In the Face of Lockdown, China’s E-

INNOVATION

Commerce Giants Deliver

by Chengyi Lin
April 01, 2020

Jorg Greuel/Getty Images

Leer en español
In these difficult times, we’ve made a number of our coronavirus articles free for all readers. To get all of HBR’s
content delivered to your inbox, sign up for the Daily Alert newsletter.

/
On Jan. 23, 2020, the Chinese government imposed a full lockdown on the City of
Wuhan. Eleven million citizens were placed in quarantine and all major highways were
blocked. The lockdown would last for 60 days – a duration no one expected at the time
of the announcement.

The lockdown posed serious challenges. In a city like Wuhan, the retail sector is like the
body’s circulatory system: pumping groceries and everyday supplies through an
extensive network into every neighborhood. The lockdown put an instant, hard barrier
in the system’s major arteries, cutting off communities from their regular supplies. 
After a burst of initial panic-buying stripped the shelves bare in local stores, people
hunkered down in their apartments, unwilling to risk contamination by going outside,
effectively cutting themselves off from access to future supplies.

FURTHER READING Let’s look at how two of China’s retail

Coronavirus:
Recovery Leadership and giants rose to the challenge of keeping
Book Wuhan’s quarantined residents supplied
$22.95 during their two-month isolation.  Their
View Details response is characterized with a high
degree of innovation and flexibility in terms
of technologies deployed, skills leveraged,
processes applied, and the range of
products and services provided.

Technologies
Alibaba was the first to move, leveraging its digital logistics platform. In less than 48
hours, it had identified and contacted all qualified manufacturing partners, which
reopened plants in over 58 cities during the Chinese New Year vacation in order to
produce N95 masks and other medical supplies. Alibaba was also able to fast-track
shipping of warehouse stock to Wuhan, setting a rolling release schedule for critical
supplies, such as facial masks and hand sanitizers, at guaranteed prices through its B2C
and C2C marketplaces, Taobao and Tmall.   At the same time, it leveraged its integrated
digital payment system, AliPay, to collect online donations from the entire country,
collecting $1 million in the first eight hours alone.
/
In terms of physical delivery, Alibaba’s Cainiao Network and its competitor JD.com had
already been experimenting with new automated technologies in a bid to gain an
advantage on Western rivals Amazon and Alphabet.  In 2018, for example, JD.com had
tested drone delivery in remote areas near Xi’an and driverless smart vehicles in
Haidian District in Beijing.

During the Wuhan lockdown, digital retailers faced an immediate challenge: How could
they increase delivery capacity within Wuhan city without moving manpower into the
province? It was not a perfect solution, but JD.com and other retailers deployed their
new automated technologies into Wuhan. They shipped smart vehicles to the Wuhan
boarder, loaded the local map, and remotely operated (from Beijing, about 750 miles
away) deliveries of donated goods to hospitals and household purchases to communities
in Wuhan. The empty streets were an ideal sandbox for experimenting with the smart
machines. At the same time, they made it possible for the retailers to cope with surges
in demand needs without violating government restrictions.

The lockdown also blocked major roads and highways, making it difficult for retailers to
deliver goods to remote areas affected by the virus. Delivering essential supplies to
villages across Baiyangdian, a large lake in Hubei province, would take at least six hours
by the small road or ferry that remained open. In a moment of creativity, JD’s local
logistics team proposed deploying the drones, which did the job in just 20 minutes.

Talent
The lockdown caused a spike in demand for staples such as rice, wheat flour, and
cooking oil, as well as vegetables, meat, fish and other seafood. With consumers that
had traditionally purchased many of these goods offline switching to digital almost
overnight, China’s e-commerce supply chains were suddenly confronted with a
shortage of human resources.

Freshippo, a grocery subsidiary of Alibaba, confronted the challenge by hiring workers

from shuttered restaurants and retail outlets to staff the supply chain. JD.com’s 7Fresh
branch quickly followed suit. The companies were able to leverage these workers’
supply chain and logistics skills, which meant they only had to provide limited training
to transfer the skills to the e-commerce context.
/
The retailers also leveraged these “new talents” to adapt their product range. During
the lockdown, 7Fresh significantly increased production of semi-processed “ready-to-
cook” foods because they could use the skills of their temporary workers that came
from the catering industry.

