(Yicai Global) April 16 -- The home appliance retailing business of Chinese e-commerce giant JD.Com aims to replicate its success online in the offline world.
"We will copy our success in the offline sector," Yan Xiaobin, senior vice-president at JD and president of JD Home Appliances, said at this year's annual strategy conference for the unit.
The Beijing-based firm aims to open 50,000 square-meter home appliance experience superstores in all first and second-tier cities in the country to realize its goal.
It will also open offline retail stores in each medium-sized city, as well as specialty stores in fourth to sixth-tier towns. The strategy will put JD in direct competition with the country's traditional offline chain store giants such as Suning and Gome.
Offline outlets do not contradict the current online retailing businesses, Yan told Yicai Global, saying that the new offline stores will use digital management to integrate with online units.
First Store in Chongqing
JD has chosen central Chongqing municipality as the first site for its stores, said Yang Zisheng, the person overseeing the project, adding that the location will possess full fifth generation wireless network coverage as well as support for smart electronics. Users can try trending products and take part in the entertainment, family and e-sports experience scenarios. They can scan quick response codes of their favorite products and order on-site.
"Chongqing is just the start," said Yang. "There are plans to set up an offline business department for the stores."
The number of in-store stock keeping units will exceed that of traditional chain stores, and they will achieve digital operations, Yan said, highlighting the first mover advantage of traditional players. "We will not charge site fees for vendors," and the factories only need to provide samples to our stores without the need to showcase them, he Yan. One store in each major city will bring offline marketing opportunities for new brands and products.
The locations will change the traditional "no sales without promotions" model used by existing players, he Yan. It will employ product engineers instead of sales personnel to give better product experiences to users. "60 percent of big home appliance buyers prefer to try the product," Yan said. "They can order on site via QR code, or they can make the purchase after going home."
JD has not set a goal in terms of store numbers, sales amount and profit, he said, adding that rival firms have been operating for two to three decades and it still had a lot to learn.
Huge GMV Potential
The company's plans for outlets in medium-sized cities and expansion in towns rural areas will run parallel to the plans for the superstores.
JD will open 5,000 smaller locations in towns and aims for gross merchandising volume running into the hundreds of billions by 2021 while it will also try to attract more specialist suppliers in the process, said Liu Jun, general manager of the specialty store department. Several major home appliance makers have supplied nearly 1,000 types of such products to JD.Com as of this March.
The growth of Chinese home appliance market significantly dropped in the last year due to a weak property market among other factors. China's domestic sales of home appliances increased by less than 10 percent to CNY1.5 trillion (USD223.6 billion) in 2018, said Jiang Feng, chairman of the China Household Electrical Appliances Association.
The sector's winter urged JD to work with factories to identify users' real needs. Yan hoped that functional home appliances will make up between 50 percent and 60 percent of sales while customer-to-manufacturer customized products will make up the remainder. "This is where we are heading," he told Yicai Global.
Its C2M business has involved more than 100 brands and more than 300 SKU products since last year's launch. JD penned C2M operation deals with Midea and other suppliers at the Appliance & Electronics World Expo last month.
"Product similarity in the sector has led to heated price wars, while consumer demand is difficult to meet," said Lu Luqun, head of JD's household appliances department, adding that the unit will promote the C2M business through sharing of user-specific demand data with manufacturers. The firm hopes to create and innovate more than 10,000 SKU products and over 1,000 brands jointly with manufacturers and users.
It will not only partner major manufacturers in the C2M business but also work with small factories on single product lines with output running into the tens of thousands.
The business model will flourish in the next year, Yan Xiaobin projected. JD is shaping its own business into a platform where it will choose products and set prices but the data will be open so vendors can take part in operations and use data to communicate better with users and improve what they make in a timely manner.
Editor: William Clegg