Electronic enthusiasts gathered at eight in the morning to hear the words of "When the user experience reaches its peak, the cost is minimized, and operational efficiency hits its limit, it can create more value for our industry, suppliers, brands, and consumers alike. I believe that our fourth retail revolution will be the ultimate revolution."
At today's (July 20) Lenovo Global Innovation Technology Conference (Tech World), Liu Qiangdong, Chairman and CEO of JD.com, for the first time publicly shared his vision for the fourth retail revolution.
In his opinion, the essence of retail will not change—it will always focus on user experience, cost, and efficiency—but artificial intelligence technology will revolutionize the current retail landscape, pushing user experience, cost, and efficiency to unprecedented extremes and creating immense societal value. Liu emphasized that JD.com will remain open, empowering partners to collaborate in producing better products for consumers, ensuring technology becomes tangible and usable for everyone.
Below is an excerpt of Liu Qiangdong's speech:
Before diving into how artificial intelligence is driving the fourth retail revolution, I want to share my thoughts on JD.com's growth over the past decade. Understanding our evolution in retail helps explain where we stand today.
Over the last 13 years, JD.com has achieved an average annual growth rate exceeding 140% for 13 consecutive years. Many people have differing opinions about us, but honestly, very few truly grasp what we're about. Theåˆå¿ƒof any company is often tied to the founder's life experiences and the social and industrial environments they encountered early on. When I started JD, I witnessed the chaos in Zhongguancun, where goods were sold across numerous stalls. Information was opaque, there were multiple layers separating consumers from manufacturers, and logistics were fragmented across countless regional companies. Handling goods from factories to consumers' homes required an average of 7.2 transfers, each involving significant social costs, product damage, and inventory buildup. For products like Lenovo, which rapidly depreciate, this led to losses across the industry.
What opportunity did JD.com seize in retail? When we began, whether in the e-commerce sector before or during our journey, our focus was always on solving these industry issues. Thus, we established three key areas of development: user experience, cost, and efficiency.
JD.com boasts the lowest operational costs in the supply chain, both online and offline. We can compete with any traditional retailer in China. We've reduced the overall retail operating costs by 70%. This has been JD's contribution over the years. Our manufacturers still earn substantial profits because we lower costs and pass these savings back to them, enabling them to invest more in R&D and produce better-quality products. This, in turn, gives our retailers more opportunities.
Our core efficiency lies in our inventory turnover days. As of December 31 last year, we managed over 4 million products in our warehouses, with over 260 types of goods stored across more than 260 inventory centers nationwide. Behind these numbers lie advanced technologies. Managing inventories manually, whether by 10,000 or 50,000 people, would lead to inefficiency. Our current inventory turnover days are around 37 days, whereas traditional retailers managing 50,000 SKUs require 60-70 days. Our 4 million SKU inventory is not a linear challenge but a geometric one—thousands of times more complex. Yet, we’ve overcome these challenges with technology. JD.com has one of the most comprehensive systems in e-commerce. Besides the financial system, which uses Oracle, all other systems are independently developed using open-source software. Over 10,000 R&D personnel continuously iterate and upgrade our information systems daily.
Using artificial intelligence to reinvent retail
After everyone understands JD.com's rapid growth, why are we focusing on AI today and proposing the fourth retail revolution with robotics? It's because we've nearly optimized costs and efficiencies using traditional technology and methods. Further improvements are almost impossible without a technological breakthrough. For instance, we've reduced the number of product transfers from seven times to just twice—once from the factory to our logistics center and again from the center to the consumer's home. This saves significant social resources and improves efficiency. Our inventory turnover days are around 37 days. Internally, we aim to optimize this further to 30 days, but imagine reducing it to 5 or 10 days. What if we could eliminate one of these transfers entirely?
This is why we’re proposing to fully leverage technology over the next 12 years, using AI and robotics to re-engineer the retail industry.
What can technology do? Today, we use AI to predict sales for the next week, 15 days, or even the next three months. These forecasts help optimize supply chains. Without highly accurate sales predictions, all suppliers' efficiencies are limited.
How can we reduce costs? Currently, our delivery staff in Beijing can handle 150 packages per day, reaching their peak capacity. Increasing delivery volumes would overwhelm human workers. The solution? Robots. For example, we're building unmanned warehouses in Beijing. By next year, these facilities will operate without employees, using AI and robotics. We're also developing self-driving trucks, which won't just be autonomous vehicles but mobile distribution hubs. Their data feeds continuously into our distribution systems. Our drones are already addressing the high costs of rural logistics. In the future, deliveries will be fully robotic, eliminating risks to human workers. Over the next 12 years, I believe JD.com will grow significantly, perhaps even 10 times larger, while maintaining today's workforce. Consider this: if our sales grow 12-fold or even 20-fold, and our workforce remains constant, transitioning from two transfers to one—from Lenovo's factory straight to the consumer's home—we’ll reach the limits of user experience, cost, and operational efficiency. This creates immense value for our industry, suppliers, brands, and consumers. Hence, we propose the fourth retail revolution, believing it to be the ultimate transformation. I’m confident no future retail revolution will surpass it, as it pushes the entire industry to its limits.
AI will create massive societal value
Beyond the immense benefits AI and robotics bring to our retail industry, they hold enormous societal value. Let me give you an example. Recently, we signed agreements with Shaanxi and Sichuan provinces to build 150 drone ports in Sichuan. Each port costs only $100,000, yet once completed, they'll ensure that all wild fruits and high-quality goods scattered across Sichuan's forests reach any city in China within 24 hours. In the past, many remote areas remained impoverished due to high logistics costs. Take Sichuan, with its abundance of delicious foods. Once outside the mountains, consumers couldn't afford them due to logistics expenses. Drones can change this by connecting isolated regions without the need for expensive cars.
Let me give another example. JD Finance, though relatively late to the game, leverages cutting-edge technology to capitalize on financial opportunities. Take JD Gold Bar, a cash loan service launched in January 2016. In its first month, we disbursed 100 million yuan. By December 2016, this had grown to over 5 billion yuan. By June this year, monthly cash loans reached nearly 10 billion yuan. Importantly, we achieved this without seeing any consumers in person. There were no offline audits, no paper contracts, no physical branches, and no credit points. Since 2016, our cumulative bad debt rate has remained under 0.3%. Compare this to the average financial institution's 1%-2%, and you'll see the immense value technology brings to the financial sector.
In the past, JD.com implemented many technologies, but most went unnoticed. Consumers know our products are authentic, services excellent, and user experience top-notch. However, they rarely perceive the underlying technology. I believe as technology continues to evolve and accumulate, more front-end consumers will feel its impact. For instance, our smart fridges and smart audio systems will offer smarter, more intuitive products.
Therefore, I believe that over millennia, technology has driven societal progress and fundamentally transformed core elements of society. I'm honored to discuss future technology with you today. I hope all our partners will continue supporting JD.com as they have in the past. Together, let's produce better products for consumers, making our technology tangible and usable. Thank you all!
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