JD.com Aims to Cut Costs Through Investment in New Technologies, Founder Says
Yang Yanqing|Zhou Ailin
/SOURCE : Yicai
JD.com Aims to Cut Costs Through Investment in New Technologies, Founder Says

(Yicai Global) Jan. 25 -- Chinese e-commerce titan JD.com Inc. will continue to invest in technology as it strives to reduce costs in its supply chain, while boosting efficiency and user experience.

Key areas of focus for the Beijing-based firm include unmanned warehousing and delivery facilities, use of drones, autonomous trucking and logistics robots, said JD Chairman Liu Qiangdong in an interview on the sidelines of the World Economic Forum in Davos.

"Once we manage to make inroads in these areas, we believe our profitability will improve further," he noted.

Liu fielded questions on how his company will strike a balance between technology investment and profitability, how it positions the firm's fintech arm, as well as its plans for expansion overseas.

The e-commerce giant's negative profit figures have long remained a contentious issue for investors. JD ended an 11-year losing streak when it reported a net profit of CNY1.4 billion (USD 219.4 million) for the first quarter of last year, with capital markets paying close attention its ability to generate sustainable profits.

Short-term profitability is not a big issue, says Liu, though he admits that it is unrealistic to expect any viable business to stay loss-making forever. "Many big companies care nothing but profit. All they care is to make more money, and everything they do is to boost financials. They've lost their dreams," he added. 

Liu has high hopes for JD Finance, the company's second-biggest business after e-commerce, once stating that the company would derive 70 percent of profits from the sector. The unit is no longer included in JD.com's financial statements as of the second half of last year following a reorganization in assets, with some market insiders speculating that it could go public as a spinoff.

JD Finance is not interested in banking or wealth management businesses or going toe to toe with traditional financial institutions, Liu said. It is not seeking financial business licenses, though that does not mean that it wouldn't do so in the future, he added.

"We're not a financial firm, but a technology company. We want to help traditional and emerging financial institutions to optimize their risk control systems and minimize bad debts. In doing so, we aim to create value for them and get our share of the profits," he said. As a fintech firm, JD Finance has successfully exported its core business capabilities to financial institutions.

Like other Chinese tech conglomerates such as Alibaba Group Holding Ltd., JD.com harbors ambitions to expand into global markets, especially regional markets in Southeast Asia. It chose Indonesia as the first step in its global branding campaign, and Liu has called on Chinese brands to band together to bring products to overseas markets through JD's commodity circulation system.

 

JD Finance and JD Logistics will go abroad together with the group, he stressed. "All four business lines of the group -- e-commerce, logistics, finance and technology -- will enter foreign markets collectively. They're not separate businesses."

 

JD Logistics is in the middle of seeking funding from investors, and it will be listed as an independent entity in future, he disclosed. "[We] have not decided on the location for the share offering, because we're still far away from it." 

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Keywords: JD.com , Liu Qiangdong , Davos