecting consumer’s rights and interests and also to create a fairer
competition environment. This does not impact JD group too much as quality assurance is JD philosophy.
The country will also release all kinds of safeguard measures policies to further develop e-commerce
with more patent management policies but will also regulate more thoroughly the payment industry,
taxes, and antitrust
Economic factors:
China GDP is expected to reach 15600.00 USD Billion at the end of 2021 with an average year on year
growth of 6% excluding the two last year due to the pandemic.
The growth in GDP results in an enhanced per capita purchasing power. This increasing purchasing
power coupled with the large population in China means the market will constantly expand.
Under the guidance of the government, China is gradually moving toward a mature and stable situation.
The country can still be considered to be in a transition stage switching from high-speed growth to high
quality development which offer new growth opportunities for e-commerce platforms.
In the retail industry, the cost of the e-commerce model is lower than traditional retailer with a higher
profit margin. China e-commerce is anticipated to continue maintaining a rapid growth then enter a
maturity and stability phase.
Social factors:
The total number of Chinese Netizen reached 1billion in 2021 with an internet penetration rate of
around 70% (globaltimes.cn) forming the largest and most active online community around the world.
This number is growing at a fast pace as it increased by 21.75 million compared to 2020. The ecommerce industry become increasingly mature with a standardized government supervision, an
improved level of distribution and logistics, and safer payment methods.
The scale of e-shopper is constantly increasing, reaching 782 million online consumers, more than twice
the US population, the next largest market at the end of 2020. The total revenue from the e-commerce
industry in China is 2.3 trillion dollars. This amount is forecasted to reach 3.57 trillion U.S. dollars in 2024.
The online consumers in China are getting younger and are becoming more sensitive to quality.
According to “E-Commerce Consumer Behavior Report” released by JD.com, post 80-90 represents more
than 50% of the users. We can expect this percentage to be higher in 2021.
Technological factors:
E-commerce is based on internet technology. New information technologies such as instant chat, search
engine and other have laid the foundations. Internet is available to Chinese mainly through smartphones
In the process of e-commerce, electronic payment method technologies are of utmost importance such
as Alipay, Tenpay and others.
Cloud computing and big data technologies have greatly improved over the lasty years and is now
applicable to e-commerce companies’ large user-bases.
In recent years, JD has invested in smart logistics projects, the company now owns the most intelligent
sorting robot for express delivery and other high-tech equipment which significantly reduce delivery
times.
There are also technologies in development that will contribute greatly to the online retailing sector such
as the Internet of Things and Artificial Intelligence.
Industry environment: Porter 5 forces
New Market Entrants






Supplier Power
High capital and resource investment
Customer need of unique experience
High Regulatory framework
Low Switching cost, loyalty
Access to distribution channels restricted
JD & Tmall own 80% of the market shares
Existing competitors

High for large supplier
(competition has not
been determined yet)

Supplier power is low for
small medium sized
companies (do not have
the ability to create their
own website)




Global competition
Low switching costs
Differentiation is low,
although possible on
quality and customer
service
Rivalry is high as there is
no leader yet despite
Tmall and JD owning
80% of the market
shares
Threat of substitutes