Similarly, MTDP, a super-app restaurant delivery platform extended its service to the

delivery of everyday supplies, partnering with over 7,000 brick-and-mortar
supermarkets to process digital orders and deliver to individual households.

Process
Delivery workers interact with a large number of consumers on a daily basis, putting
their own health on the line and creating a vector for transmitting the virus. To reduce
these risks, JD.com and Alibaba not only equipped their employees with facial masks,
gloves, and disinfectants, they also added new safety processes, such as daily
temperature checks, mandatory disinfection before and after each hand-off, and
mandatory disinfection before final drop-off.

The last mile delivery process also needed rethinking. Delivering goods typically
required a customer signature. But once the lockdown was imposed many gated
communities would no longer allow delivery service personnel to enter the community.
Consumers didn’t want to provide a signature because this meant they had to interact
with a delivery employee.  As a result, e-commerce firms like JD.com were initially
forced to take back many “unaccepted” delivery packages and had to swallow the costs.

To get around this problem, JD.com added more deposit boxes in gated communities
and changed the process. Once a package was placed in a box, a bar code was sent by
mobile app to the consumer for pickup at any time. They also recruited volunteer
residents to help distribute goods to those who couldn’t leave their apartments,
managing the network through mobile apps as well.

Category
The lockdown crisis has also created opportunities for some e-commerce firms to catch
up with the competition in areas that they looked to have lost out in. JD.com’s
telemedicine unit, for example, had so far failed to gain traction with consumers, who
preferred PingAn’s Good Doctor or Alibaba’s AliHealth. /
Anticipating a spike in demand for online consultation for Covid-19, JD.com ramped up
its telemedicine business, quickly adding more doctors to its network. In a matter of
days, it not only became a major channel for processing the purchase of medical
products and standard telemedicine, but also turned itself into one of the front-line
Covid-19 triage services for citizens all over the country. Through a series of prescribed
questions (following a government-set protocol), telemedicine doctors can assess
whether a caller is likely to be Covid positive. They apply this protocol to all callers and
if a given caller is deemed to be at risk, they are connected to a local hospital for a
physical checkup. If the caller is not identified as being at risk, the consultation
proceeds as normal. JD.com also rolled out a smart epidemic assistant to share official
information about the virus and offered psychological service online.

AliHealth also moved fast, pushing Covid-19 information through Taobao and Alipay. As
the virus spread across the country, it offered free online consultation on both
platforms. For its part, MTDP has expanded its MTDP University-level educational
offering during the lockdown, creating online classes in small business management
and related skills. These programs are helping to keep housebound people occupied
during the crisis while gaining new capabilities.

***

As businesses and governments around the globe continue to combat the coronavirus
crisis, the rapid responses of the Chinese e-commerce giants offer guidance on how
digital-savvy retailers capable of accessing mass markets in Europe and the U.S. can
play their part in keeping the supply chain flowing. The experience from China suggests
that the most valuable contributions will come both from leveraging their digital
logistics platforms and their high-tech last-mile delivery capabilities and from quickly
engaging newly available workers with transferrable skills from other sectors. Aside
from the moral imperative of engaging in this fight, those that do will find themselves
well placed to compete in a post-Covid world, not only in terms of goodwill, but also in
their strategic competencies and opportunities.

/
If our content helps you to contend with coronavirus and other challenges, please consider subscribing to HBR. A
subscription purchase is the best way to support the creation of these resources.

Chengyi Lin is an affiliate professor in strategy at INSEAD in Fontainebleau, France

This article is about INNOVATION

 Follow This Topic
Related Topics: Operations | Supply Chain

Comments
Leave a Comment

Post Comment
3 COMMENTS

Finn 5 months ago

Harvard is pandering and placating the enemies of America with such propaganda as this article. It just
proves Harvard puts tuition income from Chinese students and their families over the well being of our
American nation. Shame on you Harvard!
 Reply 03
 Join The Conversation

POSTING GUIDELINES
We hope the conversations that take place on HBR.org will be energetic, constructive, and thought-provoking. To comment, readers
must sign in or register. And to ensure the quality of the discussion, our moderating team will review all comments and may edit them
for clarity, length, and relevance. Comments that are overly promotional, mean-spirited, or off-topic may be deleted per the moderators'
judgment. All postings become the property of Harvard Business Publishing.
/
/