JD.com Inc, China's second-largest e-commerce company, plans to open more than 1 million JD convenience stores across the country in the next five years, with half of them located in rural areas, says CEO Liu Qiangdong.

He says owners of the stores will be able to order goods, including consumer electronics, home appliances, clothing and home furnishings, through JD's application software.

JD will be responsible for logistics and distribution to the stores, according to the company.

This is JD's third offline cooperation project after launching 10,000 JD home appliance stores, an important measure in the expansion of its offline retail channel.

JD launched the New Market Programs at the end of 2015, aiming to build a new channel targeting small and medium-sized stores in small cities, becoming their suppliers and partners. The program is set to cover 500,000 stores this year.

The penetration rate of e-commerce players in small cities is not high, while convenience stores play a vital role.

E-commerce giants have stepped up the combination of online and offline retail channels. Alibaba Group Holding and Bailian Group Co reached a strategic partnership in February, under which the two will co-design brick-and-mortar stores that merge online and offline shopping experiences.

Jason Yu, general manger of consumer research firm Kantar Worldpanel, says: "The network of stores will help JD to enhance its O2O presence in the fast-moving consumer goods sector. To address the last-mile delivery challenge, the move can help consumers to order products at nearby stores.

"While it brings business to those convenience stores, it also makes those stores an entry point to the JD platform so that it can increase its penetration among shoppers."

Yu adds that it is more challenging to grow purely in e-commerce, so both Alibaba and JD have moved into offline business.

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(China Daily European Weekly 04/14/2017 page25)