Richard Liu Qiandong, the founder of JD.com, has applied to list his company’s JD Logistics distribution arm in Hong Kong, which will be his business empire’s third public offering within nine months.
According to a report by Bloomberg, JD.com is expected to raise about US$5 billion by floating logistics unit stock, with a possible total valuation of over US$40 billion for JD Logistics. That would make JD as China’s second-most valuable delivery firm after Shenzhen-listed SF Express. This amount comes after the US$4.5 billion secondary listing by JD.com last June and the US$3.5 billion IPO by JD Health in December.
At the heart of JD Logistics is the 240,000-strong army of deliverymen and service crew members that Liu has proudly referred to as “my brothers,” the business also seeks to differentiate itself from the competition by selling itself a more technologically advanced logistics company.
The business said the cornerstone of its operation is supply chain technology in a Hong Kong exchange website statement. It’s also why JD.com is different from its rival. 5G, AI, big data, cloud computing, and the Internet of Things are the sort of technology they apply to distribution workers.
Jeffery Towson, an investment professor at the Guanghua School of Management of Peking University in Beijing, said that JD is the only company on this scale to develop an integrated, on-demand, digitised and increasingly autonomous logistics system.
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According to the prospectus, the JD Logistics network spun off from JD.com in 2017 comprises over 800 warehouses across China, covering a total area greater than 11 Victoria Parks. It also included a group of robots, drones and autonomous vehicles.
JD Logistics has expanded by acting as the country’s second-largest e-commerce platform’s distribution unit, unlike its larger rival SF Express, a solely third-party delivery service provider. Like a model currently used by Amazon in the US, the American e-commerce giant has developed its own logistics capabilities.
JD.com would still hold over 50 per cent of JD Logistics, even after offering, but earnings from other outlets are continuing to grow.
In its brochure, JD Logistics now serves 190,000 customers. During the first nine months of 2020, external customers’ sales represent 43.4 per cent of total sales, up from 38.4 per cent in 2019 and 29.9 per cent in 2018.
During that time, sales rose 43.2 per cent to 49.5 billion yuan (US$7.7 billion) relative to the same period in 2019, helped by a spike in online shopping during the pandemic of Covid-19. But that revenue still accounted for just about half of what SF Express got during the same time.
JD Logistics still has to make a profit as it starts making major investments. However, its losses decreased from 996 million yuan a year earlier in the first nine months of 2020 to 11.7 million yuan.
A report by 36Kr, an online publication on Chinese technology, indicated that at the beginning of 2018, Richard Liu had entered into agreements with investors by raising US$2.5 billion from the investor group, with one condition – JD Logistics needs to complete an IPO either within three years or before March 2021.
According to JD Technology Committee Chairman Bowen Zhou, who spoke at a company event in November, the ultimate aim of JD is to encourage supply chain digitisation. It is one that ties in with the country’s business trends.
Unmanned Methods To Deliver Goods
“China is pulling away in smart logistics by virtue of scale, but also because it can connect digitised consumers, retail and manufacturing in a real-time, data-driven loop,” said Towson. “No other country has all four pieces at this scale.”
JD.com claims to be the first company to deliver products to shoppers using drones. In December, the company tested the JDX-500, its new heavy-load drone. It has also been creating intelligent vehicles, and during the Covid-19 outbreak, the citizen of Wuhan saw its autonomous minivans roaming the streets, carrying supplies to hospitals and residential areas. JD announced in October that 100 of these self-driving minivans would hit the streets of Jiangsu province’s Changshu town.
One of the more ambitious proposals by JD Logistics is to construct an underground smart parcel distribution logistics system. In the Xiongan New Sector, southwest of Beijing, the company said in early 2020 that it tested the new technology.