“Last year during the 618 festival, we processed 700,000 packages a day, and it seems we'll surpass that this year.” This was noted on the morning of May 15 at the 'Asia No. 1' smart logistics center of China e-commerce corporation JD in Daxing District, southern Beijing. With the preliminary events starting on the 13th, the place was in constant motion handling the influx of packages ahead of China’s largest discount event, the '618' shopping festival, which occurs on June 18. A representative hinted that the center could dispatch up to 720,000 packages a day when fully operational, and during this year's 618 festival, employees might need to work extra hours due to the high volume of logistics.
China is making a full-scale effort to boost domestic demand. Amid a trade war with the United States that has shaken its primary growth engine, exports, China aims to fill that gap with consumption. The nationwide discount event known as the 618 shopping festival has arrived as an excellent opportunity for recovering domestic demand. E-commerce corporations like JD are integrating advanced technology to enhance delivery speed while working with the government to allocate subsidies to encourage consumer spending. This article takes a closer look at JD, standing at the forefront of domestic demand in China.
◇ JD begins next day morning delivery… thanks to an automated logistics system
JD is considered one of the top three e-commerce corporations in China, alongside Alibaba and Pinduoduo. Unlike Alibaba and Pinduoduo, which use an open market model to bring in sellers, JD directly purchases products and operates its own logistics network, similar to South Korea's Coupang. Recently, JD Logistics, a subsidiary, has begun establishing logistics centers in Incheon and Icheon, marking a significant entry into the South Korean market.
In addition to direct product purchases, JD is also seeking differentiation in delivery speed. JD guarantees 'next-day delivery' for over 90% of its orders, and since last year, it has introduced 'delivery before 8 a.m. the next day.' Considering the vast size of China, this is groundbreaking. The logistics technology makes this possible. JD has developed a 'Tianlang (天狼·Sky Wolf)' system that automatically retrieves items from storage and brings them to employees. Compared to the previous method where employees searched through the warehouse with order forms, this has reportedly increased efficiency by as much as 500%. This system ensures that high-selling products are stored at the front, related products are grouped together, and spaces are automatically allocated based on product size. As a result, JD has claimed a 300% increase in warehouse storage capacity.
One side of the center was filled with a 19-story shelf, where unmanned transport vehicles (AGV) called 'Dilang (地狼·Ground Wolf)' and drones, along with shuttles moving at a speed of 5 meters per second, were transporting goods. A JD representative stated, “We apply different automation solutions at each stage of logistics,” adding, “This automation has increased efficiency by at least three times, and up to ten times.” Since starting its own technology development in 2017, JD has invested approximately 140 billion yuan (about 27 trillion won) by last year.
◇ Expanding domestic roles amid US-China trade war… The importance of the 618 shopping festival
JD's efforts to secure logistics competitiveness are closely tied to the recent economic conditions in China. The retail sales indicator that sheds light on the domestic situation had recorded a growth rate of 7.8% compared to the previous year until 2019, prior to the COVID-19 pandemic. However, last year, it fell to just 3.5%, indicating continued sluggish consumption. The rapid growth that the Chinese e-commerce industry experienced during prosperous times has started to slow down, leading to increasingly fierce price competition in the industry. However, since there is a limit to lowering prices, competitiveness in other areas such as delivery speed has become essential.
Additionally, the ongoing US-China trade war is adding pressure to the Chinese e-commerce sector. China saw a growth of 5.0% last year, significantly driven by exports. However, this year, the high tariffs imposed by the U.S. on China are bound to weaken export momentum. While a truce agreement was recently reached in the US-China trade war, the period is limited to just 90 days, making it premature to feel secure. Nevertheless, the Chinese government has set a growth target of around 5%, the same level as last year, highlighting the need to stimulate domestic demand as a substitute for exports. Given that consumption mainly occurs online in China, the growth in revenue for the e-commerce sector is directly linked to national growth. Facing sluggish domestic demand, Chinese e-commerce corporations that previously rushed into overseas markets are now having to shift their focus back to the domestic market.
In this context, the 618 shopping festival, which officially kicked off on the 13th, serves as an indicator of the potential for domestic recovery. The 618 shopping festival was initiated in 2004 to commemorate JD's founding and has now established itself as one of the two major discount events in China, alongside the Double Eleven (双十一·11th of November) event in the second half of the year. The Chinese government is flooding the market with liquidity through measures such as lowering the key interest rate and reserve ratio while reinforcing the 'Iguhuanxin (以舊換新)' policy initiated last year. This policy provides subsidies for replacing old products with new ones to stimulate consumption. However, the results so far have been underwhelming. Retail sales announced that month increased only by 5.1% compared to the previous year, falling short of market expectations.
In light of this, e-commerce corporations like JD are making a full-scale effort to ramp up the 618 shopping festival. JD, in particular, is promoting that consumers can receive discounts of up to 2,000 yuan (about 400,000 won) when purchasing consumer goods such as mobile phones and home appliances, combining the Iguhuanxin subsidies with its own subsidies. Special members can also receive subsidies of over 1,000 yuan (about 200,000 won), which can be used in combination with other benefits. Companies like Alibaba, Pinduoduo, and Douyin (the Chinese version of TikTok) have similarly kicked off preliminary events for the 618 festival. The Chinese newspaper Shangguan News noted, “Major e-commerce platforms in China have begun a full-fledged price war.”