With ecommerce growing rapidly beyond China’s big cities, JD.com has launched a fully operational drone delivery programme in rural China.
Other big ecommerce companies, including Alibaba and Amazon, have been testing delivery drones for years. But over the past year, JD.com has been building out a real drone delivery network – making China’s second-largest online retailer the first to get drone delivery up and running. JD launched the service in rural China, and has made some 20,000 drone deliveries to date. The drones operate autonomously, with remote monitoring, allowing villagers to receive same-day orders.
Launching drone delivery in rural areas makes practical sense. Since these regions are more sparsely populated, they are easier for current drone technology to manoeuver. Batching village-bound deliveries together is also more cost-effective by drone, as customers are more spread out. Making the same deliveries by van would take considerably more time. Conversely, delivering to customers who are clustered together in densely populated cities is often more efficient by road than by air.
“We now have daily operations for drone delivery in several locations in China,” said Chen Zhang, JD’s Chief Technology Officer, at the International TCG Retail Summit in January. “We use drone delivery to lower logistics costs and increase efficiency in areas where complex terrain and poor infrastructure make ‘last mile’ logistics challenging.”
With the proliferation of smartphones in rural China, ecommerce is quickly gaining traction. According to The Economist, online retail in rural China grew by 39% in 2017, up to 1.24 trillion yuan ($183 billion). JD believes that offering fast, reliable drone delivery will help it take a bigger share of this burgeoning market. As Chen explains, “China is a mobile-first commerce market and Chinese consumers look for the best consumer experience. On JD.com, about 80% of our orders come from mobile and for our users in many parts of China, same- day delivery is seen as a standard.”
JD has yet to see real returns on its investment in drone delivery infrastructure, though the company says that making a delivery by drone costs a fifth what it would by van, given labour and other costs. Chief Executive Liu Qiangdong believes that once drone delivery is scaled up across the country, it will cut costs by 70%. Drones are expensive, but JD expects the cost to decline as it expands its network and builds more delivery drones, both for its own use and for sale to other companies.
Perhaps most importantly, if drone delivery eventually cuts JD’s costs, and enables it to attract more customers, it will be in a better position to compete with arch-rival Alibaba.
