Danone Waters China, a subsidiary of Danone Group, is tapping into the distribution network of China’s largest retailer and e-commerce giant JD.com as the French company expands its coverage of Southwest China.
A shared warehouse will be built in Chengdu, the capital of China’s southwestern Sichuan province, that will store and manage inventory, merging Danone’s online and offline operations.
“China is a market with both huge opportunities and major challenges when it comes to managing distribution across our many sales channels,” said Hanbin Lyu, vice president of Danone Waters China. The company has seven factories in China across six regions.
Lyu said JD.com’s in-house logistics network and supply chain management technology would help Danone improve demand planning, inventory placement, warehouse and transportation management to increase efficiency across different sales channels.
The Danone tie-up furthers JD Group’s push into the logistics business following the creation of JD Logistics earlier this year as a stand-alone business unit. JD operates China’s largest in-house fulfillment and last-mile delivery network with 405 warehouses.
As part of the joint effort, JD will leverage its big data capabilities through the analyzing of billions of data points. The technology enables JD to help suppliers more accurately predict the ebb and flow of demand, and more efficiently manage stock. JD’s expertise in the area can help limit stock outs, waste, and higher logistics costs for last-minute replenishment that have traditionally plagued retail as a result of multiple layers of handling by a mix of third-party providers.
“We believe our infrastructure and technology will benefit shippers and industries, including those that don’t sell directly on our platform,” said Wei Tang, vice president of logistics at JD. “Online retailers like JD can lead the way to more efficiency, transparency and reliability in commerce, benefitting both customers and suppliers.”
A rapidly developing trend in China is the fast-growing demand for fresh products. During its Single’s Day promotion, JD.com sold over 20,000 tons of fresh products that included highly perishable items such as 500,000 tiger shrimp from Thailand and 2 million hairy crabs. There was also huge demand for Australian sirloin, Chilean frozen salmon, and Vietnamese base fish.
The efforts in logistics are part of JD’s broader “retail as a service” strategy. As changing consumer demands force changes throughout global retail models, large-scale e-commerce companies are working on the development of an efficient and advanced supply chain.
The need for efficiency is crucial to facilitate the growing cross-border e-commerce sales in China that are expected to reach $100.17 billion by the end of 2017, with the average spend per cross-border digital buyer at $882, according to eMarketer research. Average spend per buyer has increased because of growing awareness of overseas brands in China, as well as better logistics and the perception that foreign goods are of better quality.
“The factors fueling the trend toward greater cross-border shopping are nothing new, as the average Chinese consumer is now more tech savvy, more exposed to foreign brands through overseas travel and the internet and, crucially, more willing to spend,” said Shelleen Shum, senior forecasting analyst at eMarketer.
“With shopping sites such as TMall Global, JD Worldwide, and Kaola adding more brands to their offerings and improving cross-border logistics and processing times, there is an opportunity for foreign brands to tap into the demand for high-quality products, especially in categories like baby, maternity, health, and beauty.”