China’s JD creates standalone branch for online-to-offline services

China’s on-demand delivery space is growing just as heated as that of the US. Yesterday, online retailer JD – Alibaba’s arch-rival – announced it would establish an independent subsidiary specifically for online-to-offline businesses.

The new division will be headed up by Wang Zhijun, who will report directly to JD CEO Liu Qiangdong. Wang was previously responsible for building out the ecommerce titan’s customer service and logistics systems.

JD, which is China’s second biggest business-to-consumer ecommerce site behind Alibaba’s Tmall, has already been toying with on-demand services. Last month it launched food delivery service called Pai Dao Jia that detects one’s location, and then lists specific foods and household goods that users can order from within a three-kilometer radius. JD partners with supermarkets and uses logistics from either itself or the retailers to guarantee delivery within two hours. A JD spokesperson tells Tech in Asia that while fresh flowers can be purchased online, other products are currently only payable on delivery.

Pai Dao Jia is currently available through an official account on WeChat. Apps for iOS and Android are currently in beta testing. JD says that the food delivery service only serves Beijing right now, but hopes to expand to Shanghai, Shenzhen, and other densely-populated cities this year.

China gets demanding

JD makes a natural fit to take advantage of an upcoming tide of on-demand ecommerce due to its already robust logistics network. The company has famously offered same-day delivery since 2013. As of December 2014, it provides same-day delivery to 134 counties and districts, and next-day delivery to 866 counties and districts. It accomplishes this by building out an in-house delivery and fulfillment infrastructure, supplemented by third-parties. JD claims that most of its orders are delivered by the company itself.

Alibaba, meanwhile, works the other way around – most of its logistics infrastructure is comprised of third-parties, but it established its joint-venture China Smart Logistics to unify its network and improve efficiency.

JD also has recently contributed to large rounds for Chinese on-demand take-out startups. It helped raise a US$50 million series C round for Daojia, and participated in a US$350 million round for Ele.me. A JD spokesperson describes Daojia and Ele.me as “major partners” of Pai Dao Jia.

Other startups in China are also aiming to enter the food delivery space, each with their own approach to sourcing and delivery. BeeQuick, which partners with mom-and-pop roadside convenience stores and freelance couriers, recently raised US$20 million from Sequoia Capital and Hillhouse. Shequ001, meanwhile, partners with more established chain retailers and uses an in-house logistics teams to carry the goods. That firm reportedly raised a series B round last October.

Editing by Steven Millward