Traditional retailers
New retail C2C
Direct selling channel (by TV)
Buyer Power,

High for customer
due to the price
wars between the ecommerce platforms
and supplier own’s
websites
Business model canvas
Key partners
Key activities
Value proposition
Customer relationship
Customer segment
Strategic partnerships
with Tencent Holdings
and Wal-Mart, eBay
E-commerce, sales, retail
Provide access to a
wide selection
(continuously growing)
of high-quality product
thanks to the
partnerships with local
and international brands
B2C, B2B, C2C
Mainly Chinese
consumers
Digital marketing
Distribution, Logistic
Manufacturers and
distributors
Customer service
Online retail
experience (userfriendly app, flash
deals)
Individual and
group consumers
Online direct sales
Procurement
Domestic and
international major brands
An accessible and easy
to use shopping
platform, which offer a
variety of payment
methods (such as cash
on delivery)
Finance
Payment providers
Same day delivery
Online to offline
Third party sellers
(100k merchants
accounts on is
marketplace at the
end of 2016)
Customer service
30-days return policy
Tech providers
Key resources
Yamato’s logistics
network for shipment
outside China
The fastest and most
reliable delivery service
Online retail platform
High quality products
Warehouses (210 across
China)
Delivery and pick-up
stations
Customer’s data
Online marketing
services
Channels
Website and mobile
app
Media and internet
advertisement
Finance service which
gives its customers
access to microcredits
so they can spend more
on the platform thanks
to the partner
ZestFinance
Shows and
conferences
Personnel (warehouse,
delivery, personnel – 108k
employees)
Intellectual property
Cost structure
Revenue
Cost of products
Technologies
Sales of JD own products
Logistics
Facilities/office
Commission from sales of third-party merchants
IT infrastructures
Employees
Provide advertisement and logistic services on its marketplace
Marketing
Conclusion
JD.com is a promising Chinese internet company. Richard Liu started the company in 1998 and dedicated
himself to online retail in 2003. The first companies in this sector traces back to 1999, so the company
has benefitted from a first mover advantage and is now an influential brand.
JD is a B2C online retail company with its own advanced logistics network that aims to deliver household
appliances and electronics product to Chinese. It earns revenue through sales, advertisement, and
logistic services. The company has received the support and achieved significant partnership with both
Chinese and international brands.
The ecosystem of JD is more complicated and costly than typical B2C online retail stores such as Amazon
and Tmall as they focus on a direct sales model which implies, they buy products from suppliers’
partners and resell it on their platform.
The external environment of JD is favorable for its development. The Chinese party has implemented
laws and regulation to help online retailers evolve with the “Suggestions on Accelerating E-Commerce
Development”. On the other hand, they also strengthened the regulation and management imposed on
them. However, these regulations aim to protect consumer’s rights and quality. However, that does not
impact JD as much as others as the company has a strong focus for quality.
The economical environment also encourages the company to develop as China is a stable country with a
high GDP growth rate, the consumer purchasing power is rising, and the country benefits from a large
population which further escalate the market with the increasing purchasing power.
The penetration rate of internet is high in China and the consumer of online retailing are constantly
increasing. On the technology side, Internet companies develop in a continuously innovating
environment. Notable innovation in internet includes e-payment and cloud computing. There are also
technology that are still developing such as Internet of Thing (IoT) and AI which will further increase the
development of JD
Richard Liu is definitely a person worth investing in but I would not invest my own money in JD.com as
there are many limitations as he showed in his career that he is a great entrepreneur having managed to
turn a single offline retail store in Beijing to the 59th ranked company in the fortune 500 list.
Although there are claims that there is no definite leader in the B2C online retail sector, JD is still far
behind Tmall, its main competitors in terms of market shares. Tmall currently owns 64% of the
transaction shares (Q 3 2021) while JD is the second with 28.5%. The gap was around the same in 2018
with 56.5% for Tmall and 24.7% for JD. This means that there is no trend of faster growth for JD.com.
Secondly, their finance, and especially their income from operation is relatively low. The company has
been in negative until 2018 and managed to become positive in 2019 with 8.995 million RMB incomes
from operations. In 2020they have reached 12.343 million RMB profits.
Sources
https://corporate.jd.com/aboutUs
Statista
JD annual report 2020: https://ir.jd.com/annual-reports
https://e-research.siam.edu/wp-content/uploads/2019/06/IMBA-2018-IS-Research-on-CompetitiveStrategy-of-JD-Group1-compressed.pdf
https://en.wikipedia.org/wiki/JD.com
https://www.oborconsulting.com/en/jd-worldwide-the-leading-shopping-platform-for-importedproducts-in-china/
https://vizologi.com/business-strategy-canvas/jdcom-business-model-canvas/
https://www.export2asia.com/blog/selling-jd-jing-dong-in-china/
https://corporate.jd.com/forPartners
https://www.cleverism.com/company/jd-com/