JD’s China’s retail profitless growth model will create convergent service platforms that will be very tough to compete with. 1 JD has a lower cost structure by purchasing power and economies of scale 2 JD then uses this cost advantage, not to make profits, but to offer lower prices than their competitors, to increase market share over time. And this increases their relative scale even more. Which makes points 1 and 2 even greater. 3 Their strategy is a virtuous cycle of “profitless growth”. 4 JD maximises pending on technology and logistics. They keep outspending their competitors on the things that will eventually make them even cheaper and better: automated warehouses, robots and other R&D projects, & keep building out their logistics network. Basically, the strategy is to slash spending on the necessary costs and maximise spending on the strategic costs to pull further ahead of their competitors. JD’s financials – minimal profits but rapid growth, increasing market share and steadily increasing spending on logistics, marketing and technology (both in total and as a % of sales). Alibaba / JD platforms provide the ideal opportunity to introduce consolidated services banking etc from scratch without the burden of established retail models.
