JD.Com Inc (NASDAQ:JD) is planning to make drone delivery a reality next year, hoping to lead a shift in the way retail is delivered.
JD.Com on Drone Delivery
By the end of 2017, JD.Com intends for drone delivery to operate in at least 100 regular routes.
“By the end of next year we’ll hopefully have over 100 routes available and in operation,” boasted Chen Zhang, JD.Com Chief Technology Officer (CTO).
Last week, the eCommerce giant had already begun operating five drone types flying in four routes to deliver packages in rural areas on a trial basis— just in time for Singles’ Day, the biggest annual 24-hour shopping holiday in China.
Drone delivery can potentially give JD.Com a significant edge over its main rival, Alibaba Group Holding Ltd (NYSE:BABA). Currently, JD.Com operates most of its own logistics, making rural area delivery more costly. With drones taking care of the job, the company can cut costs while increasing delivery efficiency especially in rural communities.
Typically, rural customers receive their packages weeks after placing orders. With drone delivery, they can get their packages in just a matter of days.
When a customer makes and completes an order, his package is sent from a warehouse to a delivery station. It is then hooked to a drone that zips over to a rural contractor. The rural contractor then delivers the package to the customer.
Mature eCommerce Industry
As of Friday, Alibaba had generated $17.80 billion in total sales during the Singles’ Day. This indicates a year-over-year growth of about 30%. Last year, Singles’ Day sales had grown 60% year-over-year.
As the eCommerce industry matures, online shopping will become the norm, and as industry competition tightens, Alibaba will find it difficult to sustain a year-over-year growth in gross merchandise volume (GMV) of more than 50%.
While Alibaba Group Holding is the brain behind Singles’ Day, competitors such as JD.Com are also taking major market share from the annual shopping event.
JD.Com closed Friday’s session at $24.04 while Alibaba Group Holding has concluded at $92.99.
