JD.com and Fung Retailing Form AI Partnership

On February 2, JD.com, China’s leading online retailer, announced a partnership with the retail business arm of Hong Kong conglomerate the Fung Group, Fung Retailing, which has a network of over 3,000 stores. The two companies will cooperate in using AI to transform the retail lands in areas such as AI platform development and the application of AI to smart retail. The agreement calls for:

• Establishing an AI Boundaryless Retail Center that will oversee and manage cooperative research and development (R&D) projects, and facilitate the sharing of information and expertise relating to AI technology.
• Combining JD.com’s extensive online expertise and Fung Retailing’s offline expertise to develop a new retail format for China and Asia.
• Creating an AI-driven retail system that seamlessly integrates online and offline retail platforms.
• Developing an end-to-end system that enables the management of products, pricing, storage, orders and payment.
• Enhancing the consumer experience through solutions such as AI-driven virtual fitting, unmanned stores and smart shopping assistants.

The Partnership Is Part of JD.com’s Boundaryless Retail Strategy

We view the partnership as part of JD.com’s push to open up its retail infrastructure to support wider retail businesses. Richard Liu, Founder and CEO of JD.com, advocates a “Boundaryless Retail Strategy,” which aims to transform JD.com’s retail business into an open platform to support other retailers by providing “retail as a service.”To do this, JD.com will work to open up its supply-chain capability, logistics, big data, marketing, finance and technology in order to develop an ecosystem. We believe this partnership will be a big boost for JD.com as it figures out how to deploy AI solutions for external retailers. The move also signifies the first step in opening up its retail services, which will potentially be followed by logistics services, supply chain and finance. Bowen Zhou, Vice President, AI Platform & Research at JD.com, believes that figuring out how to deploy AI solutions is critical to the company’s future success. “Drawing on Fung Retailing’s global offline retail expertise, this partnership will be important for us as we deliver our retail vision,” said Zhou.

JD.com’s Accelerating Push to Develop AI Technology

Although late to the AI race, JD.com has been accelerating its push to develop AI technology. Aiming to improve both operational efficiency and customer service, the company has been hiring top AI talent over the past few months.

    Source: Capital IQ/FGRT

Given the rapid pace of the hiring of AI talent, Zhou mentioned that he will continue to focus on AI talent recruitment to play catch-up with other big tech companies in China. “We will see more and more AI talent joining JD.com in the future, but it is not an easy job to find AI talent,” said Zhou. JD.com will test AI applications such as a recommendation engine and smart warehouse and logistics, including unstaffed vehicles, all in-house.

A Big Boost for Fung Retailing and the Fung Group’s AI Initiative

The Fung Group, which comprises supply-chain leader Li & Fung, branded fashion business Global Brands Group and retail business Fung Retailing, is keen on AI development. We believe this newly formed cooperation will give a big boost to the Fung Group’s AI initiative. The Fung Group operates a brick-and-mortar retail business model testing platform in Shanghai called the “Explorium” as an omnichannel retail laboratory for the China market. At the Explorium, data on Chinese consumer behavior can be collected through in-store sensors to better plan market entry or expansion. We believe the Fung Group and JD.com will be able to share the data on Chinese consumer behavior and their expertise in AI to improve the consumer retail experience as well as explore the adoption of technologies to enhance the supply chain at the back end. In addition, the cooperation should help Fung Retailing explore new retail formats and improve its operational efficiency as an omnichannel business. Sabrina Fung, Managing Director of Fung Retailing, pointed out that AI is an essential component when it comes to the future of retail and driving the customer experience.“Across our retail portfolio, AI is a focal point and this co-operation with JD.com will, without doubt, accelerate our progress,” she said.

Summary

We believe the partnership will be a win-win for both companies: it represents a major step for JD.com to open up its retail infrastructure in order to achieve its “Boundaryless Retail Strategy,” while at the same time, Fung Retailing and the Fung Group’s AI initiatives will be accelerated with JD.com’s support.