Dive Brief:

• Chinese e-commerce company JD.com attributed its slight decline in Q4 2017 profit margins to its recent heavy investment in new technology — including AI, blockchain, Big Data, automation and drones — as the company propels itself into fiercer competition with Alibaba and Amazon (Walmart has a 5% equity stake in JD.com).
• The same day it announced quarterly earnings, the company also announced the launch of its new blockchain platform to trace beef in the end-to-end supply chain.
• JD.com is making a push to become a world-class e-commerce site that is on par with the likes of Amazon, which currently dominates the European and U.S. markets. According to Bloomberg, the company wants half its revenue to come from foreign marketplaces within the next 10 years.

Dive Insight:

JD.com's approach indicates its thinking that competing in the e-commerce space means deep investment in big new tech, primarily AI, automation and blockchain.

In fact, JD.com CFO Sidney Huang said the modest profit reduction in Q4 2017 was due mainly to JD.com's new business and tech ventures. "The margin reduction was mainly due to impacts from new businesses, which include the JD Logistics third-party business, technology services and overseas operations," he said.

Already JD.com is working with local Chinese governments' smart city initiatives to eventually deliver packages via drones and autonomous vehicles. According to the South China Morning Post, JD.com is already testing these technologies.

Based on industry trends and predictions, JD.com is on the right track. CB Insights says AI is the future of retail, and that includes e-commerce sites.

The CB Insights report focused especially on Amazon's efforts in AI and automation technology, but JD.com's own initiatives are farther ahead: the Chinese e-tailer has already built drone fleets and is testing drone and AV deliveries.

Then there's the blockchain initiative: supply chain visibility and transparency is a big trend, especially as companies seek to slim their supply chains and share necessary data to eliminate counterfeits. By tracing the beef supply chain, JD.com's new blockchain platform can help measure temperature conditions, highlight safety concerns and prevent spoilage.

JD.com says it has a plan to move into European and U.S. markets by the end of 2018, according to the earnings call, and as CEO Richard Liu said at the World Economic Forum, the company wants its foreign markets to grow to provide at least half of the company's revenue.

Investing in AI is powering JD.com's future in e-commerce, and if the company moves successfully into Europe and the U.S., it could become a significant competitive threat to Amazon.