JD.com, the Chinese e-commerce giant, is planning to spin off its logistics and supply chain unit in an initial public offering (IPO) that is projected to potentially raise billions of dollars.
JD Logistics Inc.’s IPO could raise as much as US$5 billion. While many of the details are still being finalized, the IPO is yet another achievement for JD.com founder and chief executive officer Richard Liu.
The company filed a prospectus on February 16 with the Hong Kong exchange that would value the logistics division at $40 billion. The company is leveraging the e-commerce boom that has been accelerated by the ongoing pandemic, driving more consumers to order online.
JD Logistics has grown steadily in recent years. According to the prospectus, JD Logistics reported RMB49.8 billion (US$7.6 billion) for the year ended December 31, 2019, up from RMB37.9 billion (US$5.8 billion) the previous year. Revenue surged in 2020, with the division reporting revenue of RMB49.5 billion (US$7.6 billion) for the first nine months of the year, compared to RMB34.5 billion (US$5.3 billion) for the previous year’s first three quarters.
Remarkable Growth in Supply Chain Logistics Excellence
JD Logistics offers a range of supply chain services from warehousing to distribution to serve both its e-commerce partners and customers. Today, it is the largest revenue producer in China for integrated supply chain logistics services.
The unit began as an in-house component of JD.com’s e-commerce business in 2007, rapidly building infrastructure, operational expertise and technology. Beginning in 2012, it was supporting inventory turnover rates below 40 days while the number of SKUs it sold increased.
In 2017, the division began offering its logistics services to external companies. Today, the division supports more than 190,000 corporate customers in multiple industries, including apparel, appliances, furniture, fast-moving consumer goods, produce and automotive parts.
In 2020, the company reports that about 90 percent of total online retail orders processed for JD Group were delivered on the same day or the day after an order was placed through the help of their fast and reliable courier delivery. This is possible because of the combination of their reliable in-house same day courier service as well as an outsourced courier service. They also make sure that they only deliver orders in good shape. They do this by packaging the orders in high-quality shipping boxes to avoid damage.
Technologies are at the heart of JD Logistics, which uses 5G, rf amplifier, artificial intelligence, the Internet of Things, big data and cloud computing as part of its operations. Automation is at the core of its supply chain operations, using automated guided vehicles, sorting robots, self-driving vehicles and autonomous mobile robots to improve the speed, accuracy and productivity of important logistical components that include warehousing, sorting, transportation and delivery.
The division, as of September 30, 2020, operates 28 smart-technology warehouses in 18 cities across China, including a fully unmanned warehouse in Shanghai, which can process more than 1.3 million orders daily. JD Logistics has developed proprietary systems for warehouse management, transportation management and order management, all of which are synchronized and allow for better centralized decision-making about sales forecasting, supply chain optimization and merchandise distribution planning.
In 2020, the company operated more than 800 warehouses with an aggregate gross floor area of about 20 million square meters (21.5 million square feet) and more than 190,000 delivery employees.
JD Logistics had more than 4,400 patents and computer software copyrights at the close of 2020, more than 2,500 of which are related to automation and unmanned technology.
The division also has created six logistics networks that are highly synergized to provide flexibility and digital integration. According to the prospectus, these networks give it a significant competitive advantage and act as a barrier to entry for would-be competitors. The six networks are:
- Line-haul transportation
- Last-mile delivery
- Bulky item logistics
- Cold-chain logistics
- Cross-border logistics
JD Logistics is banking on the surge in e-commerce that has grown moreso during the COVID-19 pandemic. With storefronts shuttered and consumers reluctant to shop indoors, online commerce has continued to become a mainstay across the globe.
“We believe China’s rapid digitalization of the economy has created increasingly multi-faceted customer demands,” the prospectus notes. “Such demands are currently serviced by a fragmented group of incumbent logistics players and are severely underserved, which present significant opportunities for supply chain solutions and logistics services providers like us.”
The move is the latest in a series of remarkable growth for Liu, who founded the company after starting his own brick-and-mortar shop that sold magneto-optical products. As he saw the demand for e-commerce grow he relaunched his business. JD.com went public in 2014 and today is valued at $57.6 billion.