THOSE WHO TRY TO PREDICT WHAT JD COULD DO WITH CECONOMY ...

... may want to keep an eye on how it handles the recent acquisition of Kai Bo, a supermarket chain in Hong Kong with 90 stores. Although a different market sector, it might provide some insight into JD's intentions and approach.

I've seen quite a bit of speculation on what JD's intentions are, ranging from a jubilant 'JD will make MediaMarkt's online capabilities amazing!' to fear-mongering about the very common clause that JD won't interfere in the organisation for 3 years. Both are, IMHO, overblown. And I still expect the most significant short-term change will be in the supply chain (e.g., more Chinese brands coming to Ceconomy stores).

There's an important clue in a statement by founder Richard Liu at a media conference in June, where he stated that his entire life, and indeed the entire JD Group, has been centred around the supply chain and how all JD companies serve the supply chain.

So let's look at Kai Bo, based on a recent report in the Chinese retail media ...

▶️ Kai Bo's founder, Lin Xiaoyi, will continue to lead the business and retain the original management team. Kai Bo has also been established as the Kai Bo Business Department in JD's innovative retail division. This suggests that both parties intend to pursue greater development opportunities through resource integration.

▶️ JD will retain the existing Kai Bo Supermarket team. This demonstrates JD's acquisition strategy, rather than forceful takeovers, fosters synergy.

▶️ JD will primarily provide its supply chain to Kai Bo Supermarket, including its own-brand products and fresh produce (it has experience with its 7Fresh supermarkets). This seems to be the direct purpose of JD's acquisition of Kai Bo Supermarket.

▶️ Kai Bo Supermarket can become a key channel for JD to penetrate Hong Kong and the Greater Bay Area, and sell goods and services provided by JD's supply chain.

▶️ Kai Bo needs JD's supply chain support because the Hong Kong market is highly competitive, requiring external sourcing for goods, and lacks price competitiveness. With mainland supermarket chains entering HK, Kai Bo needs to find new supply chain enablers. Diversifying product categories and improving product value are key priorities.

▶️ Through direct sourcing and efficient logistics, JD's supply chain can bring a richer, higher-quality, and more affordable product selection to the Hong Kong market. JD's own-brand products are now available at Kai Bo, including 7Fresh products. By the end of this year, JD plans to introduce nearly 100 private-label and fresh produce products.

Conclusion: exporting the product supply chain is JD’s obvious strategy.

Source: 第三只眼看零售