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E-commerce giant JD plans shift into offline retail
JD.com Inc, China’s second-largest e-commerce company, plans to open more than 1 million JD convenience stores across the country in the next five years, with half of them located in rural areas, said its CEO Liu Qiangdong.
He said owners of the stores could order goods, including consumer electronics, home appliances, clothing and home furnishings through JD’s application software.
JD will be responsible for logistics and distribution to the stores, according to the company.
This is JD’s third offline cooperation project after launching 10,000 JD home appliance stores, an important measure in the expansion of its offline retail channel.
JD launched the New Market Programs at the end of 2015, which aimed to build a new channel targeting small and medium-sized stores in small cities, becoming their suppliers and partners. This program is set to cover 500,000 stores this year.
The penetration rate of e-commerce players in the small cities is not high. In contrast, convenience stores play a vital role.
E-commerce giants have stepped up the combination of online and offline retail channels. Alibaba Group Holding Ltd and Bailian Group Co Ltd reached a strategic partnership in February. The two sides will co-design bricks-and-mortar stores that merge online and offline shopping experiences.
Jason Yu, general manger of consumer research firm Kantar Worldpanel, said: "The network of stores will help JD to enhance its O2O presence in the fast-moving consumer goods sector. To address the last-mile delivery challenge, the move can help consumers to order products at nearby stores.
"While it brings business to those convenience stores, it also makes those stores an entry point to the JD platform so that it can increase its penetration among shoppers."
Yu added it is more challenging to grow purely in e-commerce, so both Alibaba and JD move into offline business.
"JD has strengths in delivery and distribution in rural areas. Establishing offline stores will help JD cover more areas and access to more consumers," said Lu Zhenwang, CEO of the Shanghai-based Wanqing Consultancy.
Lu added that the growth of online retail channels has slowed compared with their rapid growth in the past, so they have to seek new business growth points, adding the cost of opening stores in rural areas is relatively low
Statistics from international consultancy Kantar Retail showed there are nearly 7 million small convenience stores in the Chinese market, which account for 40 percent of shipments among all retail channels.